Discover What Makes a Deed and Title Different
The world of real estate is full of jargon – MLS, buyers’ agent, appraisal, amortization, origination fee, purchase agreement, to name a few. If you are a first-time homebuyer, or even a seasoned real estate investor, there are two other terms – deed and title – you may be familiar with. While most people use the terms title and deed interchangeably, they are actually two different things with two different purposes.
What exactly is a property deed? And how is it different from a property title? Let’s take a close look at each term and what it means when you are buying or selling a home.
What is a Title?
A title is not an actual ‘physical’ thing but rather is a concept. A title is your “bundle of rights” related to homeownership. A title is a legal way of saying you have ownership of the property and can access the house and land at any time and use it as you see fit.
The bundle of rights includes:
- Right of possession
- Right of control
- Right of exclusion
- Right of enjoyment
- Right of disposition
Having the title to a property also means that you can sell the property at any time, assuming that the title is “clean.” A clean title means you’ve proven the home is free of any defects such as liens, judgments, or bankruptcies. During a real estate transaction, a title company will conduct a title search to uncover any title defects that may prevent the sale from going through.
Common title defects include:
- Unknown liens
- Surprise heirs
- Disputed property boundaries
- Clerical errors
- Unknown easements
When buying a home, your mortgage lender will require lender’s title insurance, which protects their investment from title defects found after settlement. Owner’s title insurance, like lender’s title insurance, protects you from title issues for the duration of your homeownership. This insurance, although optional, is highly recommended in case of unknown title defects that may come to light after the sale of the home.
What is a Deed?
A deed is an official legal document used to transfer ownership from the current owner, or grantor, to another party. A deed will generally include the names of both the home buyer and the home seller.
There are several different types of deeds including:
- General warranty deed: This is the most common in traditional home sales. It provides the most protection and means that the owner has a clear title and right to sell the property and has no knowledge of any issues that may arise with the property.
- Special-purpose deed: A special-purpose deed, also known as a special guarantee deed, is similar to a general warranty deed, with one exception – it guarantees the title is clean for only the time you’ve owned the property. This type of deed is generally used in commercial real estate transactions.
- Quitclaim deed: A quitclaim deed offers the least amount of protection for a buyer. It transfers the rights and ownership to the buyer, however, does not guarantee the seller has the right to do so. This type of deed is often used when close friends or family members are transferring ownership, for example, when a father passed down the family home to a daughter.
Your title company will prepare the paperwork and closing documents – including the deed – for your settlement. On the day of your settlement, you will receive your property deed as well as your title. Although the two terms are closely related, they are two different things with two different purposes.
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Watermark Land Transfer is your local go-to for real estate settlement services. Our team provides concierge-level services to consumers, realtors, and real estate investors and can help make your next real estate transaction stress-free and smooth. We are licensed in Pennsylvania, Maryland, and Virginia, and offer both on-site and virtual services. If you are in the process of buying or selling a home, reach out today to learn how we can help.