House Titles: The Complete Guide

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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.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.