Not sure why your title company I flagged it, but since they did it is now your responsibility to disclose the defect to the new buyer or to fix it before you sell.

If title evidence or survey reveal any defects which render the title unmarketable, Buyer will have 7 days from receipt of title commitment and survey to notify Seller of such title defects and Seller agrees to use reasonable diligence to cure such defects at Seller's expense and will have 30 days to do so, in which event this transaction will be closed within 10 days after delivery to Buyer of evidence that such defects have been cured.

Lots of cases get delayed or unwind due to insufficient or defective noticing.

And possible defects it holds? 

It went under contract a few weeks later.Had they sold to this person and the individual later found the defects in the property after closing, you can bet their would have been a lawsuit.

The appraiser had to value the properties low due to them not being zoned multi-family; he instead appraised them as 1 SFH with a "functional defect".

Aside of that, you may lose your EMD.It may not be so much about hiding defects as it is about enforcing the contract to the benefit of the seller - which, after all, is the job of every seller's agent.

Somebody wanting to sue for you backing out of a bad deal or accusing you of selling them a property with defects like unknown termite damage).

If you have a tax deed, then the quitclaim deed just clears up title defects in your deed, and the liens do not re-attach.

WARNING: This post contains a chemical known to the State of California to cause cancer, birth defects, or other reproductive harm.