Planning on buying or selling a home? If so, “deed” and “title” are two important real estate terms you will definitely want to understand thoroughly. The real estate world is full of jargon that is unique to the industry. The deed vs. title debate is a common area of confusion for many first-time home buyers and sellers alike.
These two terms are very closely connected which is the main reason many buyers and sellers have such difficulty differentiating the two. However, while these terms are closely related, deeds and titles remain two separate things. Understanding what these two terms mean in relation to each other is key to easily navigating the home buying and selling process.
What is a title?
A title is a legal term that refers to the legal ownership of something. Titles can be applied to any property item of value such as a car or a boat. Titles can be held by either individuals or by groups of two or more people. In terms of real estate, a title applies to the ownership of a home or property. Holding a title on a home provides a bundle of legal rights. These right include:
- The right of possession
- The right of control
- The right of exclusion
- The right of enjoyment
- The right disposition
Included in this title is also the legal right to resell the home. However, those with a title ownership are unable to do so unless they have a “clear title”. This means that you have proven that your title is clear of liens, bankruptcies, judgements, unpaid taxes or any other defects. New buyers and their lenders don’t want to take on your old debts that use the property as collateral. This is why it's important to perform a title search before moving forward in closing on a house.
What is a deed?
Where a title is the legal confirmation of ownership, a deed is the actual legal document that transfers the title of a property from one person to another. The person selling the home (the grantor) will sign the deed to transfer property rights to the buyer (the grantee). This deed will contain a description of the property, as well as indicate the grantor and grantee. Both parties must sign the document to make the title official.
Types of Deeds
General Warranty Deed
A general warranty deed is the one used most often in traditional home sales as it provides the most protection for buyers. This type of deed ensures that the seller has a clear title and that they are the sole property owner with the right to sell. It also acknowledges that the seller has no knowledge of any unforeseen property issues that may arise with the title during the life of the property. In most situations, this type of deed is prepared by a mortgage company.
Whether you are the buyer/grantee or a seller/grantor, it is important to research local laws to fully understand all that needs to be disclosed in the deed. Some of the most common categories for disclosure include any neighborhood nuisances, neighborhood crime history, property damage risks, and major structural repairs that have been made to the home.
Special Warranty Deed
Special warranty deeds are very similar to general warranty deeds. However, special warranty only guarantees clear title for the time the property was owned by the seller. Home sellers/buyer will likely not have to use special warranty deeds as it is typically used for commercial properties rather than residential homes.
Grant Deed
Like the other two deed types, a grant deed will show proof of a clear title and no knowledge of any issues that may impact the home's title. But, this deed type does not include a warranty that the seller defends the title against anyone else who may try to stake a claim to the property after the sale takes place.
Quitclaim Deed
A quitclaim deed provides the least amount of protection to the buyers as they don’t offer the same protections as a general deed. These types of deeds are used to transfer ownership rights of a property from one legal entity to another with no money changing hands.
Oftentimes this deed type is used to exchange a title between family members (ex: parents to children or spouse to spouse). It is also often used when transferring property ownership to trusts or LLCs, or to change the legal name written on a deed in the case of a name change.
While titles and deeds are often thought to be the same thing, their true legal meaning is quite different. Title is a term for stating that you have ownership rights to a property. The deed is the official legal document that declares and proves evidence of the title.
Once you have an understanding of the differences between a title and a deed, you are likely to have a much better idea of the closing process. If you have any further questions or are not sure about all that is involved, reach out to an experienced real estate agent who can help you through the process.
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Conclusion
Understanding the differences between a title and a deed is crucial when navigating the world of real estate transactions. The house title refers to the right of ownership, which is verified through public records and encapsulates the history of the property's title. On the other hand, the property deed, particularly a bargain and sale deed, is the actual physical document transferring ownership rights from the seller to the buyer.
A title company plays a significant role in the entire process. Not only do they conduct a thorough search to confirm the property's title is clear of any issues, but they also typically provide the necessary title insurance policies. An owner's title insurance protects the buyer from any unseen errors in the title's history, whereas a lender's title insurance policy safeguards the lender's interest in the property.
Lastly, don't underestimate the importance of title insurance. Despite the rigorous public records search conducted by the title company, issues can arise post-sale, threatening your ownership rights. A sound owner's title insurance policy will provide an essential safety net in these circumstances, reinforcing the stability of your house deed and sale deed. Thus, distinguishing between a title and deed, and understanding the protection that title insurance offers, is indispensable for a secure and smooth real estate transaction.
