We all know what it means to own something. But how do you prove you own it? Especially if you want to sell or use it for a loan?
That’s where the certificate of ownership comes in. A certificate of title is a legal document issued by a state or municipality that shows you own property. A title deed proves ownership of any type of real or personal property, but is most commonly used for big-ticket assets people need to borrow, such as homes and automobiles.
Although it seems like it should be simple, property ownership can be complicated, especially when it comes to real estate. Here’s how title deeds can help homeowners prove their status.
What is a Certificate of Title in Real Estate?
A certificate of ownership is a document that officially gives ownership of a property to a specific owner. In the real estate world, a certificate of title typically refers to a document written by a title company or attorney stating that the property is legally owned. It can also be a state or municipal document that identifies the property owner(s).
The certificate of ownership bears the name of the person who takes charge of the property until the person decides to sell it to someone else. Contains no information about previous owners. It may have associated with it information related to the funds used to acquire the property as collateral.
When it comes to the mortgages that most people use to buy homes: The buyer may consider themselves a homeowner – but they don’t own the title. The creditor of the borrower is actually the owner of the certificate of ownership. Only when the borrower makes the final payment to the lender do they become the full, legal owner and title holder of that property. In this case, the municipality or government agency will give the buyer a certificate of ownership in their name.
What information is on the certificate of ownership?
A certificate of title has identification information on it, the name of the property and the person who holds the title. For example, a car title certificate includes information such as a vehicle identification number (VIN) or license plate number. In real estate, it has the full address of the house or other building.
The title identifies the owner, specifically by name and address.
Title deeds also indicate any liens, financial claims, or other encumbrances on the home or that allow someone else to use the property. Mortgage statements are often attached to the certificate, as well.
Melanie Hartman, owner of Creo Home Buyers, a Maryland buying company based in Baltimore, said any deficiency in title deeds can hinder or even cancel real estate transactions. “One way a home sale can fall through is that the home does not have a clear title and the homeowner is unable to clear it at closing.
Certificate of Ownership vs. Deed
A certificate of title is different from a deed, although the two overlap a bit in their functions when it comes to real estate. Both distinguish and provide proof of ownership, e.g.
A certificate of ownership is an official municipal document that serves as a record of ownership. A deed is a contract-like document describing property (although it may be filed with a municipality), drawn up when ownership of that property is transferred. It mainly plays a role in the purchase process to determine the amount of ownership and usually to indicate whether the buyer or seller of the transaction is responsible for any claims and liabilities arising from the property.
Why is a certificate of ownership important?
Certificates of ownership are important because they serve as proof of ownership. If you can’t prove that you actually and legally own the property, you’ll have a hard time doing things like selling your home or convincing a lender to give you a home equity loan.
The certificate of title lists any liens, liens, or encumbrances on the property. Having a clean title gives you complete control over how you use or transfer the home to someone else, free from encumbrances and free of any encumbrances. Most mortgage lenders require a clear title deed before approving financing to purchase the property.
Examples of real estate ownership certificate
If you buy a home, you’ll receive a certificate of title in your name immediately — if you pay cash. If you finance the purchase, you’ll receive it when (and when) you make the final payment on your loan.
Generally, the lender will send a discharge of mortgage deed to the local deeds registry, notifying them that they have paid off the mortgage. You can then obtain a certificate of ownership from the relevant authority in your province or municipality. Once this is done, once you have verified the title on your home, it should be returned clear without any liens, liens or other encumbrances.