What is a Clear Title?
A clear title refers to claims of ownership of an asset or property without any encumbrance or defect. When the ownership of a real estate or asset in uncontested and free from debts from creditors, lien or financial obligation, it has a clear title. A clear title is otherwise called a clean or just title, it is a title that is free of all kinds of lien, defect or encumbrance.
How Does a Clear Title Work?
A clear title can be described of ownership claims on a property or asset that is indisputable or unencumbered. When an individual has a clear title over a property, it means such property is without any lien or financial obligations, the owner holds full right to the ownership of the property. In every real estate transaction, a clear title is crucial, this status of a property is detected by title companies after a thorough investigation on the property. If there are claims on a property or any form of lien, such property is encumbered and has no clear title.
Why Clear Title Is Needed for Property Sales
Before the ownership of a property or asset is transferred from one party to another, it is important to do a search on the title. This search helps to identify the actual owner of the property and if the property is free from encumbrances. For instance, if there are financial claims or liens on the property, such property is not fit for sale. A clear title is the proof that the legal ownership of a property can be transferred. In cases where a property belongs to more than one heir of there are previous owners, the actual ownership must be ironed out and shown through the presentation of a clear title. Purchase of properties that have no clear title carry many risks. When there is a clear title on a property, it guarantees that the property has no claims, defects or liens. This title also helps to prevent fraud in real estate transactions. For instance, false deed might be recorded in a public record which can be used to defraud a buyer in the sale of property. However, even with a false deed, a seller that has no clear title on a property cannot sell the property, thereby reducing the rate of fraud in real estate transactions. Properties with liens have cloudy or dark title which makes the transfer of its ownership impossible.
