Purchasing a new property can quickly become stressful and overwhelming. There is a lot of paperwork and many confusing terms in the mix. To make the process much easier, it is important to know some of the key terms. 

You likely have heard of the real estate terms “title” and “deed”. Many times, these two terms are used interchangeably, but they actually have different meanings. While a title and deed are related, they are different documents, and you will need both when owning a property. 

So what exactly is a property title? What is a deed? And, what’s the difference between a title and a deed?

In this post, we will break down the concepts of a title and deed and explain all you need to know about each of them. Read on to learn more about a deed vs title. 

Real Estate Title 

Technically, a title can be applied to any item, but it is most commonly used for more expensive purchases like a vehicle or real estate. In real estate, the property title defines who has the legal ownership and right to use a property. The house title gives you the legal right to use the property how you want to. The title encompasses a “bundle of rights” which includes:

  • The right of disposition 
  • The right of control
  • The right of possession
  • The right of enjoyment 
  • The right of exclusion 

Selling a property involves transferring the title. The title is not actually a set of documents, it is a concept, and the new owner must “take the title” to own the property. People can hold a real estate title for different reasons. Some common real estate titles include those for:

  • Commercial properties like warehouses, shopping centers, retail spaces, or office buildings. 
  • Residential properties including apartments, homes, or condominiums. 
  • For your primary residence or investment property. 

Clearing the Property Title 

Before transferring the property ownership, you must “clear” the title. In essence, you must prove there are no bankruptcies, liens, or judgments on the property. A new buyer does not want to incur any former debts on the property. A title search is done before closing to ensure the title is clear. 

Always make sure the title is clear of defects before closing on a property. Any issues must be resolved before the title transfer. Some of the most common title defects are:

  • Boundary encroachments
  • Unpaid taxes
  • Liens from child support or bankruptcy. 
  • Former errors in the paperwork that cause improper title transfer. 
  • Bankruptcy

If the title has any defects, it is not “clear” and cannot be transferred. The seller must confirm the title is clear and resolve any defects before it is possible to close. 

Protection Against Title Defects

As a buyer, you should protect yourself against title defects. The first step is to perform a title search to look for defects. Most real estate attorneys are able to perform the search. A title search is a simple way to catch any title defects before you buy the property. 

It is also a good idea to include a contingency in your home. In your home purchase agreement, add a contingency that requires the current owner to prove the title is clear. If the seller cannot prove they have a clean title, then you can end the agreement for no additional fee. This method ensures you are not obligated to purchase a property with a defective title. 

The steps above are ones you should always take before closing on a property. However, if it is too late and you uncover a problem with the title after the purchase, then title insurance can help. Title insurance will protect you if past ownership claims arise. It is important to remember that a title insurance policy does not erase the need for a title search. 

Title Insurance 

Title insurance protects you from title defects that were not discovered during the title search. It is a good idea to get title insurance regardless of if you are paying for the property in cash or with a mortgage loan. Although the insurance is not required if you are paying in cash, it is usually mandatory when obtaining a mortgage loan. 

The insurance will protect you from liens, claims, or other issues that were not documented or found during the search, and is a small investment that protects your property and can save you immensely.  While it is unlikely that you will receive payment from title insurance, it is required in most transactions and will protect you in case of an unexpected issue with the title. Without title insurance, a title problem could cost you your entire property. Your property is not worth the risk, which is why title insurance is required for mortgage loans. 

What is a Deed?

Now that you understand the basics of a real estate title, it is time to dig into what a house deed is. 

Unlike the title, the property deed is an actual document that represents the title transfer. The property deed describes the property and what is included in the title transfer. For the deed, the seller is known as the grantor and the buyer as the grantee. Both the grantor and the grantee must sign the deed to fully seal the title transfer. 

The property buyer will get the physical deed to prove they own the title to the property. 

The Types of Deeds 

There are a few different types of deeds that are used. The main types of deeds include:

Grant Deed

A grant deed demonstrates that you have a clear title and do not know of any issues with the title. However, the grant deed does not include a warranty that you will defend the deed against future claims after the sale. 

Bargain and Sale Deed 

For a bargain and sale deed, the seller does not have to clear the title. In this case, the buyer also does not have protection. Bargain and sale deeds are commonly used when the property is being sold as a foreclosure or in a tax sale. 

