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Marketable Title vs. Insurable Title

  • If not defined by your purchase and sale contract, the law implies that the seller will provide good and marketable title.
  • Good and marketable title has been defined as one free from reasonable doubt, that is, not only a valid title in fact, but one that can be sold to a reasonable purchaser or mortgaged to a person of reasonable prudence.
  • You might want to include within your contract the following recommendation by the State Bar of Georgia which can facilitate the closing process by providing guidelines regarding title matters:
    • “It is understood and agreed that the title herein required to be furnished by the seller shall be good and marketable and that marketability shall be determined in accordance with Georgia law as supplemented by the Title Standards of the State Bar of Georgia. It is also agreed that any defect in the title which comes within the scope of any of said Title Standards shall not constitute a valid objection on the part of the buyer provided the seller furnishes the affidavits or other title papers, if any, required in the applicable Standard to cure such defect.”
  • A formatted purchase and sales contract may define good and marketable title to mean title which a title insurance company licensed to do business in Georgia will insure at its regular rates subject to standard exceptions. This, in the trade, is referred to as an “insurable title.”  The title insurance company may make a business decision to insure title that is not marketable because of one concern or the other. If this is the case and you have purchased owner title insurance you would be insured against any loss including the cost of defending the claim, but the issue will remain.
  • As an example, suppose the property the buyer has contracted to buy has a mortgage that has not been cancelled at the courthouse taken out in the year 2000, but the property has been bought and sold four times since that date. It is pretty apparent that the 2000 lender has made no demand for payment as the debt has in fact been paid, but there was a failure by the 2000 lender to record a Cancellation Order – a statement the debt has been paid. The title insurance company would probably insure the title notwithstanding the old mortgage.  Now you may not want property encumbered by a condition such as this, but the title is in fact an insurable title if the title company is willing to insure it.  You would, however, by purchase of an owner title policy, be covered against financial loss including the cost of defending the claim.  The policy, however, would not insure that you had a good and marketable title, but only one that is insurable.

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