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. It sets out all liens, easements and other claims against title.
The document includes information such as:
- The name of the owners or title holder
- Description of the house or property
- Lien holder information (if applicable)
Upon sale of the property, the certificate of title will pass to the buyer, provided there are no mishaps along the way. However, if the certificate of title is “dirty”, meaning it contains liens or easements, further research will need to be done to see how this affects the home purchase.
When buying real estate, make sure the seller has a clear title to sell to the buyer. Certificates of title with liens or drawdowns from creditors can present a problem.
For example, suppose the owner of a property you are interested in has outstanding mortgage payments or owes contractors for work they have done on the house. Since the title is unclear, the new owner would be responsible for resolving those liens, which after buying a new home is the last thing you want to deal with.
Buying a home with a free and clear title ensures that you will have complete ownership and that third parties will not ask questions of ownership in the future.