What “Clear Title” Means

November 9, 2020 Blog

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Simply put, ‘clear title’ means that ownership of the property (movable and immovable) in question is free from any outstanding legal claims or procedures. In simple terms, the items are yours. Alternative terms for the same meaning are good title, just title, or free and clear.

Another term you may come across in connection with titles is ‘lien.’ This means that the home or car in question has been used as security for a loan, in other words someone has given authority for the item to be taken if payments on the loan are not made. While a lien is in place, the item cannot be sold or transferred to other persons without being satisfied.

Car Title

Having a clear car title means there are no outstanding payments to be made on the car, and ownership is therefore clear and established. Conversely, if you are still paying off a loan for the purchase of your car, you do not fully own that car yet and do not have clear title. A clear title on a car is also known as a ‘pink slip’.

If you are buying a car, check the car’s history at carfax.com. Repossessed cars do not show up on the title, but they do show up on the car’s history. You will need to go to your local DMV to remove any names still holding title over the car.

Property Title

If you are buying a property you need to make sure there are no liens in place. The way to do this is to hire a company to research public documents for you and establish if the seller has clear title and is free to sell. If you pay for a property that was not rightfully the seller’s, then you have wasted your money and own nothing for your trouble.

Not having a clear title on your property may actually mean that you pay less tax and may be advantageous to you. This is because the interest payments you make on a home loan are deductible from your income for tax purposes. Owning your home free and clear will mean you pay higher taxes. If you have finished paying for your home, you could remortgage it for part of the equity value to carry out improvements and raise the value of the property.