Which of the following would be used to cure a defect in title of real property?
(a) A mortgage
(b) A quitclaim deed
(c) Title insurance
(d) Contract for purchase and sale
The Correct Answer and Explanation is :
The correct answer is (c) Title insurance.
Explanation
Title insurance is a form of indemnity insurance that protects property buyers and lenders from losses related to defects in a title. A defect in title refers to issues that could affect ownership rights to a property, such as liens, encumbrances, errors in public records, or disputes over ownership. Title insurance is particularly important because it ensures that the buyer holds clear title to the property and is protected against financial losses arising from these defects.
When a buyer purchases a property, they typically receive a title search conducted by a title company or attorney. This search identifies any potential issues with the title. However, even the most thorough search might not uncover every problem, as some issues, like forgery or undisclosed heirs, may arise after the purchase. Title insurance protects the buyer against such unforeseen defects by covering legal costs related to defending against claims and compensating for any financial loss due to title defects.
In contrast, the other options listed do not directly cure defects in title:
- (a) A mortgage: This is a loan secured by the property, which does not address issues of title defects.
- (b) A quitclaim deed: This is a legal instrument used to transfer an interest in real property. While it can convey whatever interest the grantor has, it does not guarantee that the title is clear or free of defects; thus, it can sometimes exacerbate title issues.
- (d) Contract for purchase and sale: This is an agreement between the buyer and seller but does not address title issues or provide protection against them.
In summary, title insurance is essential for buyers to safeguard their investment in real property against title defects, making it the correct choice in this scenario.