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. 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. Lien

    The legal right of a creditor to sell the collateral property ...
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. Credit & Loans

    What is an Alt-A Mortgage?

    Called "liar loans" for their low documentation requirements, Alt-A mortgages were hot until the subprime crisis. Now Wall Street wants to bring them back.
  7. Credit & Loans

    New Rules May Make It Easier to Get a Mortgage

    Fannie Mae and Freddie Mac have come to terms with lenders on how to solve mortgage disputes. This could be good news for people with lower credit ratings.
  8. Retirement

    Best Mortgage Companies Friendly to Retirees

    If you’re no longer in the workforce and need a loan to buy a home, which companies are the most welcoming? Plus, good news about qualifying for a loan.
  9. Credit & Loans

    Don't Get Overcharged for Your Mortgage

    Don't pay more for a mortgage than necessary. Here’s a quick look at the different categories and how to be sure you're getting the best deal.
  10. Home & Auto

    Rent-To-Own Homes: How The Process Works

    A rent-to-own agreement can benefit homebuyers with bad credit or insufficient funds for a down payment. Here’s how one works.
RELATED FAQS
  1. Do FHA loans require escrow accounts?

    Federal Housing Administration (FHA) loans require escrow accounts for property taxes, homeowners insurance and mortgage ... Read Full Answer >>
  2. Do FHA loans have prepayment penalties?

    Unlike subprime mortgages issued by some conventional commercial lenders, Federal Housing Administration (FHA) loans do not ... Read Full Answer >>
  3. Can FHA loans be refinanced?

    Federal Housing Administration (FHA) loans can be refinanced in several ways. According to the U.S. Department of Housing ... Read Full Answer >>
  4. Can FHA loans be used for investment property?

    Federal Housing Administration (FHA) loans were created to promote homeownership. These loans have lower down payment requirements ... Read Full Answer >>
  5. Do FHA loans have private mortgage insurance (PMI)?

    he When you make a down payment from 3 to 20% of the value of your home and take out a Federal Housing Administration (FHA) ... Read Full Answer >>
  6. How many FHA loans can I have?

    Generally, the Federal Housing Administration (FHA) does not insure more than one mortgage per borrower. This is to prevent ... Read Full Answer >>
Hot Definitions
  1. Liquidation Margin

    Liquidation margin refers to the value of all of the equity positions in a margin account. If an investor or trader holds ...
  2. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  3. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  4. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  5. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
Trading Center