What is an Open Title?
An open title on a car happens when the seller signs the title over to the vehicle buyer but leaves the buyer's information blank, and the ownership isn't formally transferred. An open title on a vehicle is extremely risky, not to mention illegal too, and can lead to title jumping. We compiled a short guide on open titles and why they are risky.
During normal circumstances on a vehicle sale, the seller will sign the certificate of title to release ownership to the buyer or new owner. The buyer will then complete and sign the new owner's section and hand over the vehicle title to the DMV for registration of the new ownership of the vehicle.
If you purchase a motor vehicle with a title signed by the owner but the buyer information is blank, you have an open car title. The seller's name and contact information appear in the "seller's section" of the title; however, the previous owner didn't complete the "buyer's section" and failed to add important information related to the sale of the vehicle, including the:
- Sale price
- Buyer's name and contact information
You should rectify the problem immediately at your local state Department of Motor Vehicles (DMV), especially before selling the vehicle. Transferring an open title through multiple buyers is known as title jumping, and it is an illegal practice that can land you in hot water.
An open title occurs in three main ways, namely:
- The seller doesn't sign the title, either accidentally or intentionally.
- The buyer doesn't sign the title, either accidentally or intentionally.
- Multiple successive buyers don't sign the certificate of title.
Reasons for Leaving a Car Title Open
If an open title is illegal, what purpose does an open title on a car serve? Selling a motor vehicle with an open title allows the new owner to sell the car without recording the ownership with their local DMV. This tactic means the buyers can flip the used car to the next owner without paying any sales tax on the purchase.
Open titles commonly occur between a private seller and buyer; however, some dealerships will also hand over an open title on a car. Unlicensed dealers, nicknamed "Curbstoners," employ an open title strategy to stay under the radar of state restrictions for selling multiple vehicles in one year. These dealerships can continue selling cars without applying for a dealer license while avoiding sales taxes.
Another reason a title may be left open is if the buyer loses the certificate of title before transferring the ownership of the vehicle at their local DMV. This is a temporary open title, and the situation can be quickly fixed if:
The original seller applies for a duplicate title and signs it again.
The buyer applies for a bonded title to transfer the ownership of the vehicle.
How to Identify an Open Car Title
If the person listed on the title deed is not the same person selling the vehicle to you, you are looking at an open car title. You can confirm this by asking the seller for their proof of identity and comparing their information against the name listed on the title. If the names don't match, then you definitely have a vehicle with an open title in front of you.
Purchase a Vehicle History Report
While it doesn't necessarily mean the car is problematic, you should proceed with caution and make sure you do extra research on the vehicle before buying it. Most importantly, determine whether you can complete a title transfer into your name after concluding the sale.
Several services provide vehicle history reports; they should be your go-to because vehicle history reports can reveal potential title transfer problems.
You can use the following services:
The National Motor Vehicle Title Information System: This system forms part of the government's anti-vehicle theft program, and drawing a report from them costs around $4.95.
Carfax: This private company offers vehicle history reports for $39.99.
AutoCheck: They are also a private company, and they charge $19.99 for a report.
You can order a vehicle history report by going onto one of the provider's websites and entering the vehicle identification number (VIN). If you look on the driver's side of the dashboard, you will locate the VIN of the vehicle.
Once you receive the vehicle history report, look for any important information relating to the certificate of title. A salvage vehicle will have a salvaged title, but you can complete a title transfer as long as you have the bill of sale. If a title lien or open stolen vehicle report is listed, then you won't be able to complete the title transfer. If nothing is listed in the section relating to the certificate of title, then the car is most likely clean, but if you want to be on the safe side, confirm the clean title with your local DMV or AAA.
Confirm the Title
Purchasing a vehicle history report (VHR) alerts you to potential problems relating to the vehicle's transfer of ownership, but the last say on its transferability lies with your state DMV. A VHR may not pick up a lien placed against the vehicle in the day immediately preceding the proposed vehicle sale; however, the encumbrance will be available on file at the state DMV.
When buying a car with an open title, make an appointment at your local DMV or AAA office that provides DMV services for added peace of mind. They can run a check on the title for any red flags that may prevent the ownership transfer.
Risks of Buying a Car With an Open Title
Leaving a title unsigned or with missing information may seem innocent. Still, it can cause serious problems, especially if multiple people pass the same open title along the line of transactions. While we have explained that an open title may prevent the transfer of ownership, especially if the vehicle is problematic, let's look at some other risks involved.
Open Titles May Hide the Truth
For example, if John own a vehicle with a title branded Flood or Salvage status, he may have a challenge finding a buyer for it when he wants to sell his car. This status remains on the paper title, and even the new title will share the vehicle's status as Flood or Salvage.
For this reason, if John were a dishonest seller, he could pass his salvage vehicle off as clean utilizing an open title. The new owner wouldn't know about the vehicle's damage until it was too late. This is why you should always confirm an open title with the AAA or your local DMV before approving the sale.
Open Titles and Liability
Typically, the new owner must process the vehicle's title before registering for plates. This means any citations from sources like parking tickets and traffic cameras will go to the existing titled owner instead of the new owner.
When a title is left open, the recorded seller is liable for anything that happens with the vehicle. A sure indication that the buyer hasn't obtained a new title in their name is when the seller starts receiving parking tickets, registration renewals, and moving violations in the mail long after selling the vehicle.
Unpaid registration fees accrue, and somewhere down the line, someone will be held liable for payment. State laws differ for these situations. In California, for example, a seller can file a "notice of transfer and release" form, which releases them from the responsibility of paying registration fees and parking tickets; however, they are still the listed owner of the vehicle. In the event of a civil suit or car accident, the court will decide whether the seller is liable or exempt from the liability.
Open Titles Cause Legal Problems
Title jumping is illegal in all 50 states except in some instances, such as when the owner passes away, and the next of kin sells the vehicle. If the open title continues for a while, from one owner to another, then the title jumping may eventually be realized by your state. Should the DMV catch this, there will be no record of the original seller; the only information they will have is you as the current owner, leaving you responsible for the felony.
If the state realizes they have an incomplete ownership history on a vehicle, they will assess the fines and registration fees and contact all those on record as involved parties. Legal action is possible because those previous owners have essentially stolen money from the state by curbing their taxes.
End the Open Title Trail
Do not fall victim to the risks of an open car title.
As the seller, sign the certificate of title and ensure the buyer does if you want to avoid the risk of remaining liable for a vehicle you sold. Ask the new owner to confirm the transfer for peace of mind.
As the buyer, never purchase a motor vehicle with an open title. If you are confident in your decision to buy the car with an open title after confirming its status as a clean vehicle with the AAA or DMV, then ensure you end its trail of having an open title. Register the title in your name as soon as possible. Most states have a timeframe for this title transfer, but you still need to transfer the title into your name to avoid the associated risks and liabilities even if you exceed this window.
In order to place the title of the vehicle into your name, you will need to provide a vehicle bill of sale. If you do not have this document, ask your state DMV on the best way to proceed.
If you find yourself at the end of a jumped title trail and want to mitigate any of the potential risks, then you have some options available:
If you bought the car from a licensed dealership, file a claim against the business.
If you bought the car from a private seller, try and get the seller to work together with you to set up the transfers that should have occurred during the jumped title trail.
You can get a bonded title. This is a title with a bond attached to it, which acts as a promise that you are the valid owner.
If the original seller isn't cooperative, you can ask for your money back, but this may be challenging.