Defective Title

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.

BREAKING DOWN '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. Defect Of Record

    A public record outlining any encumbrance on a piece of property, ...
  2. Encumbrance

    A claim against a property by a party that is not the owner. ...
  3. Property Lien

    A property lien is a legal claim on a tract of real estate granting ...
  4. Title Search

    An examination of public records to determine and confirm a property's ...
  5. Home Lien

    A legal claim placed on a home that makes selling the home, obtaining ...
  6. Absolute Title

    Title to a property that is free of any encumbrances or deficiencies. ...
Related Articles
  1. Economics

    What's an Encumbrance?

    An encumbrance is a claim against a property by another party.
  2. Investing Basics

    Investing In Property Tax Liens

    Property tax liens can be a viable investment alternative for experienced investors that are familiar with the real estate market.
  3. Home & Auto

    Encumbrances And Nonpossessory Interests In Real Property

    Learn about nonpossessory interests and the various forms of encumbrances.
  4. Professionals

    Property Titling And Transfer

    Property Titling And Transfer
  5. Home & Auto

    Tip No.5: Make Sure You Have Clear Title

    Liens and encumbrances on a property can leave you stuck with the past owner's liabilities.
  6. Economics

    How Does a Lien Work?

    A lien gives a creditor the legal right to seize and sell property, then use the proceeds to pay off a borrower’s debt.
  7. Retirement

    Holding Titles On Real Property

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

    Equity Stripping Leaves Creditors Empty-Handed

    Add additional debt to your real estate assets to keep the creditors at bay.
  9. Home & Auto

    Attention Home Buyers! Why You Need A Lawyer

    Property transactions are complex and subject to specific state/local rules. A professional can simplify the process.
  10. Financial Advisors

    Top Alternatives Assets for Capital Preservation

    At best, alternative investments can help preserve capital by avoiding correlation with stocks and by beating inflation. Here's a look at some options.
RELATED FAQS
  1. What is the difference between a lien and an encumbrance?

    Understand the legal terms ''lien'' and ''encumbrance,'' and learn the significant distinction between these two essential ... Read Answer >>
  2. How can I invest in tax liens?

    Find out about the steps an investor must take to invest in tax liens, along with the potential benefits of doing so. Read Answer >>
  3. How do I avoid a tax lien on my property?

    Find out the best way to prevent the government from placing a lien on your property, including the consequences of having ... Read Answer >>
  4. What types of liens are seen as good and which are bad for my credit?

    Understand what a lien is and what types of liens are most common for individuals, and learn which types of liens are good ... Read Answer >>
  5. Does the IRS report to credit bureaus?

    Understand the relationship between the IRS and the various major credit bureaus. Learn how credit bureaus find out about ... Read Answer >>
  6. What real estate documents need to be recorded?

    Learn how recording documents on real estate transactions, such as deeds, mortgages, easements and taxes, help ensure proper ... Read Answer >>
Hot Definitions
  1. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  2. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  6. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
Trading Center