Bonded Title

Bonded titles are often used in vehicle transactions, particularly when the original title of a vehicle is missing, lost, or damaged. This situation can arise when purchasing a vehicle without proper documentation or in cases where the title has been lost over time.

This article will explain what bonded titles are, what triggers the need to get a bonded title, what process is required PRIOR to obtaining a defective title bond, how much a surety bond costs & finally where to obtain a defective title bond.

Important note: there is a distinction between the purchase of the bond, and, the paperwork, fees, and procedures for obtaining a defective title bond – they are connected but they are separate.

First, it is very important to establish that this article is written based on the rules & regulations for California residents & the California DMV. There are many articles out there that touch on this subject, but today we aim to specifically talk about bonded titles in California only. So if you are in another state, it is imperative to use this information as a general guide to understanding what a bonded title is, but you should inquire directly with your local DMV to see what their rules, guidelines & state’s laws are when we are talking about a bonded title.

What is a bonded title?

A bonded title is a title that has a defective title bond “attached” to it during the title transfer process. So, let’s say you purchased a vehicle, you take your application to the DMV, the DMV sees that there is a key document or signature missing – you make every attempt to get those signatures or documents but you are unable to – the DMV deems your application incomplete unless you purchase a defective title bond. Once you purchase that surety bond, you send your application WITH the bond that you just purchased. Your application is now processed/received with the bond attached to it. A new title is issued with your name and address on – and at least here in California – there is no branding on your title indicating that it is a “bonded title” – but on the back end where the DMV files away its paperwork – there is a bond on file with your application.

What is a surety bond?

I will keep this brief – because at the end of the day – you have a problem with the titling of a vehicle – and ultimately this is the problem you want to fix – you aren’t here to find out the mechanics of a surety bond. But in the rare case that you ever will need to file a claim on your surety bond, it is very important that you understand what you’re purchasing.

A surety bond defined: A surety bond is defined as a three-party agreement that legally binds together a principal (YOU) who needs the bond, an obligee (THE DMV)who requires the bond, and a surety company(THE BOND COMPANY) that sells the bond. The bond guarantees the principal will act in accordance with certain laws. If the principal fails to perform in this manner, the bond will cover resulting damages or losses. (I got this definition from www.suretybonds.com)

To paraphrase, it’s like title insurance, if someone comes out of the woodwork claiming that is their car, and they have the proof, a claim can be made against that bond to make the injured parties whole.

Note, other people may refer to this bond as a “lost title bond”, “title surety bond”, “bonded vehicle title”, and “defective title bond”.

What triggers the need/requirement to have a defective title bond?

When it comes to California, there are 3 scenarios in which you will need a defective title bond:

A vehicle that is valued at over $5000 and you do not have the appropriate signatures from the current owner releasing their interest in the vehicle
A vehicle, regardless of value, that has a lienholder/legal owner listed on the California DMV record.
An out-of-state vehicle brought into California with no title, regardless of value (not all states issue titles – but for the ones that do, this is a requirement).

A bond is not insurance

it is imperative to understand that the purchase of a surety bond does not override your financial responsibility requirements in California. You must purchase insurance separately to satisfy your legal and financial responsibility.

What must You do before obtaining a defective title bond?

In California, there is a special process called a “diligent effort” that must be done PRIOR to getting the bond. The bond itself is not the only requirement to obtain a bonded title, otherwise, people would just buy the bond and bypass any attempt to contact the prior owners and obtain the proper signatures. As it states, you must make a diligent effort to “reconstruct the title” – basically obtain all of the proper signatures from anyone that could have an interest in the vehicle. The following is a list of people or entities who you may have to contact:

contact all of the known previous owners, known possible owners, and anyone on the record, if there is one
state entities such as the DMV
financial institutions that are listed on the record as a lienholder or legal owner
individuals that are listed on the record as a lienholder or legal owner

Once you have identified whose name and address you will be reaching out to you will need to do it all by certified mail with a return receipt. By doing this part, you achieve 2 things: you are showing the DMV that you are attempting to get those signatures, and, you may in some cases actually obtain those signatures and may even bypass the need to purchase a bond altogether – this does happen, but it is rare.

While you are doing this, please remember to keep track of everything you do, and make sure to keep everything organized, especially the stuff you get from the USPS.

