Also known as a good title, a perfect title is a deed for a piece of real estate that is completely free of any type of liens or claims that would complicate the sale of the property. This is in contrast to a quiet title, where there is some sort of obligation currently attached to the real estate that would have to be settled before the property could be sold, or that would be transferred to the new owner. With a perfect title, there are no disputes in terms of the description of the property found in the deed, no tax liens, and no claims that cause the ownership of the property in dispute.
In most cases, both residential and commercial property is sold only when a title has been perfected. This means that the property has been researched and no evidence of any type of lien or claim has been discovered. At that point, the current owner is deemed to hold a perfect title, and is free to sell the property if he or she wishes.
The presence of a perfect title is extremely important to anyone wishing to acquire a piece of real estate. Homeowners want to be assured that the acreage identified in the deed is accurate and there are no financial obligations they are assuming, other than the mortgage used to purchase the property. Investors who purchase property for development also want to make sure there are no prior claims on the property before investing resources to improve the value and use the real estate to generate short-term or long-term revenue. A perfect title means the possibility of anyone coming forward to stake a claim on that property once those improvements are made is extremely rare.
When there are some type of encumbrances on the title of a given piece of real estate, steps to remove those claims or liens before going through with a sale is very important. In some cases, the buyer may take steps to remove the claims and restore a perfect title. This is particularly true in situations where the claim is in the form of back taxes. Should the property be especially desirable to the buyer, he or she may agree to pay those taxes as a means of removing the lien and allowing the sale to take place. Investors who purchase distressed properties often engage in perfecting titles so they can be purchased at low rates, renovated, and then resold at a significant profit.