A marketable title is a title to a piece of real estate which has no defects which could be discovered by a prudent purchaser. It is deemed more or less “perfect” and there are no reasons why the title cannot be transferred. The marketable title is the gold standard in title quality. It should be noted that “marketable” in the sense of title has nothing to do with “marketable” in reference to the property; a property with a marketable title can still be difficult to market and conversely a property with a clouded title may be very marketable.
People involved in a real estate transaction determine whether or not a title is marketable by running a title search. This investigation into the title looks into the history of the title and the chain of owners and events associated with the title. If the title is completely clear with no encumbrances, claims, and other issues, it is considered marketable. It may also be deemed “insurable,” which means that it has some defects but a policy for title insurance could still be written on it.
Both buyers and sellers usually want a marketable title in a real estate transaction. From the point of view of both, when a title is marketable it means that there should be no problems with the legal transfer of title which would hinder the deal. Once buyer and seller agree on the terms of the sale, in other words, the title can be smoothly transferred.
When disputes arise during a real estate transaction, if the title is marketable, the court will rule to enforce the contract. Buyers can be compelled to buy a property with a marketable title if they attempt to renege on a deal unless they can demonstrate that there is a compelling reason not to purchase, such as a defect with the property which is uncovered during the property inspections.
It is important to note that when a title is marketable, it simply means that a reasonable or prudent buyer would not be able to uncover problems with the title. This does not necessarily mean that there are no claims against the title or other issues which might come up in relation to the title. When a title is clouded, there are steps which can be taken to resolve the problem so that that the title can be transferred to allow the deal to conclude.