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Insurable vs. Marketable Title.

Hello,

I'm looking to by a house in Maryland, and I have a sales contract that says the seller will provide an Insurable Title and pay for the buyers title insurance. From what I found on the internet it is common for foreclosures (which this property is) to do this and provide the buyer with an "Insurable title" as opposed to a "Marketable Title". I also found information saying that this type of title may come with some blemishes on it that may need to be addressed down the road.

 

My questions are:

Do you know if there is anything I need to be aware of when getting an "Insurable Title"?

Is there a way to find out what blemishes are on the title and how to get them resolved?

Will I have any trouble when I go to sell/refinance the house?

Is there a way to convert the title from an "Insurable title" to a "Marketable title"?

Is there anything else I need to know about this I may not have asked?

  • January 30 2012 - Westminster
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Answers (4)

Profile picture for the_country_hick
I would simply insist on a warranty deed. It is the strongest one you can get.
  • January 31 2012
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WMJW...

This is a great question, and a very important "fine line". This question should be directed immediately to a qualified and competent title company or RE Attorney, and any opinions given by us on Zillow are probably worth less than what you are paying for them!

Please stop back here when you get "official" answers and update us!

Jim, American Bank
  • January 31 2012
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The reason you are encountering this different  title is because with bank foreclosures the bank has little knowledge of the state of the property with regards to condition, leins, easements, judgements and other things that could affect the marketability of the property.  For this reason the bank is providing a title that is insured (warranted) only for the things that have occurred since the bank has owned it (since the foreclosure).  Since all bank owned properties are "as-is" the Buyer is assuming any risk or potential problems that might occurr after the sale. Most people think that "as-is" only applies to the physical condition of the property, but this is incorrect.  It is the trade off you get when buying a foreclosure home for less than you would have paid for a traditional sale.

With bank owned homes it is more important than ever that an adequate title search be performed to insure that problems from the past do not return after the fact.  The laws of each state are different with regard to claims that can come back to the property, but over time these will disappear and you will eventually be able to sell the property with the equivelent of a "marketable titile".  If you are using an attorney, he/she should be helping you with this.  If you are working directly through the RE Agent, I would be leary of one that cannot explain your situation. Perhaps an attorney would be a good idea.

As with all foreclosure homes, "due diligence" is the key.

  • January 30 2012
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If I am reading your questions correctly, I think insurable and marketable are one in the same.  Unless you mean insurable as in home owners insurance.  If home owners insurance is what you are referring to then the question would be how many insurance claims the home has had.  If it has had a lot of claims the new owner may have a problem acquring home owners insurance.  Referring to insurable as in title insurance, then you could speak with a title company and ask to have a title search done.  This would show any currently filed liens on the home.  If there are liens it would be up to the home owner to contact the lien holders and work something out directly.  Make sure, if this is the case, that once the lien is resolved, that the lien holder gives you a date stamped copy from the court house that shows a lien release has been filed.
I hope this helps.
  • January 30 2012
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