Definition
The legal document that provides the identification of ownership for a certain property is called a certificate of title. The three most common forms of a certificate of title include those for automobiles, homes, and land. If a loan or mortgage exists on the car or home, the certificate of title is usually held by the lending institution until the loan is satisfied.
Explanation
While possession of an item is typically thought to indicate ownership, the certificate of title provides proof of ownership. For example, when cars are sold, the owner will sign the certificate of title over to the new owner. Signing the certificate passes legal ownership of the vehicle over to the buyer.
When homes are readied for purchase, a title search is performed to assure the buyer that a certificate of title can be passed to the purchaser without legal dispute. Title insurance is often purchased to guarantee that errors were not made during the title search, and that future legal claims will be settled without loss of the home.
A deed is a written document used to pass the certificate of title for a home to its new owner.
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