Clear Title VS. Marketable Title

2 Replies

I'm curious to know what they real estate professionals think Clear title vs. Marketable title is... Comment on this post and let me know your opinions... I find most don't really understand the difference.

Clear title is squeaky clean free of any and all encumbrances.  An example would be an owner who owns the property freed and clear of any mortgage.  Marketable title is one that has "manageable" encumbrances that can be cured prior to closing, examples of such encumbrances would be a mortgage, mechanics liens, municipality or code enforcement lien, etc.  The VAST majority of property titles full into the latter category.  Basically, the chain of title is unbroken and free of defects and transfer of title can take place with little to no additional work involved above and beyond a normal closing.

Marketable title is title that doesn't have material defects... and as such the buyer cannot claim there is a title problem and refuse to close. Marketable title does not mean unrestricted... a property can be subject to restrictions such as CCRs, rights of way, easements and still be considered marketable. Of course you are not going to eliminate any of these restrictions before closing because they run with the land.

Let's say you are buying a property and your plan is to tear down the existing home and build a mansion. Unfortunately the title report and survey show an easement that will prevent this. Is the title marketable? Almost certainly. So if you have plans like this you better include some contingencies beyond curing title defects.

The term "clear" usually means free and clear, i.e., no mortgages or other liens.