what is the difference between Insurable and Marketable title?

Asked by Sean Meehan, Salem, NH Sat Aug 11, 2012

A property we are looking at was under a P&S contract in 2010, but the sale fell through because of questions concerning the property title. The issue was that part of the house sits on land owned by an association (with 150 members). The sellers purchased the land but there was a clause in the deed that stated anyone who had access to this land before still had access. Since then, there was an association resolution ratifying the land sale and confirming that “the remaining common land adjacent to the property provides members with adequate access to the beach, and that the 2008 transfer of common land did not impair any beach rights of the Members or the Association or any rights of the Association or the Members to access the beach area.” The sellers’ attorney wants the P&S changed from marketable title to insurable title. We are worried about how this will affect our ability to re-sell the property in the future.

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Jackson Will…, Home Buyer, Provo, UT
Fri Jan 16, 2015
You should really talk to a professional about all of this. the title is going to be a huge factor when it comes to what you are able to do with the property later. Even beyond selling it, there could be things that it stops you from being able to change on the property. You want to be able to have freedom to change whatever you want. You should look into all of that with someone who specializes in these issues. Hopefully you'll be able to get it all figured out.
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Margaret Mit…, Agent, York, ME
Sun Aug 12, 2012
Sean - that is an excellent question. Do NOT sign a P&S without talking with a real estate (title) attorney first who can explain this to you in detail.
My layman's understanding is that marketable title means no cloud or blemishes on the title. It is possible to have a blemish on the title but a title company will still insure it. That would be considered non-marketable, but insurable title. Again, talk to an attorney to get a more complete explanation.
My opinion as a real estate agent is that non-marketable, but insurable title does affect the value of the property. Some buyers will accept this title and some will not. Also IMO, the title issue should be disclosed in the Sellers Disclosure. Non-marketable but insurable title does not make it impossible to sell a property but perhaps a bit more difficult. The price should reflect that.
Again, get legal representation before buying a property with title issues. And ask your buyer agent their opinion of the impact on the value.
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