What about the numerous issues of inheritance as it applies to the property and the possibility there were illegitimately excluded heirs to the property?

Say the local recording authorities lose the record of your deed. What assurance have you that you can recover all challenges to your property rights?

Consider the legal ramifications within that lineage of title transfers back through the years. Say a married person who owned the property had misrepresented himself as a single person, nobody caught the error and his or her spouse was illegitimately shut out of rights to ownership. But now they might reassert such dower rights.

Consider the possibility that a man’s parent was the true owner of the property, but that it was junior who sold and passed title.

How about the possibility of confusion of identities along the way?

What if, along that chain of recordings somewhere there was a forgery of title?

How about a partner in a holding company who was not party to the conveyance and later asserts his rights?

Or, how is your legal standing going up against the case of a minor or a person who has been shown incompetent executed a title along the way?

And what about the ramifications of property easements, covenants, claims, liens and other encumbrances?

So, what is defect of title? Any unresolved claim against full right of ownership which could result in loss of property or the inability to sell and convey it.

So, what is title insurance? It is private companies that have the expertise to research titles and abstracts and in exchange for a one-time premium are willing to take the risks of guaranteeing perfect title, and then dealing with whatever problem might later cloud that title. Perhaps they cannot guarantee that you will continue to have a marketable title or that you will not lose the property, but they can guarantee that you would be fully reimbursed for having done so.

States are known as either “lien theory” or “title theory” states. The difference between the two is in the way they handle legal entitlement to property. In “title theory” states, the legal authorities divide titles which are mortgaged between the mortgagor and the mortgagee. The mortgagor holds legal title until such time as he is paid in full and files a quit claim. The mortgagee holds what is known as equitable title which gives him superior title of usage and enjoyment or else of subletting the property, so long as he is not in violation of any of his contractual obligations. There is advantage for the mortgagor in this case, as he has more immediate remedy in case of the borrower’s default.

“Lien theory” states handle this differently. They merely give lien status to lenders for the purpose of securing indebtedness. In either case the mortgagor must foreclose on the mortgagee to extinguish his title altogether.