Purchasing a Home: Which Form of Ownership Should You Declare?

shutterstock_125806499As you delve into the process of purchasing a home, you will quickly realize that there are many pieces of paper that need to be signed and transferred in order to finalize the deal. Among these papers, the one that is likely to be the most important to you is the deed. The deed is the paper that officially transfers ownership of the property from the seller to you. To ensure you are truly able to take ownership, however, it is essential to be sure you have a clear title to the property. You must also declare a form of ownership on the title. While there are several different types of ownership that can be claimed on a title, the three most common are joint tendency, tenancy in common and tenancy by the entirety.

Joint Tenancy

Joint tenancy is when two or more people have equal rights to the property. Under this form of ownership, the other owners receive an equal share of the property if one of the tenants passes away. Ultimately, the full title goes to the lone survivor. If you enter into a joint tenancy, you cannot legally sell your share of the property without the consent of the other tenants. It is possible, however, for a creditor to petition the correct to collect judgment from one of the owners based on their share of the house.

Tenancy in Common

Just as with joint tenancy, tenancy in common provides each owner with equal right to the property. The main difference is that each hold a separate interest in the property. As such, each owner may sell his share of the property without gaining consent from the other owners. Furthermore, if one of the owners dies, that person’s share of the property is left to his or her heirs. Some states presume ownership is set up in this manner unless the deed specifically states otherwise.

Tenancy by the Entirety

This form of ownership is generally used with married couples, as it treats the husband and wife as one person. As such, ownership is provided to the couple as one person, which means ownership passes entirely to the surviving spouse if one should pass away. Furthermore, a spouse cannot leave his or her share of the house to someone else in a will or through other legal action. In the case of divorce, tenancy by the entirety typically changes to tenants in common.

If you are unsure of which form of ownership is right for you, discuss your options with your real estate agent to learn more about your options and the pros and cons that each delivers.

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