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What is a title cloud?

On Behalf of | Aug 22, 2022 | Real Estate Law |

Having a title cloud is not a good thing. A cloud on a title is an encumbrance that shows that there is a problem with the property in some way. For example, there may be a lien on the property, or the title could be fraudulent.

Titles can be cleared up, which is important to know whether you’re buying or selling a property. To find out if a title has clouds, a simple title search should be conducted.

When is a title search performed?

Normally, title searches are performed as a part of the mortgage origination process. If you’re buying a home with cash or selling to a cash buyer, it’s not a bad idea to have a title search then, too.

Title searches and title insurance tend to be required by lenders to make sure that the property owner will be protected if claims are made against the home in the future. For example, if there is a lien, resolving the lien before transferring the property would prevent the new buyer from having issues with ownership down the line.

What does it mean if you have a defective title?

If you have a defective title, it means that it’s hard to figure out who the owner of the property really is. The vendor or creditor that put the lien or claim against the property may have an interest in it, for example, or the title could be fraudulent and not be real at all, meaning that someone could spend money on a property that they don’t really own.

Sometimes, title clouds and defective clouds are caused by probate-related issues, such as problems with inheritances. Those problems can slow down tile transfers, too, when it’s not clear who the final owner of a property is going to be.

Clearing up a title for a purchase or sale

Clouds on titles are generally resolved with quitclaim deeds. Paying off liens or clarifying ownership through the courts may also be necessary in some instances. Overall, titles can be cleared of clouds, though, which will allow a property to be sold or purchased more easily.