Key Takeaways:
– A house title is a legal term that defines who owns a property.
– The title is different from a property deed, which is a legal document listing the owner.
– Holding the title means you are the legal owner of the property.
– Different ways to hold title include sole ownership, joint tenants, tenancy in common, tenancy by entirety, and living trust.
– Components of a house title include the property description, ownership information, encumbrances and liens, and restrictions and conditions.
– A clean house title is important as it ensures there are no liens or legal issues with previous owners.
– The house title process involves a title search and examination, title insurance, and title transfer and closing.
– When buying a house, the title automatically transfers to the new owner’s name.
– To transfer or gift a house title, the new owner’s name must be added to the deed.
– Inheriting a house title requires a quitclaim deed and documentation proving ownership.
– It is recommended to conduct a title search and invest in title insurance before purchasing a property.
BiggerPockets:
Purchasing property is exciting, but it’s a legal process, too.
A major part of buying a property is taking title to the property. But house titles aren’t the legal document most people think they are. Keep reading to discover what is a house title.
What Is a House Title?
A title is a legal term defining who owns a property. A title is different from a property deed. A property deed is a legal document listing a property’s owner. A title is not a legal paper or contract; It is a word meaning someone (or some entity) is the legal owner of a property.
Titles are essential: Holding one means you are the legal owner of a property. You do not legally own property unless the title is in your name or the name of your business or nonprofit.
Want to update or improve your property? You might not be able to if you don’t hold the title. You also can’t sell a property without the title, and you may face other restrictions, such as being unable to rent the property to others.
Difference Between House Title and Deed
The title is the legal ownership of the property, and the property deed is the legal document that shows ownership. When you buy or sell a property, the deed changes and is recorded in the county’s records.
During a sale, the seller is the grantor on the property deed, and the buyer is the grantee or the person receiving the property. The deed is the physical documentation of property ownership, but you must hold the title to be listed on the deed.
Types of House Titles
Property owners can hold title in different ways, and how you hold title determines how the property or its profits get split when selling the property or if one owner dies. Here are the most common ways to title properties.
Sole ownership
You don’t share the title with anyone when you own a property as a sole owner. You own 100% of the property. Whoever you name in your estate will inherit the property if you die.
This type of ownership is most common for single people. However, some married individuals own property this way, but only if their spouse waives their spousal rights when you purchase the property.
Joint tenants
Joint tenants own a property in equal parts. You each own 50% of the property if there are two owners. The property is split evenly; if one partner dies, their share goes to the surviving partner.
Tenancy in common
If you want to own property with different ownership percentages than 50/50, you must hold title as tenancy in common.
This allows you to split up ownership in increments, and owners can do what they want with their share, including willing it to an heir, giving the shares away, or selling them.
Tenancy by entirety
Tenancy by the entirety is only legal in some states and treats married couples as a single person in ownership. Like joint tenants, tenancy by entirety requires a right to survivorship, which means if one partner dies, their portion of the property goes to the surviving spouse.
Living trust
You can put property you own in a living trust. This means the trust owns the property; you don’t. But when you die, the property will be distributed according to your instructions without going through the probate process.
Related: The Post-Passing Plan: 3 Steps to Protect Your Family’s Financial Future
Components of a House Title
Understanding the components of a house title can make it easier to understand your rights as a property owner.
Property description
The property description is the legal description of the property, including its boundaries, size, and location.
Ownership information
The chain of title shows the current and previous property owners. This helps future owners track down any past owners if there are legal issues with the chain of title as property ownership changes hands.
Encumbrances and liens
Any legal claims to the property will be in this section. The most common is mortgage financing, but if there are other claims to the property, they will be listed here.
Restrictions and conditions
Any zoning restrictions, HOA guidelines, or environmental issues will be listed here. This is what tells potential property owners if the property is available for what they intended.
Importance of a Clean House Title
Before purchasing a property, it’s important to do a title search. The search will determine the chain of title or ownership and any liens on the property. Since liens travel with the property, not the person, you’d be responsible for paying if you bought a property with a lien on it.
When there is a clean title, there are no liens or questions about the previous owners and their ability to transfer the property to new owners. A clean title gives you peace of mind when buying a house, versus taking a risk and buying a property that may have legal issues.
The House Title Process
You’ll start the house title process when you’re interested in a property. This must happen whether you use mortgage financing. You must know the title is clear and the property is free to be transferred.
Title search & examination
A title search and examination evaluates a property’s chain of ownership, existing liens, and any restrictions or encumbrances. Investors can use this information to determine if they should purchase a property.
Usually, title companies or real estate attorneys conduct the title search and examination, providing you with a report of the findings.
Title insurance
Title insurance protects mortgage lenders and the buyer (if you purchase a policy) from defects appearing after the title search determines the clean title.
Title insurance can help with the cost of any legal battles should someone claim ownership of the property or try to attach a lien from before you took title.
Mortgage lenders require a lender’s policy, paid by the buyer, but the buyer’s policies are optional. If you purchase one, it’s good for the entire time you own the home.
Title transfer and closing
The final step is to transfer the title into the new owner’s name and close the sale. This is when the legal names change on the property deed, and the deed gets recorded with the county, showing the new owners on record.
Changing of House Titles
The house title must reflect the new owner’s information when transferring property.
Buying a house with a new title
When you buy a house, the title automatically transfers to your name as the new owner of record. This is done after a title search ensures the house can be legally transferred.
Transferring or gifting a house title
If you want to gift property or transfer it to someone, like a family member, you must have their name added to the deed.
If no financing is involved, you can request a quitclaim deed from a real estate attorney, who will add the new owner to the deed (and title) and remove or leave the existing owners.
