Marketable Title vs Insurable Title

In the previous episode of Whiteboard Wednesdays, we discussed the concept of a title search and how it can benefit both buyers and sellers.  This episode, we take a look at marketable title vs insurable title, and how a potential buyer should look at each.

A marketable title is, in many ways, the ideal.  A home with a marketable title is one that is entirely free of defects; that is, it has no mortgages, liens, or judgments on either the property itself or the current owner.  By some definitions, a marketable title must also be free of outstanding taxes, which may or may not be achievable at any given moment – for this reason, completely marketable titles are somewhat rare, particularly in the arena of real estate investment.

An insurable title, on the other hand, sets a more achievable standard and allows for the sale of properties for which the title is not impeccably clean.  Essentially, an insurable title is one that may have certain defects – say, an issue with the chain of title due to a circumstance such as inheritance – but that can be insured against those defects, should they pose an issue in the future, rather than being unsaleable in its current form.

Regardless of whether a property has a marketable or an insurable title, it’s important to understand both and to know what each can mean for you as a potential buyer.