Understanding the difference between a title with liens on it and an absolute title, as well as how to use a title search to understand whether a title is absolute, is very important. It can help settle property disputes and put to rest confusion about the legal owner of a property. Learn more about what absolute title is, how it works, and what it means for property buyers and sellers.
Definition and Examples of Absolute Title
Absolute title conveys at least two important things. First, it implies a clean title, meaning that no creditors can lay claim to the property in order to offset a debt in another context. It also means that the property is free of loans, reverse mortgages, or any other debt that is associated with purchasing the property or borrowing against it. Second, it means that you don’t share ownership with anyone else. If there is a defective title, this could mean that someone thinks that the property belongs to them when you think you own it. According to Landy Liu, general manager of insurance products at digital homeownership platform Better.com, clear, perfect, and absolute title are terms that are used interchangeably, at least in casual discussion, to refer to a title clear of judgments and liens.
Alternate names: clear title, clean title, perfect title, title absolute
Let’s say you received a parcel of land through inheritance. You’d want to verify through a title search that the property was indeed owned free and clear by your late relative and that no will or other inheritance-related document disputes who would receive it. Once you received the property and knew that no one else laid claim to it, you’d have to make sure you paid the taxes regularly and did not borrow against it in order to continue holding the absolute title to the property. Holding that title gives you rights, including the right to modify or sell the property.
How Does Absolute Title Work?
Having the absolute title to a property is more than just a name on a document. You can, for instance, hold the physical deed to a property and still have various people to whom you must answer if you want to seek absolute title status. A title search is how you can learn whether you do or don’t have absolute title. “A title search is essentially a big research project, relying on private or public data that goes to the beginning of that property’s claim to ownership, the chain of title of the entire history of the property,” Liu told The Balance by phone. “Say a mechanic did work on the home and the previous owner never paid that mechanic, that would create what’s called a mechanic’s lien, which is attached to the property, and that’s a defect on the title,” Liu said. He also said that boundary-line issues, such as a shed that is technically on your property but that a neighbor has had the right to use in the past, would also be an encumbrance that shows up on a title search. An example of an easement might be that a previous owner gave a property owner near you permission via an easement to create a driveway to get from their property to the main road. Before you have absolute title, your title company will work to resolve any liens, encumbrances, or judgments against the property so that the sale of the property to you can proceed.
What Absolute Title Means for Sellers and Buyers
The time when a property’s title is discussed and searched tends to be at a transfer of ownership. No one wants to go through the effort to find a buyer or put an offer in on a property only to find out that the property has a disputed claim of ownership or that the current owner has a lot of back taxes that need to be paid to clear the title. This is why title insurance is considered a valuable purchase during the home-buying process, and lender’s title insurance is required. Liu said that some people opt out of owner’s title insurance if the property has been in the family for generations and they are very confident that the title is absolute, but most typical purchasers gain a level of protection from purchasing optional owner’s title insurance. Holding absolute title, proven by a clean title search, is the best way to have a property transfer seamlessly between one owner and the next.