Inheritance of a house title
You must also prepare a quitclaim deed if you inherit a house title. However, you must have a copy of the death certificate and any documentation proving you are the property’s new owner.
Final Thoughts
Knowing a property’s title is clear is a key component of purchasing a new property.
Before investing in a property, pay for a title search and invest in title insurance. This protects your investment in the property should anything happen down the road.
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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.
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Property Chomp’s Take:
Purchasing property is an exciting endeavor, but it’s important to remember that it’s also a legal process. One crucial aspect of buying a property is taking title to it. However, house titles are not the legal documents that most people think they are. In this article, we will explore what a house title actually is and why it is important.
A house title is a legal term that defines the ownership of a property. It is different from a property deed, which is a legal document that lists the owner(s) of a property. A title is not a legal paper or contract; rather, it is a term that signifies that someone or some entity is the legal owner of a property. Holding a title means that you are the rightful owner of a property. Without a title in your name or the name of your business or nonprofit, you do not legally own the property.
Having the title to a property is essential if you want to update or improve it. Without holding the title, you may not have the authority to make changes to the property. Additionally, you cannot sell a property without the title, and you may face other restrictions, such as being unable to rent the property to others.
It’s important to understand the difference between a house title and a deed. The title represents the legal ownership of the property, while the deed is the physical documentation that shows ownership. When a property is bought or sold, the deed is changed and recorded in the county’s records. During a sale, the seller is referred to as the grantor on the property deed, while the buyer is the grantee, or the person receiving the property. To be listed on the deed, you must hold the title.
There are different ways in which property owners can hold title, and the way in which you hold title determines how the property or its profits will be divided in the event of a sale or when one owner passes away. Here are some common ways to hold title:
1. Sole ownership: When you own a property as a sole owner, you don’t share the title with anyone else. You own 100% of the property, and if you die, the property will be inherited by whoever you name in your estate. This type of ownership is most common for single individuals, although some married individuals may also own property this way if their spouse waives their spousal rights during the purchase.
2. Joint tenants: Joint tenants own a property in equal parts. If there are two owners, each owner has a 50% share in the property. In the event that one partner dies, their share automatically goes to the surviving partner.
3. Tenancy in common: If you want to have different ownership percentages than a 50/50 split, you can hold title as tenancy in common. This allows you to divide ownership in increments, and owners have the freedom to do what they want with their share, including willing it to an heir, giving it away, or selling it.
4. Tenancy by entirety: Tenancy by entirety is only legal in some states and treats married couples as a single person in terms of ownership. Like joint tenants, tenancy by entirety has a right to survivorship, meaning that if one partner dies, their portion of the property goes to the surviving spouse.
5. Living trust: Putting property you own into a living trust means that the trust owns the property, not you. However, when you die, the property will be distributed according to your instructions without going through the probate process.
Understanding the components of a house title can help you better understand your rights as a property owner. The key components of a house title include the property description, ownership information, encumbrances and liens, and any restrictions and conditions. The property description provides the legal details of the property, including its boundaries, size, and location. The ownership information shows the chain of title, which helps track down past owners if necessary. Encumbrances and liens refer to any legal claims on the property, such as mortgages. Finally, the restrictions and conditions section outlines any zoning restrictions, HOA guidelines, or environmental issues that may affect the property.
Before purchasing a property, it is crucial to conduct a title search. This search will determine the chain of ownership and identify any liens on the property. Since liens are attached to the property, not the person, you would be responsible for paying off any liens if you bought a property with one. A clean title, on the other hand, means that there are no liens or questions about previous owners and their ability to transfer the property. Having a clean title provides peace of mind when buying a house, as it reduces the risk of potential legal issues.
The process of obtaining a house title begins when you express interest in a property. This process is necessary whether or not you are using mortgage financing. You need to ensure that the title is clear and that the property can be legally transferred. The steps involved in the house title process include a title search and examination, title insurance, and title transfer and closing.
During a title search and examination, a property’s chain of ownership, existing liens, and any restrictions or encumbrances are evaluated. This information helps investors determine whether or not they should purchase a property. Typically, title companies or real estate attorneys conduct the title search and examination, providing a report of their findings. Title insurance is crucial as it protects mortgage lenders and buyers from any defects that may arise after the title search determines a clean title. It can help cover the cost of legal battles if someone claims ownership of the property or tries to attach a lien. While mortgage lenders require a lender’s policy, buyers have the option to purchase a buyer’s policy, which remains valid for as long as they own the home. Finally, the title transfer and closing involve changing the legal names on the property deed and recording the deed with the county to show the new owners on record.
When it comes to changing house titles, there are a few scenarios to consider. When you purchase a house, the title automatically transfers to your name as the new owner. This transfer occurs after a title search has confirmed that the property can be legally transferred. If you want to gift or transfer a house title to someone, such as a family member, you must have their name added to the deed. If no financing is involved, you can request a quitclaim deed from a real estate attorney, who will add the new owner to the deed (and title) and remove or leave the existing owners. In the case of inheriting a house title, you will also need to prepare a quitclaim deed. However, you must provide a copy of the death certificate and any other documentation proving that you are the new owner of the property.
In conclusion, understanding the concept of a house title is essential when purchasing a property. Before investing in a property, it is crucial to conduct a title search and invest in title insurance to protect your investment. By ensuring that a property has a clear title, you can have peace of mind and reduce the risk of potential legal issues. The house title process involves a title search and examination, obtaining title insurance, and transferring the title into the new owner’s name. Remember that changing house titles requires the appropriate legal procedures to be followed.
