Equitable title is the interest held by one party to purchase property before closing.
Before we jump into specifics, though, if you have no idea what title is – title exists to prove ownership. Having title is not a physical thing, though. It’s NOT like a deed where there is an actual paper in the courthouse that says you own the property. No. Title is merely a legal concept.
Now with that being said, let’s take a look at the term equitable title.
What is Equitable Title?
Definition: The interest held by one party to purchase property before closing.
So what does that mean? Well, there are different levels or steps during a transaction. Closing is the final step. However, in between closing and the execution of a sales contract, the buyer has something called equitable title. Meaning, they have the right to purchase the property before closing. They do not have the deed, or full ownership because closing has yet to occur.
During this time frame, the buyer may need to deal with loan approvals, inspections, due diligence, or other contingencies. During this time frame, the seller cannot back out of the offer because the buyer has equitable title. So simply put, having equitable title is the right to obtain absolute ownership of a property. Once they obtain absolute ownership, they earn full title. Full title meaning they have the deed in their name.
What to Know for the Real Estate Exam
Understanding equitable title is really important for your real estate career. It also may show up on the real estate exam. Specifically, in questions that have to deal with contracts, closing, deeds, and more. Make sure you remember in real estate that an equitable title is the interest held by one party to purchase property before closing.