When lawyers and other real estate professionals talk about "title," they are referring to who has legal ownership and the legal right to use a piece of property. Although the idea of legal title can be applied to anything, people most often use it to refer to real estate and automobiles, because those are substantial purchases which can have complicated ownership arrangements.
Defective titles can result in problems establishing ownership, which can complicate resale or impact the exercise of rights over the property.
Even though you may have bought a house, and made the mortgage payments, you may not necessarily have a clear title to your property. Some of the "clouds" or "exceptions" to your title can include:
Sometimes, when a particular piece of land has been in the family for generations, the original owner can be forgotten. Or perhaps someone took the land through adverse possession and there never was a clear transfer of ownership rights at the beginning. In these instances, someone from the past could come back to take title of the property.
Liens are like mini-mortgages and home loans placed on the property to force the property owner to pay a debt. Any liens on the property must be paid before the land can be sold to a new owner.
These are promises that the original landowner made to someone else. For example, the owner could have promised his neighbor that the neighbor will always be able to drive an ox cart across the property. This promise was then written into each deed, every time the house was sold.
Fortunately, there are several things you can do when buying a new home to minimize any problems from a defective title. The first is to perform a title search, which most real estate attorneys would be happy to do for you. A title search will discover many of these defects before you buy a house so that you know what you're getting into.
The second is to demand a special warranty deed. This would allow you to write a contingency into your home purchase agreement that states that if the current owner cannot prove that they have clear title, then you can back out of the agreement at no additional cost. That way, you're not obligated to buy anything with a defective title.
Finally, to protect you should you discover that there is a problem with your title after you purchase the house, one option is to buy title insurance. Title insurance covers you in case someone who thinks they have a claim to your land sues to quiet title.
Title issues can have a huge impact on the rights to real property and a person's ability to sell it. They can result in huge financial losses, unnecessary lawsuits, and uncertainty about your rights. A local attorney real estate attorney will be able to cut through the legalese and give you the right advice.