Once you have conducted the diligent effort portion – which is supposed to last no less than 30 days, you should proceed to buy the defective title bond.

What if the previous owner responds & objects to the ownership of this vehicle?

if you hired us to conduct the diligent effort on your behalf and someone that has an interest in the vehicle we are conducting the diligent effort on contacts us stating that they are objecting – we will immediately cease to continue the process.

There is nothing in the manual that dictates the rules in case someone responds, however, it is logical to assume that if someone is objecting now, they will have an issue with you transferring the vehicle’s title over into your name. I want to remind you that the diligent effort is a process in which you are piecing everything together – in some cases you don’t know the story prior to you buying the vehicle – there may be a history of a stolen vehicle, debate on the legal ownership or other unknown issues with the title.

As a side note, we highly recommend that you always attempt to obtain the driver’s license number of the person that is selling you the vehicle. It is always advisable, especially when it comes to out-of-state vehicles, to obtain vehicle titles to help reduce the chances of you having to go through the bonded title process.

How much does a defective title bond cost?

The cost of the bond is relative to the value of the vehicle. The value of the vehicle determines the bond amount. Every bonding company has its own rates, and rates vary based on the bonding company itself, but for the most part, they stay within dollars of each other when pricing the bond.

Vehicles valued between: $1 – $5000 – $100 premium

What Other costs are associated with a bonded title?

Aside from the bond itself, you must consider the following:

The cost for someone to do the diligent effort for you – this article is a guide on how you can do it yourself – but if you chose so, Quick Auto Tags can help get this process done for you. Our office charges $350 for this service
Sales tax
The DMV fees & penalties

What documents Will I need to submit?

The following documents need to be in your application:

Statement of Facts – Reg 256 form – explaining the following:
- Who you bought it from
- when you bought it
- how much you paid
- and what location you purchased it from
- detail exactly what efforts you made
- detail why you do not have the paperwork needed to title the vehicle
Any document that can prove ownership, or intent to transfer ownership
Documentation of attempts to contact the previous owner

What happens next?

After the diligent effort & after you purchase your bond, it is now time to take your application over to the DMV. It is very important to keep in mind that if you missed a step, such as notifying the wrong person, or not notifying them at all, your application will be rejected. Even after your application is received by the DMV’s field office, you still may have your application kicked back by the Sacramento headquarters if they see that something was overlooked or missing. I will get you a very good example: a customer’s vehicle has a legal owner named WFS Financial. WFS Financial itself does not exist anymore (it was bought out), however, it was acquired by Wells Fargo. Because Wells Fargo was not contacted, this application had to be re-submitted again after we sent letters to Wells Fargo by certified mail – no step can be skipped. Eventually, you will receive a vehicle title, (a normal title – there is no branding on the title) and you will become the official vehicle owner of that car.

Important details to pay attention to

The application for a bonded title requires extra attention to detail. Because the application process is time-sensitive, any mistake will reset all the time that you have spent on the application back to day 0. Pay attention to the following:

Before you get anything started – TRIPLE check that the vehicle identification number on the vehicle matches the paperwork that you are submitting.
Confirm that the bond amount you are buying matches the bill of sale or any other supporting evidence.
Confirm that all names and their corresponding addresses are mailed notifications

Who sells title bonds?

You can purchase most bonds online easily. Lost title bonds are straightforward bonds that can be written within minutes, however, there are some cases where the bond application may require underwriting due to the value of the vehicle or some other factor. Our sister company Mey’s Insurance Services is another option for you to quickly and easily get your bond needs met.

Other things to consider before applying for a bonded title

As you consider moving forward with obtaining a certificate of title one thing to consider is this: is the cost to get a bonded title more expensive than the vehicle/trailer that I am trying to get an original title for? I had a situation where the surety bond, paperwork & DMV fees cost exceeded the value of the vehicles the customer was attempting to fix (it was a vessel & trailer). In some cases, not all, becoming the vehicle owner is not worth the cost.

in cases where some motor vehicles do not have the vehicle identification number, it is strongly advised to NOT proceed with the bonding. These really rare cases will most likely require you to get a VIN assigned by the DMV or CHP before you continue with your diligent effort.

Do you have other questions?

Please feel free to get a free quote or call us if you have any other questions.