Deed vs. Title: Difference Between Deeds and Titles
Purchasing real estate will likely introduce you to several unfamiliar terms. Although most people mistakenly believe titles and property deeds are the same, they actually refer to two separate legal concepts. You will hold both the deed and title when you own a property entirely. A title is different from a deed. Mixing the two up can be problematic if you don’t know what you’re doing.
What is a Title?
What does title mean? Title is a legal term that signifies ownership. In real estate, the term title refers to ownership, meaning you have the right to use the property and do with it as you wish. You may own a partial interest in the property or you may own the entire thing. As long as you have title to the land, you can access it and modify it as you see fit. A title also allows you to transfer an interest or portion of your ownership to another. Nevertheless, you can never legally transfer more than what you own.
What is a Deed?
Deeds are the documents that transfer the ownership of a property from one party to another. According to the Statute of Frauds, the document must be written. Deeds are sometimes referred to as vehicles for transferring property interests. The property interests you are transferring may be less than the title that you hold. For example, if you own 100 percent of a property, you can transfer half of it to someone else. To do so, you must utilize a deed. In most states, a deed must be recorded in the courthouse or assessor’s office to be fully enforceable, but a failure to do so will not affect the transfer of title. Rather, it simply means the deed isn’t perfected. Imperfect deeds do not necessarily imply problems with the title, they usually mean that the paperwork surrounding the deed was handled in an improper manner.
Types of Deeds
Deeds are legal documents used to transfer ownership of property. A deed can serve a variety of purposes, and each type serves a specific legal purpose depending on the property’s history, the presence of liens, and/or other encumbrances, such as mortgages.
Deeds fall into several categories:
- General Warranty Deed
- Special Warranty Deed
- Bargain and Sale Deed
- Grant Deed
- Quitclaim Deed
- Deed of Trust
- Mortgage Deed
The following list of deeds explains how and when to use each type of deed:
As the title is transferred, warranty deeds are used to provide various legal protections to the grantor.
There are two distinct categories of warranty deeds based on the level of protection offered:
General Warranty Deed
A general warranty deed is used in residential real estate transactions The seller confirms that the property is free and clear of debts, liens, or any other encumbrances, and that they have the right to sell it.
The grantee of this type of deed has the most significant protection and is entitled to legal recourse if there is an unresolved issue or debt.
Special Warranty Deed
The grantee of a special warranty deed acts as protection from any issues that were present while the grantor owned the property entirely. As the current owner is unlikely to be familiar with the entire history of the property, it does not apply to the whole history.
Typically, these deeds are used to convey residential property or commercial property. Despite being less protective than a general warranty deed, it includes the following:
- Assurance that the grantor has the right to the property title
- Verification that the property was free of encumbrances during the time it was owned by the grantor
Bargain and Sale Deed
Real estate deeds like this are used to transfer or sell residential properties, but they do not guarantee that the property is free of debts or liens. The grantor is only identified as the title-holder.
Any lien against the property would be transferred along with the title to the grantee.
In exchange for a previously agreed-upon price, the seller transfers their interest in a property to the buyer with a grant deed.
Despite being a guarantee that the seller owns the property in its entirety, the grant deed does not protect the buyer from title defects such as:
- Boundary disputes
- Improper signature
- Undisclosed liens
- Errors in public records
When familiar parties, such as family members or divorced spouses, transfer property, it is called a quitclaim deed. The grantee (the person receiving the transfer) does not have much legal protection under a quitclaim deed.
A grantee cannot take legal action if the grantor is not legally entitled to the property outlined in the deed.
Additionally, there is no legal protection against liens or other encumbrances that may exist on the property. As a result, quitclaim deeds involve a great deal of trust, and people who know each other well prefer them.
A grantor can also use this type of deed if they are not completely certain whether or not the title is defect-free.
Deed of Trust
Transferring ownership of an asset from a trustor to a trustee for the benefit of a beneficiary is a deed of trust.
Rather than a mortgage, a deed of trust acts as security against a loan that has been transferred to a trustee by the trustor. Trustees hold the property until the borrower pays off the debt, agreeing to sell it if the borrower defaults on the loan.
While the trustee retains legal and financial possession of the property, the borrower retains an equitable title, which allows them to legally enjoy or use the property.
Anyone that has transferred ownership of real estate to another party must have prepared a deed and other land documents for the sale...
A mortgage deed is a contract between a homeowner and a bank or lending institution, which gives the lender the right to attach a lien to property if the loan is not repaid. As a result of this deed, a mortgage payment is made towards the debt of a loan, and the house serves as collateral.
The financial institution holds the legal title to the property during the period of loan repayment under a mortgage deed
Each type of real estate deed serves a different purpose and offers a different level of protection during the transfer of a property. You can better understand which level of protection you need for your real estate transaction by understanding the difference between deeds.
Before transferring your property, make sure you understand the difference between a title and a deed.
Special Purpose Deeds
Lastly, special purpose deeds are typically used at times when a person holding a public position owns a deed. A grantor receives no real protection from these, as they are similar to quitclaim deeds.
Here are some examples of special-purpose deeds:
When someone dies and they have a will, they use this type of deed. In this deed, the executor will distribute the estate’s assets and transfer the property to the grantee.
When a property is sold due to unpaid taxes, a tax deed is used.
At a sheriff’s sale, a buyer receives this deed as evidence of ownership. Typically, this happens after a foreclosure has taken place.
What is the Difference Between a Deed and a Title
A title is a document that proves a property’s legal ownership and is used by the next owner to transfer ownership between them.
The title to a property must be carefully examined and protected because any defect or unresolved issue could invalidate it. To ensure legal transfer of ownership from the grantor to the grantee, it’s also important to pick the right type of property deed and draft it carefully.
As long as these legal documents are executed properly, buyers can enjoy their new properties without worrying about future problems.
Deeds and titles are often thought of as interchangeable, but their legal meanings differ greatly. You will be able to better understand your rights and responsibilities, as well as the closing process, once you understand their relationship. It is easiest to think of the difference between titles and deeds as deeds showing that you own the rights to something (full or partial), while titles are legal documents that demonstrate who owns what. The title and the deed belong to you when you completely own a property.