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What Does Title Mean In Real Estate?

Dori Zinn4-Minute Read
July 31, 2020

Buying a home means learning an entirely new vocabulary. Words like inspection, appraisal, and escrow get tossed around. It’s easy to get lost in the terminology.

It’s also easy to confuse some of the new words you’re learning, including title. It doesn’t only mean the name of a book; it also refers to your home. Here’s what a title is, how it works, and how to protect it.

What Is A Title?

A real estate title is a legal document saying you are the rightful owner of a property. Whether partially or fully, you have access to the property and making modifications as you see fit. You can also transfer that ownership to others. If you have partial ownership, that means transferring only your part.

Title Vs. Property Deed

A title is different from a deed. A deed is the legal transfer of ownership from one party to another. It’s signed by the buyer and seller of the property. It’s part of the transfer of an asset, which includes the title. When closing on a home, there will be a title transfer from seller to buyer through an escrow or title company.

The title company performs a search to verify that the title of the property is legal and legitimate. They review and confirm that the home belongs to the person selling it to you and that this person has a legal right to sell it. Sometimes there are roadblocks to selling a home, like outstanding mortgage, unpaid home taxes, or other home liens.

Title Rights

When you buy a property, the deed transfers ownership as well as your bundle of rights. This includes possession, control, exclusion, enjoyment and disposition. Your rights as an owner can vary depending on your state and might have different limitations. For instance, your rights might be limited if you don’t pay property taxes.

Possession

The person or party that has the title has a right to possess the property. If you have the title, you are the legal owner of your property.

Control

You can use your property any way you’d like as long as it’s not illegal. If your home has a homeowner’s association, there might be extra rules and regulations you’ll need to follow. Some restrictions include very loud music or specific pet breeds.

Exclusion

As the title holder, you can exclude other people from entering your home. Essentially, you don’t have to allow anyone in your home that you don’t want there. Warrants for property searches and easements for things like utility line access will override exclusions, but for the most part you’re allowed to reject anyone from entering your home that you don’t want there.

Enjoyment

You get to enjoy your property as you see fit as long as it’s legal.

Disposition

Disposition is when you transfer property ownership to someone else, permanently or temporarily. As the title holder, you can legally sell or rent the property. There’s an exclusion if there’s a tax lien on your home.

This is only doable if you own your property outright. If you still pay a mortgage, you’ll need to pay it off first before you can dispose of it.

Title-Holding Methods

There are different ways to hold titles, whether it’s when you own a property yourself or share it with one person or multiple people.

 

  • Sole ownership: This is when one single person owns a property. Holding the title as a sole owner means no other person or party needs to be consulted or otherwise authorize deals related to the title. If this person dies, it makes transferring the title and ownership difficult to handle unless a will or trust is set up to handle it.
  • Joint tenancy: Two or more people hold equal rights to the property. If one party dies, the surviving tenants inherit the rest of the ownership. Financing must be approved by all parties. This is a form of co-ownership.
  • Tenancy in common: This is another type of co-ownership. Two or more people hold equal rights to the property, allowing each party to manage their ownership how they please. If a creditor places a lien on a property, they can do it on only one owner’s portion. However, all property liens must be removed for a total transfer of property to take place.
  • Community property: This is a type of property owned by a married couple. If you bought a home during your marriage, that’s typically considered community property unless otherwise noted. Either spouse can get rid of their portion of the property.

Title Defects

With the responsibility of owning a title comes the possibility of running into title defects. A defective title is one that has judgments or liens against it. A defect can stop a title transfer, meaning a home sale won’t go through.

 

  • Liens: A lien is a legal right against a property or piece of property. If you aren’t up to date on your mortgage or property taxes, you could have a lien out on your property.
  • Easements: This is a legal matter where a portion of the land is still owned by the landowner even if another person or party owns real estate on that land. There are different kinds of easements. For instance, easement in gross allows utility companies to build power lines on or close to your property.
  • Encroachments: An encroachment refers to a neighbor building something on your property or hangs over onto your property. There are minor encroachments, like a neighbor’s fence. A major encroachment could be a portion of a home or an extension that goes over onto your property. A structural encroachment is when someone builds something on property they don’t own.

How To Protect Your Title

Before you buy a home or other property, there are ways you can protect yourself from title defects.

 

  • Purchase contingencies: A contingent offer is when an offer on a home has been accepted but is dependent on specific circumstances or criteria that must be met first. For instance, an appraisal is a type of purchase contingency.
  • Title insurance: This type of insurance protects the homeowner if someone later sues and says they had a claim against the home before the current homeowner purchased it. This can be from old home contractors or unpaid property taxes. Most lenders require potential buyers to have title insurance.

The Bottom Line

When you buy a home, the transfer of title is a major step in the process. But there are many different parts to a title, including title rights and potential defects. Before you buy or sell a property, make sure you know what you’re liable for first.

Get the right home loan for you.

Dori Zinn

Dori Zinn is a personal finance journalist for more than a decade. She loves helping people learn about money, covering topics like credit, debt, investing, banking, real estate, jobs & careers, budgeting, college affordability, financial literacy, borrowing and more. Her work has been featured in CNET, Wirecutter, Quartz, Forbes, Bankrate, Credit Karma and others.