Deed vs. Title: What’s the Difference? Terms Home Buyers Need to Know
If you’re planning to buy a home in your new city, then you need to know what deeds and titles are all about. These are integral concepts in the real estate business but many use these terms interchangeably, thus causing a great deal of confusion.
However, there’s no need for you to get confused by all this technical jargon. In this article, we cover all the basic details you need to know about the differences between a deed and title; what they mean, what their basic functions are, and a lot more. So, scroll below and start reading!
Many elements need to be in check before buying a house and there’s a tendency of getting overwhelmed by the process of it all. Amidst all that, you might’ve vaguely heard of the terms ‘Deed’ and ‘Title’ and wondered what they’re all about. For starters, you should know that titles and deeds serve different purposes and functions. Many use both these terms interchangeably and this is a common mistake made by those buying property for the first time.
The most distinct difference between a title and a deed is the physical aspect. A deed is an official document; it’s tangible. It’s a written record stating that you own a piece of property legally. On the other hand, a title is a concept stating that you own the property. This means that you can rightfully say that the property is solely yours, and you have the right to do what you want with it.
Let us take an example to help you understand better: you can hold a physical copy of Led Zeppelin IV, one of Led Zeppelin’s best-selling albums in your hand, but you can’t physically hold the title. The title is just a concept, which is very much similar to what a property title is – not physical components. The physical copy of the album would be likened to a deed – tangible and hard proof that you have ownership over the given property.
Reinstating what we said before in the overview, a deed is a written physical document. It’s proof that a certain property has been transferred from the seller to the buyer, and that it’s free from encumbrances (mortgages), easements, and liens. According to the Statute of Frauds, a deed cannot be anything other than a written document. For a deed to be deemed legal and applicable, the following factors have to be fulfilled:
- Arguments that the seller (grantor) can legitimately sell and transfer the property.
- Arguments that the buyer (grantee) can legitimately purchase the property.
- Detailed information of the property and its components.
- Signatures of the grantor and the grantee. Done in front of a notary as a witness.
The details of the property’s deeds are all registered in the assessor’s office or in the courthouse for state records. However, if a deed is not filed for whatever reason, that becomes an imperfect deed. It doesn’t withhold the transfer of property and its validity is not questioned. But, when a deed is not registered in the public records, long delays in legal procedures are often seen in cases where there’s a legal challenge. Therefore, while dealing with paperwork, see that it’s thorough and devoid of gaps.
You will come across three main types of deeds while dealing with property matters. These are the following ones:
This type of deed favors the buyer more than anyone else. When you get to sign a general warranty deed, you should know that the seller will protect you from any previous legal matters of the transferred property by making a series of promises, also known as ‘covenants’. This protection includes any prior claims from persons who previously owned that property, and if they arise in the long run, the grantor will see to it that you’re insured.
Four main covenants rule the general warranty deed and these are:
- The Covenant Of Seisin: It’s a promise that the grantor owns the property and, as per state laws, has every right to transfer the property to a grantee.
- The Covenant Of Quiet Enjoyment: It means that the grantee will enjoy the property undisturbed when a case of a bad title is later identified.
- The Covenant Of Further Assurance: For title validation, the grantor promises to supply all the necessary documents and paperwork.
- The Covenant Against Encumbrances: The grantor guarantees the grantee that the property has no liens and encumbrances.
Before signing a warranty deed, it’s best that you look into how these deeds function in your state since laws vary from state to state.
A general warranty deed protects the grantee from claims of all persons who have held the property before and during the grantor’s possession. Also, it favors the grantee, but in a case of a special warranty deed, the favor is limited. A special warranty deed claims that the property during the grantor’s tenure had no title defects even when the property was received. This does not protect the grantee from claims previous to the grantor’s holding of the property. That’s why while buying property, many insist on having a general warranty deed since it’s more secure.
A general warranty deed and a special warranty deed offer some level of protection to the grantees. But in the case of a quitclaim deed, grantees receive the lowest level of protection. It doesn’t offer any warranties or any protection and that’s why it’s also known as a non-warranty deed.
