Which statement is true about the passage of title in a real estate transaction?

• A. Legal title passes when the contract is signed.
• B. Equitable title passes at closing.
• C. Legal title passes at closing; equitable title exists after the contract is signed.
• D. Equitable title passes only after the deed is recorded.

Answer: (C)

In a real estate transfer, two forms of ownership interest are at play: equitable title and legal title. Equitable title is the buyer’s right to obtain ownership under the contract—created as soon as the contract is signed and enforceable—giving the buyer the stake in the property and the right to compel specific performance if the seller fails to close. Legal title, on the other hand, is the actual ownership evidenced by the deed, which passes to the buyer at the closing when the deed is delivered and accepted.

That’s why the accurate statement is that legal title passes at closing, while equitable title exists after the contract is signed. Recording a deed plays a role in protecting against later claims and establishing priority, but it does not create the transfer of ownership by itself.

The other options run afoul of these timing rules: title isn’t transferred merely at contract signing, so equitable title isn’t said to pass at closing; and equitable title isn’t dependent on recording the deed—equitable rights exist from the contract itself, not from when the deed is recorded.