A title defect is any issue that clouds or challenges your ownership of a property. Common defects include undisclosed liens, forged documents in the chain of title, missing heirs who have a claim, or recording errors.
Before you buy a home, the title company researches the property's ownership history to identify and clear any defects. If a defect is missed, title insurance covers your losses up to the policy amount.
Title defects are one of the most common issues that delay closings, but with proper title work they are almost always resolved before you take ownership.
Common Title Defects
Defects can include undisclosed liens from contractors, unpaid property taxes, forged deeds, undisclosed heirs who inherited an interest, clerical errors in public records, missing signatures on prior deeds, and improperly recorded mortgages. Even a simple misspelling of a name on an old deed can create a cloud on title.
How Title Defects Are Found
The title company performs a title search before closing. They examine public records going back decades to trace the chain of ownership. They look for recorded liens, judgments, easements, restrictions, and any other encumbrances. Any issue found during this search is flagged as an exception or a defect that needs to be resolved.
How Defects Are Resolved
Minor issues like recording errors can be fixed with corrective documents. Liens may require the seller to pay them off before closing. More complex issues like undisclosed heirs may require a quiet title action in court. Most defects are identified and resolved during the escrow period.
Title Insurance Coverage
Title insurance protects you if a defect was missed during the title search. The lender requires lender's title insurance, and it is strongly recommended that you buy an owner's policy. A one-time premium at closing covers you for as long as you or your heirs own the property.
Timeline for Title Review
The title search typically takes 5 to 10 business days after the contract is signed. If defects are found, resolution time varies from a few days for simple liens to several months for complex court actions. Most closings proceed without major title issues.
Preventing Title Issues
Work with a reputable title company. Review the preliminary title report carefully. Ask about any exceptions listed. If you are buying from an estate or a property that has not been sold in decades, expect additional title scrutiny. Title insurance is your safety net for issues that surface after closing.