Insurable vs Marketable Title – reprint from Active Rain

With so many people looking at and buying forclosed properties, you should read this blog post first.  

Insurable Title vs Marketable Title

Danger in Purchasing Foreclosure Properties
Insurable Title does not Necessarily Mean Marketable Title


General Rule:  All marketable title is insurable, however, not all insurable title is marketable.

What is the difference? 

Insurable title may come with a host of defects.  However, despite these defects, a title insurance underwriter weighs the risks involved and allows the title agent to issue a title policy even though there may be blemishes and potential problems down the road.  Ironically, should the value of the property increase dramatically, the buyer is only protected to the extent of the original purchase price.

In contrast, marketable title is a title that is clean, has no defects that will come up again in a future title examination when the property owner attempts to obtain financing or more importantly tries to sell the property.  Accepting insurable title could result in problems which need to be addressed at a later date resulting in both time and money.

Title Insurance Companies may recognize a problem when you go to sell the property.  Their first solution is to ignore the problem and reinsure over it again whereby they actually profit from their previous oversight.  Unfortunately, many buyer’s, if properly represented will not accept this proposal.

Why is this important?

Standard A – Title of the standard form contracts in Collier County, Florida provides “Title to the property shall be good and marketable with legal access, subject only to the following exceptions…”

On more than one occasion in the past year, I have had frustrated sellers lose their deal because the property was not marketable.  Title companies often gamble that the issue will not come up again or will be overlooked.  When problems do come up they are more often difficult to resolve requiring corrective documents in the chain of title.


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