Mortgage Loan Originator (MLO) Licensing Practice Test 2026 – Your All-in-One Guide to Exam Success!

When a property has a title defect, it signifies that there are legal issues or claims that may hinder or complicate the transfer of ownership. This could involve unresolved liens, claims by third parties, or problems with the property's historical transaction records. Such defects make it difficult or impossible for a seller to convey clear title to a buyer, potentially affecting the property’s market value and the seller’s ability to complete a sale.

The presence of a title defect may result in complications during the closing process, requiring resolution before a sale can proceed. Buyers typically seek assurance that the title is free of defects to avoid future disputes or financial liability. Therefore, having a title defect indicates there are significant issues affecting the ability to sell the property.