Defective Title

AAA

DEFINITION of 'Defective Title'

A piece of property or asset that has a publicly-recorded encumbrance, such as a lien, mortgage or judgment. Because other parties can lay claim to the property or asset, the title cannot be legally transferred to another party. For example, a homeowner cannot sell a home if there is an outstanding tax lien on the property. That lien would first have to be cleared before any action can be taken on the property.

INVESTOPEDIA EXPLAINS 'Defective Title'

Because the property or asset cannot be legally transferred to another party, the title is considered to be unmarketable. If the title holder wants to be able to do anything, the encumbrances must first be taken care of.

RELATED TERMS
  1. Mortgage

    A debt instrument, secured by the collateral of specified real ...
  2. Defect Of Record

    A public record outlining any encumbrance on a piece of property, ...
  3. Abstract Of Title

    A brief history of the titles for a piece of land. The abstract ...
  4. Quiet Title

    A lawsuit filed to establish ownership of real estate when ownership ...
  5. Perfect Title

    A title deed for real estate that does not have any liens attached ...
  6. Unencumbered

    An asset or property that is free and clear of any encumbrances ...
Related Articles
  1. Insurance

    10 Hurdles To Closing On A New Home

    It's the biggest purchase of your life - find out what can go wrong before you even close the deal.
  2. Retirement

    Holding Titles On Real Property

    Find out how best to claim and convey ownership on your assets.
  3. Home & Auto

    Top Tips For First-Time Home Buyers

    Follow this step-by-step guide to make your homeownership dreams a reality.
  4. Personal Finance

    Understanding Your Mortgage

    We walk through the steps needed to secure the best loan to finance the purchase of your home.
  5. Options & Futures

    Housing Deals That Fall Through

    Find why buyers back out and what you can do if you're left holding the bag.
  6. Home & Auto

    Save $30,000 For A Home Down Payment In 5 Months

    Before tackling mortgage rates, home maintenance costs and utilities, every home buyer must first gather the funds for a mortgage loan down payment.
  7. Credit & Loans

    Getting A Mortgage When Building Your Own Home

    It's much harder to get a loan when you're building a home, not moving into one. Here's where to look and what to expect.
  8. Credit & Loans

    Understanding Loan-to-Value Ratio

    Loan-to-value ratio (LVR) is a tool used to evaluate the risk in a collateralized loan, usually a mortgage loan.
  9. Credit & Loans

    Surprising Ways A Mortgage Affects A Credit Score

    It takes a good credit score to get favorable mortgage rates. Then, how you pay a mortgage will shape your score – just having one can lower it at first.
  10. Stock Analysis

    Can American Capital Agency Maintain Its Dividend?

    Dividend investors know that real estate investment trusts with REITs that invest in mortgage-backed securities produce double-digit dividend yields.

You May Also Like

Hot Definitions
  1. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  2. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
  3. Preference Shares

    Company stock with dividends that are paid to shareholders before common stock dividends are paid out. In the event of a ...
  4. Accrued Interest

    1. A term used to describe an accrual accounting method when interest that is either payable or receivable has been recognized, ...
  5. Absorption Costing

    A managerial accounting cost method of expensing all costs associated with manufacturing a particular product. Absorption ...
  6. Currency Carry Trade

    A strategy in which an investor sells a certain currency with a relatively low interest rate and uses the funds to purchase ...
Trading Center