How do I legalize a car sale?

Recently on our forum a user asked, “What do I do if a woman who agreed to pay cash for my car paid the money but then allowed the tags to expire and is now driving around without insurance? I live in the State of Texas. Can you help?”

What you have described is a result of failing to properly transfer the title of the car to the new owner. While she may have followed the legal requirements of a written or verbal contract and paid you a specified amount of money to receive possession of the car, if you did not transfer the title with the Department of Motor Vehicles (DMV) in your state, the state still believes you are the owner of the car.

Title basics and steps to transfer ownership via title transfer

Each state has different requirements for transferring ownership to someone new so it’s important to review the requirements in your state. It’s also very important to take these steps prior to giving the car to someone new. Let’s take a closer look at the steps you should have taken in the State of Texas to ensure the title was transferred.

Although it’s the responsibility of the buyer to complete the DMV title transfer, there are some steps you can take to expedite the process.

First, you will need to provide the buyer with Application for Texas Certificate of Title (Form 130-U). You will also need to give them a current title which you have signed over to them. You will also need to include an odometer reading on the title certificate.

Another step you can take to protect yourself is to send notification to the DMV, via a Vehicle Transfer Notice, that you have transferred ownership of your car to another person. This form can be printed and taken to the County Tax Office or filled out and submitted online.

Information you will need about the buyer includes the date and price of sale, the VIN number for the car, and their name, address, and contact information.

Buyer’s responsibility to transfer ownership and title after car purchase

You didn’t mention when the sale occurred, but under Texas state law if you purchase a car from a private seller, you must title your car within 30 days of the date of sale. The buyer is supposed to go to the county tax office and bring the current title for the car, a completed Application for Texas Title, proof of car insurance and paid sales tax (if required), details of any release of liens, proof of inspection (if needed), and payment for all fees.

What should I do before a car sale?

Although it sounds like you might have failed to take the necessary steps to transfer the title this time around, it’s important to take the right steps next time you decide to sell a car. For instance, one of the best things you can do when you make a car sale is to go to the county tax office with the seller at the time of the sale. This may seem like a hassle, but it is the best way to ensure that the transfer is made per the requirements of the state.

Another way to ensure the transfer of title is done is to remove the license plates to the vehicle. This step will force the buyer to get a temporary Vehicle Transmit Permit and go to the DMV within 5 days from the date of purchase.

Bottom line:

Even if you have a written contract and the buyer paid all the money required to make the car purchase, if they fail to transfer the title of the car then you may be responsible for the vehicle. This can become very important if your car is involved in some type of accident. Transferring title at the time sale can ensure that your sale is done correctly, and you have no more legal ties to the vehicle.

(Tags - contracts - Assets - Tax Credits )

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