What happens if your car title is signed but never transferred?
When you go to sell a vehicle, you can have the title signed by the buyer and seller, but there is no guarantee that the buyer will then take the car title to the Department of Motor Vehicles (DMV) and get the title officially transferred and registered appropriately.
As a seller, it is essential to report the car as sold with the DMV and make sure that you have completed the transfer of title process. Ensure as the seller that you also have filed any release of liability forms as well as keeping copies for your records. Neglecting to do so can cause you as the seller to be liable for the actions of the purchaser of the vehicle.
How to Ensure Title Transfer as a Seller
Unfortunately, there's only so much you can do as the seller to ensure that the buyer transfers the title into their name. The buyer is subject to penalties if they don't complete the title transfer in an allotted amount of time, but these time frames typically aren't enforced until the buyer completes the transfer.
However, you can protect your liability. The primary way to do this is to get on the DMV's site and report the sale immediately. Make copies of the bill of sale, odometer reading disclosure, VIN number, and the signed-around title. You can then file these with the DMV through the mail or in person. Make sure to take all vehicle registration papers out of the vehicle and call your insurance company to cancel insurance as well.
If you do not cancel your insurance on the vehicle right away, you can be held liable as the seller for an accident caused by or incurred by the purchaser. Communication with the DMV and your insurance agency is the best liability protection you have as a seller.
Why Proof of Title Transfer is Important
If you don't follow up and trust that the buyer will do their job, you could end up getting traffic or parking tickets in the mail. You might even get an impound or towing notice if the new owner ends up in that situation. In all of these situations, having proof of title transfer is your best friend. Most states will back up sellers who have evidence that they sold the vehicle. Ensure you have the buyer's name, sale price, and all other proof of title transfer on hand. If you're a buyer, it's essential to be a good customer and obey the law on your end to give the seller peace of mind. Even when selling to a family member, it's a good idea to cover all your bases.
As a buyer, you want to ensure that the seller's signature is present on the back of the title before leaving with the vehicle. Most states require that all owners listed on the title print and sign their name when transferring ownership. If you are purchasing a vehicle with a loan, the title will be held by your lienholder until the loan is paid in full. Once your loan is paid in full, the lienholder will remove their name from the title and will transfer the title to you.
If you are selling a vehicle before your loan is paid in full, the lienholder will transfer the title to the purchaser when the loan amount is paid. In some situations, a lienholder may allow the purchaser to continue paying on the original loan. This is lienholder-specific and does not apply to every situation.
Title Transfer by State
Different states have different rules on transferring a title. Most have a specific time period that you have to transfer the vehicle's title before being penalized. This period is usually 30 days from the date of sale but can be as long as 60 or as short as 15. Some states require an odometer reading, while others don't.
States like Washington also require the seller to notify the DOL of the sale date, including the name and address of the buyer as well as a driver's license if available, and a description of the vehicle including the vehicle identification number (VIN). The original seller is required to file this notice within five business days of the sale. Washington also requires the new owner to apply for a new title within 15 days versus the usual 30. Many states also require you to remove license plates before letting the buyer leave with the vehicle.
It is imperative that you check your local state laws on title transfers before starting the process. States differ in the required paperwork, time periods, and options on lost titles. Your local department of motor vehicles is your largest asset in the title transfer process.
What is Title Jumping?
The process of buying a vehicle, never finalizing the transfer of title process, and then selling the vehicle again is called title jumping. Title Jumping refers to the title "jumping" over one owner and on to the next.
The new owner gets the title, but the previous owner avoided sales taxes, transfer fees, and registration fees by never registering the car in their name. This process was originated by shady car dealers who wanted to avoid paying taxes. However, many regular car buyers have caught on to this scheme and title jump to avoid paying taxes.
It is important as a new owner and original owner to know that title jumping is illegal in every state. It doesn't matter if you buy a vehicle and then immediately sell it, you still have to transfer ownership into your name first.
What Happens to Title Jumpers?
The majority of states require a vehicle title to be transferred within a specified period after buying a new or used car. If you don't transfer the title within this period, you are subject to fines and penalties. Not only that, but you still have to transfer the title.
