Title Tuesday: What is Vesting?

Advocus Title is a resource for you and your borrowers to help explain and assist with vesting to accurately prepare the title commitment and loan documents. Below we have broken down what vesting is, the most common vesting types, and the types of parties that would be involved in establishing title.

What is Vesting?

Vesting refers to the details of the actual ownership of property, including how the property is owned. The vesting rights, conveyed by virtue of a deed, typically include rights to use and occupy the premises.

Common Types of Vesting (not applicable to all states)

• Tenants in Common: Two or more people in whom title to a single piece of real estate is vested. They each hold a separate individual interest or estate in the property, and each may sell or encumber his or her respective interest (or dispose of it by will). If an owner dies without leaving a will, his or her heirs inherit the undivided interest.
• Joint Tenants: Two or more people who hold title to real estate jointly with equal rights to share in its enjoyment during their respective lives with the provision that upon the death of a joint tenant, his or her share in the property passes to the surviving tenants, and so on, until the full title is vested in the last survivor. A joint tenant cannot legally sell or encumber his interest without the consent or joinder of all the other joint tenants.
• Tenants by Entirety: Tenants by entirety (TBE) is a method in some states by which married couples can hold the title to a property. In order for one spouse to modify his or her interest in the property in any way, the consent of both spouses is required by tenants by entirety. It also provides that when one spouse passes away the surviving spouse gains full ownership of the property.

Different party types in title establishment:

• Non-Obligated Party: A non-obligated party in the mortgage process would be an individual who has legal stake in the property but does not have an obligation to repay the loan. This means that their name would be specified on the deed of the property but not the mortgage.
• Non-Vested Party A non-vested party would be an individual who is not mentioned on the deed but may have a legal stake in the property depending on certain life events. The deed does not show them as an owner, but there is the possibility that the state might provide them marital rights or homestead rights over the property.
• Vested Party: A vested party would be an individual who is vested on the deed to the property. Their name on the vesting deed represents their rights to title and ownership of the property.

Understanding vesting is important in a real estate transaction, as all parties who are vested on the title commitment must be at the signing, regardless of borrowing status, and their forms of identification must match the names on the loan documents exactly. Please note that vesting and document signing requirements are specific to each state. Click here if you want access to the state-specific rules for the different types of vesting.

For any questions about vesting or how title can be held, feel free to reach out to the Advocus Title customer support team via form, email, or phone.