General Warranty Deed

The general warranty deed is the most common for home sales as it offers the greatest protection for the buyer. A general warranty deed ensures you have a clear title and right to sell the property with no knowledge of any title issues. This deed also covers unforeseen issues for the entire life of the property, not just during the seller’s time owning it. The general warranty deed also dictates that nobody else has rights to the property. 

Special Warranty Deed 

The special warranty deed is very similar to the general warranty deed. However, while the general warranty deed promises a clear title for the entire history of the property, the special warranty deed only covers the title for the time the seller owned the property. Special warranty deeds are most often used for commercial real estate. 

Quitclaim deed

The quitclaim deed provides the least protection for property buyers. The quitclaim deed is often used when the property is given as a gift. While the quitclaim deed transfers the title to the buyer, it does not guarantee a clear title. If the buyers find out that the seller was not legally able to sell the house, they cannot take any recourse after the transfer. 

Deed Terms 

There are some important terms to know regarding deeds. Some important terms include:

  • Consideration: The consideration is the value the grantee gives the grantor in exchange for conveyance. 
  • Operative Words of Conveyance: Each state has specific words that must be used to show the intent of title transfer. 
  • Grantee: The person receiving the title to the property. An individual, multiple people, partnership, LLC, or a corporation may be a grantee
  • Grantor: The current owner who plans to convey the deed to another person is the grantor. The grantor can be a corporation, one or more persons, partnership, LLC or other entity. 
  • Legal description: This is the legal description of the property being conveyed. The legal description was included in the deed and signed by both the grantor and grantee. 

How to Obtain a Property Deed

If the title comes back “clear”, then the title can be transferred via a property deed. At closing, the grantor (seller) will transfer the title to you by signing the deed. Once the buyer and seller sign the deed, the title/escrow must then record the deed with the local courthouse. After the deed is recorded, you will receive a notification. If you do not hear back within a few weeks, check with the person who closed your deed and ensure the documents were filed. When the deed is filed, you officially own the property. The procedural requirements for a property deed are:

  • Grantor and Grantee information. The deed must include the names of the grantee and grantor. Typically, their addresses and phone numbers are also included. 
  • Filing location. Most times, the deed must be recorded in the county of the real estate. When the deed is recorded, it takes effect to creditors and subsequent purchasers. 
  • Delivery and acceptance. To be counted as an effective conveyance, most deeds must be delivered and accepted. The grantee must accept the deed by signing and obtaining it. 

What Needs to be Included in the Deed?

For a deed to be valid, it must contain some key elements. The requirements of a legally valid deed include:

  • Both the grantee and grantor must be identified in a clear way. 
  • The correct legal language describing the transfer must be in the deed. 
  • The property was must describe accurately.
  • The deed must be delivered to the grantee or someone acting on his or her behalf. 
  • The grantee must accept the deed. In some situations, the grantee can reject the delivery of the deed. 
  • The grantor must have the legal capacity to transfer the property, and the grantee must be able to receive the property. 
  • The deed must be a physical document in writing. 
  • All property owners must sign the deed. 

Difference Between a Title and Deed 

As you can now tell, titles and deeds are related but are not the same thing. There is an important difference between a property deed and title, but both are essential for buying or selling a home. A title is a concept and is the legal way of defining ownership of the real estate. If you have a title, you can access and use the property freely. Conversely, a deed is an actual legal document. The purpose of the deed is to transfer the title from one party to another. 

Before getting the deed, you must make sure the title is clear and free of any problems. Both parties must sign the deed, and the deed must include a description of the title. Recording the deed is a crucial step, and it must be filed in the same county as the property. To enjoy your new property or seamlessly transfer your property to a buyer, you must ensure all the legal documents are executed correctly. At the closing of the property, the buyer receives a deed as an official 

Knowing the difference between these two important concepts will help you greatly on your home purchasing journey. However, navigating the home buying and selling process can still be difficult. That’s where we come in. To learn more about title vs deed and other important real estate concepts, head to our blog, and contact us HERE.

Contact us at (605) 718-9820 or schedule a call and let our mortgage experts help you with your home loan.

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