At no point in the title transfer process is it acceptable not to complete all aspects of the process. If you don't transfer the title and then try to sell the vehicle, you are committing an illegal act. You could be fined and even do jail time.
Title jumping is illegal in all 50 states and is considered a felony subject to state punishment. There are some exceptions, including cases where someone has passed away and the family member or next of kin wishes to sell the vehicle.
What Happens if You Buy a Title-Jumped Vehicle?
As a new owner, it is essential to ensure that the original owner selling your prospective car is also the person on the title. There are some exceptions to this, however, such as the person signing over the title to you having power of attorney over the person on the title. The individual with power of attorney must prove it because you will need it to transfer the title.
Otherwise, it could become a hassle getting the title transferred to your name, not to mention having to get back to the last person's name on the title. Sometimes people who are title jumping will tell you that they have lost the title or something similar. Protect yourself as the buyer and don't buy a vehicle until a duplicate title arrives with the correct names on it.
Recourse as a Title Jumping Victim
If you end up buying a vehicle with no certificate of title, or a title that doesn't have the seller's name, then you have a few options. If you bought the car from a dealership, then you can file a claim of fraud against the business, or you can have them take the car back.
If you bought the new or used car from a private party, contact the seller and try to get them to transfer the original title from the original owner's name into their name. Once they receive the transferred title, they can then sign the title over to you.
If you bought a car in which the vehicle title was lost, then you will likely have to seek help at the DMV. You may have to get a bonded title, or you may have to contact the last known owner of the car to ensure their release of interest.
There are ways of dealing with title jumping or a missing title, one of which is acquiring a bonded title. Bonded titles are classified as marked titles. Marked titles signify an issue with the original title.
A bonded title has the appearance of a regular title with the exception of bonded branding on the title. You can get the brand removed for a bonded title in three to five years if there are no other issues. After the three to five-year period, you can then apply for a clean title. To get a bonded title, you will be required by the DMV to buy a Lost Title Bond.
Getting a Bonded Title
Start by checking with your local DMV to see if you're eligible. Only the DMV can tell you for sure if you're eligible for a bonded title. Explain your situation to the DMV representative and ask if you're eligible.
The following are four common situations where you might need a bonded title:
You didn't receive titling when you bought a vehicle
You only got a bill of sale when you purchased a vehicle
You received an improperly assigned vehicle title when you bought a vehicle
You lost your transferred title after receiving it
There are other situations in which getting a bonded title is appropriate. If any of the above situations apply to you, or you are unsure if your situation requires a bonded title, make sure to call your local DMV office and inquire about starting the bonded title process.
Buy a Lost Title Bond
To get a bonded title for a vehicle that doesn't have a title, you have to buy a surety bond. A surety bond is a promise from you, the buyer, to be liable for the debt of the vehicle. The average cost of a surety bond is usually around $100. Once you receive the surety bond by mail, you can turn it into the DMV to finalize the application for a bonded title. The surety bond is apart of the application process to confirm that you are the real owner of the vehicle. As long as you are the rightful owner, you shouldn't have to be concerned about anyone appearing and making a claim against your bond.
If, for some reason, someone brings a claim against your bond, however, you are then liable to cover the cost of the surety companies investigation into the claims brought against you. The surety company will then make the definitive decision on the claim. So, before applying for a bonded title, ensure you are the rightful owner and are free and clear of all other requirements.
States That Don't Allow Bonded Titles
Not all states allow you to get bonded titles. The states that do not allow bonded titles are Delaware, District of Columbia, Kansas, Kentucky, Louisiana, Maryland, New Jersey, North Dakota, Oklahoma, Oregon, Pennsylvania, South Carolina, South Dakota, Virginia, and West Virginia.
Examples of states that accept bonded titles are California, Texas, Florida, and Colorado. There are many other states that allow bonded titles. Each state has differing bonded title amounts, make sure you apply for the correct bond title amount before submitting your paperwork to your local DMV. Be sure to check with your individual state's DMV for more information on individual bonded title laws in your state.
Indiana and Ohio handle titles differently than other states and do not accept bonded titles, but they do take court-ordered titles. If all other title recovery methods fail, as the buyer, you have the ability to file a court case to secure the title of the vehicle purchased.