If the property has no title defects, the quitclaim deed functions as well as a general warranty deed. On the other hand, if there are any previous claims, a quitclaim deed will leave you high and dry and will tie your hands from taking legal action against the grantor.
Due to such vulnerability to the buyer, quitclaim deeds are done only on a few occasions such as:
- Transferring property ownership from the parents to the children.
- Transferring property ownership from one spouse to another.
- Transferring individual ownership to trusts, or other companies
As mentioned before, unlike a deed, a title is a concept and is not a physical document. A title gives you legal ownership over the property you bought from the grantor. It now becomes yours, and you have the right to do anything on your purchased property. As long as you have the title in hand, you can enjoy your property to the fullest. Also, you can legally transfer part or whole ownership of your title to another party. However, you cannot transfer more than you own.
A property title has a list of all the benefits of the property, which is neatly drafted formally in a deed. This list that we speak of is usually known as the ‘Bundle of Rights’. The Bundle of Rights include:
- The Right Of Control: You get permission to use the property without crossing the law.
- The Right Of Disposition: You get the ability to temporarily or permanently convey ownership of the property to anyone provided there are no loans, liens, or encumbrances.
- The Right Of Enjoyment: The ability to enjoy the property without crossing the law.
- The Right Of Exclusion: You have the right to choose who you want on your property.
- The Right Of Possession: Your right to claim ownership of the property.
For a title to be transferred from the seller to the buyer, there should be no outstanding disputes, liens, unpaid property taxes, debts, etc. In other words, a clear title is what you need for it to get approved.
However, if you’re buying a home, you can have an extra edge to protect yourself from any buried title flaws, or disputes. You can purchase title insurance and do a title search before finalizing any real estate deal.
No matter how thorough your research is, at times there will be titles with hidden defects. Suddenly, you’re thrown into oblivion since you don’t know how to resolve such matters, and that’s when title insurance can be useful. It’s a one-time payment that protects the grantee against title disputes, which is purchased before buying the property.
Here are some cases in which title insurance can protect you, or some prerequisites that can blemish a property title:
- Unpaid taxes
- Any building code violations that are unresolved
- Fraud or forgery
- Outstanding lawsuits
- Disputes over the property from another party
A real estate attorney or a title company will perform the title search and are reimbursed by the title insurance provider. They will thoroughly scan public records and other legal documents to search for any title defects, and disputes. And if the title search comes up with any title flaws, the grantor must resolve them immediately before they can start selling the property.
There are different forms of property titles as well. Ownership of a title is not solely restricted to single individuals, but also multiple individuals who own the same property. Here are the most common titles you’ll come across:
- Joint Tenancy: Under a joint tenancy title, two or more individuals collectively own the property throughout their lifetime. The individuals have an equal right to the undivided share of the property.
- Tenancy In The Entirety: Here the husband and wife own the title, but are treated as one singular entity. On the occasion of the death of one spouse, the entire title is transferred to the next spouse (provided the other spouse is living).
- Tenancy In Common: When two or more persons own a common piece of property but have titles to their individual shares. They can even transfer their respective titles to another party.
Now you know the basic differences between a title and deed. Always remember that a property title is a right of ownership of a given piece of property, whereas a property deed is proof of ownership. Don’t ever confuse both terms with each other and use them interchangeably. Revise the points mentioned in this article before buying a house and you’re good to go. Till then, happy house hunting!
Real estate deeds come mainly in three forms: general warranty deeds, special warranty deeds, and quitclaim deeds.
You will come across various real estate titles while you’re house hunting. Some of which are joint tenancy, tenancy in the entirety, and tenancy in common.
Title insurance will protect you from any hidden title defects. From unpaid taxes to any third-party disputes over the property, title insurance will ensure that you won’t get affected by them. They will also perform a title search to scan for any title blemishes by digging deep into public records and legal documents.