Many sellers and buyers hold the mistaken belief that a defective title can be made marketable with title insurance. The fact that a title company is willing to insure the seller's title does not make it marketable. The title insurance does give liability protection to the property owner against many damages that may arise because of the encumbrance or defect. Nevertheless, the title remains non-marketable, and the buyer would have the right to back out of the deal because of that defect.
However, the title insurance's protection extends only over those items specifically listed in the title insurance commitment. If an encroachment is not recorded and amended into the insurance commitment, the title insurance policy will not cover that encroachment.
For more information, please see the "Title and Title Insurance" article.
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