What is a certificate of title?
A certificate of title is a legal document issued by a government agency that indicates proof of ownership of real estate or titled personal property, such as a car or boat. Once ownership is transferred at closing, the certificate of title is proof of ownership. Sets liens, easements, and other claims against title.
The document includes information such as:
- The name of the owners or holder of the title.
- Description of the house or property
- Lien information (if applicable)
Upon sale of the property, the certificate of title will be transferred to the buyer, provided there are no mishaps along the way. However, if the certificate of title is “dirty,” meaning it has liens or easements, more research will need to be done to see how this affects the home purchase.
When buying real estate, make sure the seller has clear title to sell to the buyer. Title certificates with liens or liens from creditors can present a problem.
For example, let’s say the owner of a property you’re interested in has outstanding mortgage payments or owes contractors for work they did on the house. Since the title is unclear, the new owner would be responsible for settling these liens which, after purchasing a new home, is the last thing he wants to deal with.
Buying a house with a free, clear title ensures that you will have full ownership and that third parties will not raise questions about ownership in the future.