Titles are used to convey ownership of real property such as real estate or automobiles. When a piece of property is sold to a buyer, the title must then be legally transferred from one party to the other. While this title transfer process seems rather simple, it can get a little tricky at times due to all of the different documents required for special circumstances. There are quite a few different ways one person, a couple or even a group of people can all own a piece of the title. Also, in the instance of a death, a divorce or a sale, the party holding the title may differ. Here's a look at the various types of title transfer methods most commonly used in the buying and selling of real estate. Read over them to decide which method of title holding best fits your situation and specific needs.
Joint Tenancy
Joint tenancy is when two or more individuals jointly hold title to real estate with each retaining equal rights. This is only the case while both tenants are living. If one of the partners passes away, their rights and ownership of the property is then passed to the surviving tenant. The advantage of a joint tenancy is that the parties involved in the ownership of the property don't need to be legally married or even related for that matter. The downside to a joint tenancy is that all parties who share ownership of the property must approve of financing decisions or changes made to anything on the title. So, that means that each of the owners takes a huge risk in trusting the financial decision making of the other owner. This is because a creditor can force a sale of property in order to collect on a judgment owed by either of the owner's
Tenancy In Common
Tenancy in common is extremely similar to joint tenancy. The only major difference is that with a tenancy in common, each individual holds the title to each of their respective part of the property and have the ability to dispose of or sell it at their own will. Partial ownership can easily be transferred to any other party while the rightful owner is alive and in the instance of their death, ownership will then be transferred to that owner's designated heir. This type of title hold allows for an individual owner to use the wealth created by their portion of the property as collateral for financial transactions. It also allows creditors to only place liens against one owner's portion of the property, so the other owners and their portion of the property are protected. Although, any liens must be cleared before a total transfer of the property can take place.
Tenants By Entirety
This type of holding refers to real estate ownership under the assumption that the couple are considered one person for legal purposes. In the instance of a death, the title is automatically fully transferred to the other party. Keep in mind that this method of title holding is only available to owners who are legally married. The advantage of having one of these particular titles is that there is no need to take any legal action if one of the spouses passes away, which means there's also no need for a will. If the couple divorces, this type of title automatically converts to a tenancy in common. Either one of the owners then has the ability to transfer ownership of their part of the property to anyone they choose.
Sole Ownership
This type of title holding is pretty straightforward and self-explanatory. Sole ownership means that an individual or single party is the only one holding the title. This is why most sole ownership titles are held by singles or married individuals who own property separately from their spouse. Sole ownerships are also common for businesses with a corporate structure that allows them to invest in real estate. It's important to note that in the case of married couples holding property separately, most title insurance companies will require the other spouse to legally relinquish their right to ownership of the property. Sole ownership is preferred by some because it allows the easy transferred because no other party is required to approve before a transaction can take place. If the sole owner dies, it must be specified in his or her legal will who will be taking over the ownership of the property. If no will is left, many problems can arise when the courts try to determine who the rightful owner is.
Community Property
Community property is a type of title ownership that is usually reserved for married couples. Under community property, either spouse has the right to dispose of or transfer his or her half of the property. Property other than real estate which is acquired during the marriage is also considered community property. You don't necessarily have to be married to own community property as it can also apply to couples who are only common-law married. If the couple lives together as common-law spouses and the title is never changed to a sole ownership, the two of them will share ownership of the property.
Community Property With The Right of Survivorship
Although not available in the states of California, Arizona, Texas, Nevada or Wisconsin, community property with the right of survivorship is a common way for unmarried couples to hold title to property. If one of them passes away, their community property and assets are automatically passed to the other.
While every state requires the legal filing of a title when property is transferred during a sale, the laws and regulations can vary. These are just some of the most common methods for holding title to property used in the real estate industry today. There are plenty of other ways to hold title for individuals, single families, corporations, partners and trustees. If you are involved in a unique situation, you may want to contact your title company or a reputable tax professional to learn more about the title holding options which best fit your needs.
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