What is Marketable Title in Texas?

Good and Indefeasible Titles in Texas

While owning a home is a goal for many people, the road from finding a home to actually moving into that home is often not straightforward and simple. Even when the buyer and seller reach an agreement about sales price, contracts may fall through for any number of reasons. One of the reasons that a sale sometimes falls through is a lack of marketable title, which is necessary for conveyance of real property.

Definition of Marketable Title

A title identifies the actual owner of real property. If a title is marketable, it has no claims against it; no other party has a lien on the property which might allow them to lay claim to the property. Third-party claims, such as liens or outstanding debts, are known as clouds or encumbrances. In order for the title to be marketable, the property should be “reasonably free from doubts” about three areas: that the seller owns the complete property, that the title has no clouds or encumbrances, and that no doubts exists about whether or not the title is clouded or encumbered. If a seller does not provide a marketable title, the sale of the property often falls through.

Good and Indefeasible Title

Rather than marketable title, Texas, unlike other states, adheres to a “Good and Indefeasible” title standard, which is less certain than a guarantee that a title is good and marketable. During the dust bowl of the Great Depression, so many farms and homes were sold so quickly at sheriffs’ sales, that the ability to guarantee a clear title became difficult. Texas responded by adopting the Good and Indefeasible standard for a title, which asserts that the seller’s title is clear, but that the buyer is responsible for defending against any claims on the property should another party try to claim that land. According to Title Examination Standard 2.10 “To be marketable, a title need not be absolutely free from every possible suspicion. The mere possibility of a defect that has no probable basis does not show an unmarketable title.” Practically, most buyers choose to purchase a title policy to protect against title issues in Texas. However, if purchasing title insurance is not feasible, a buyer would be wise to examine and verify the marketability of a property by examining title reports or abstracts of title before closing on a property.

A home is usually one of the biggest purchases a person makes. Working with an experienced real estate attorney helps a buyer avoid the kinds of pitfalls that might cause a sale to fall through, providing peace of mind in the process.

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