What is Clear Title?
Clear title (also called clean title or free and clear title) means the property's ownership is unambiguous and there are no liens, encumbrances, or legal claims that would prevent the transfer of ownership. A clear title is a prerequisite for most real estate transactions — lenders require it to issue a mortgage, title insurance companies require it to issue a policy, and buyers require it to ensure they are getting what they are paying for.
What clouds a title
Common title issues: unpaid property taxes or tax liens, mortgage liens from previous owners, mechanics liens from unpaid contractors, judgment liens from lawsuits, lis pendens (pending litigation), unprobated estates where the owner died without a will, boundary disputes, unreleased easements, and forged or defective deeds in the chain of title.
How clear title is verified
A title search examines public records to trace the property's ownership history and identify any liens or encumbrances. The title company or attorney performs this search and issues a title commitment listing any exceptions (known issues). To proceed to closing, the listed exceptions must be resolved or accepted by the buyer.
Clearing title issues
Most title issues can be resolved before closing: liens are paid off from sale proceeds, boundary disputes are settled, missing releases are obtained, and quiet title actions resolve ownership disputes. Some issues (like boundary disputes or forgery in the chain of title) may take months to resolve.
For wholesalers
Title issues are one of the most common reasons wholesale deals fail to close. Run a preliminary title search early in the process to identify problems. Deals with significant title issues may still be viable if the cost of resolution is factored into your pricing, but they require experienced title companies and may take longer to close.