A 40% down payment without a title transfer is risky. Such arrangements often lack legal enforceability, expose buyers to financial loss, and may indicate fraudulent practices. In standard U.S. real estate transactions, a down payment is typically escrowed and applied to the purchase price at closing, with title transfer occurring simultaneously. Without transferring title, the buyer gains no ownership rights, rendering the down payment non-refundable if the deal collapses. Sellers may retain the deposit as liquidated damages, leaving buyers with no recourse.

The primary risk stems from the absence of a binding contract or escrow protection. In 2022, the National Association of Realtors reported that 20% of buyers faced deposit disputes during transactions, often due to incomplete paperwork or miscommunication. A 40% down payment is atypical, as most conventional loans require 20% to avoid PMI, but higher down payments usually coincide with formal title transfers. Without title transfer, the buyer’s funds are vulnerable to theft or retention by unscrupulous sellers. For example, the FTC’s 2021 data highlighted $1.2 billion lost to real estate fraud, with deposits being a common target. Legal experts emphasize that title transfer is a prerequisite for valid ownership, and any arrangement bypassing this process carries significant liability. Buyers should insist on escrowed deposits and title insurance to mitigate risks. Ultimately, a 40% down payment without title transfer is neither standard nor safe in U.S. real estate law.