A description of the current legal owners of the property, vesting may present the most serious type of cloud on title. By default, the vesting on a property is the same as that on the latest grant deed. However, if a marriage, divorce, or death has occurred since the last deed, then depending on the state, the vesting of the property can become a cloud on title.
For example, when a married couple purchases a property, they are both named as the buyers on the grant deed. Should they later divorce, the spouse who is awarded the property still needs permission from the ex-spouse to sell or refinance the home, often through a quitclaim deed. If the owner does not obtain a quitclaim deed, when the property is sold to a new owner, the ex-spouse can come out of the woodwork at any time and lay claim to the property. As a result, there would be a total failure of title and the new owner would suddenly have no right to the property whatsoever. In instances like these, the title insurance provider loses a significant fraction of the value of the home.
Finally, we use vesting when we record the documents of lien and property ownership during the closing of a transaction. Proper vesting is crucial to the customer in cases when property ownership changes hands, either in resale or refinance scenarios.