If you’re planning on buying a house soon, “title” and “deed” are two key real estate terms you’ll want to have down cold. When a seller (known as the grantor) transfers ownership of a house to a buyer (known as the grantee), both the deed and the title transfer. A deed and a title, however, aren’t the same, and both come with an important to-do list for the buyer/grantee and seller/grantor. Let’s take a closer look at what is a title versus a deed and how they differ.
The Difference Between A House Title Vs. A Deed
The biggest difference between a title versus a deed is the physical component. A deed is an official written document declaring a person’s legal ownership of a property, while a title refers to the concept of ownership rights.
Here’s a way to remember the difference: Although you can own a physical copy of a book, you can’t hold a book’s title in your hand. In this way, a book title and a property title are the same: Neither is a physical object, but both areconcepts. A deed, on the other hand, can (and must) be in your physical possession after you purchase property.
Understanding titles and deeds, as well as their purpose, is a fundamental part of
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What Is A House Deed?
A house deed is a legal document transferring property ownership from a seller/grantor to a buyer/grantee. A deed contains a description of the property (including property lines) and denotes the seller/grantor and the buyer/grantee. Both parties must sign the document to make it official.
General Warranty Deed
A general warranty deed protects the buyer/grantee by assuring them that the seller/grantor has full title and is the sole property owner with rights to sell. It also promises that the seller/grantor has no knowledge of any property issues that may arise. A mortgage company typically prepares the general warranty deed.
As a home buyer, it’s important to look into your local laws to understand what should be disclosed to you during the home-buying process. Frequent categories for mandatory disclosure include a history of violent crime on the property, neighborhood nuisances such as recurring bad odors, persistent property damage risks such as flooding and any major structural repairs that have been made. Sellers may also need to disclose whether the house is part of a historic district, since this can limit the extent to which a house can be remodeled.
- To-do for the seller/grantor: Research your local laws to find out what type of risks you must disclose.
- To-do for the buyer/grantee: With the seller/grantor, decide whether a general warranty deed is right for you.
Special Warranty Deed
A special warranty deed is similar to a general warranty deed but only guarantees title for the time the seller owned the property. This type of deed isn’t typically used for home purchases, but it’s used for the purchase of commercial property.
- To-do for the buyer/grantee: With the seller/grantor, decide whether this type of deed is right for you.
Quitclaim Deed
Quitclaim deeds are typically used when a property is transferred from one legal entity to another without any money changing hands. Popular examples of transfer via quitclaim include:
- Parents transferring property ownership to children
- One spouse transferring property ownership to the other
- Individuals transferring property ownership to trusts or LLCs
Quitclaim deeds are also used to change the legal name written on a deed in the case of a name change. Quitclaim deeds don’t come with the protections for the recipient that a buyer receives with a conventional deed.
Tip: Quitclaim deeds are sometimes erroneously referred to as “quick claim deeds.” Although the process of transferring property via quitclaim deed is indeed very quick, and this can be a good way to remember the difference between a quitclaim deed and a general warranty deed, it’s not correct to call a quitclaim deed a “quick claim deed.”
- To-do for the buyer/grantee: With the seller/grantor, decide whether this type of deed is right for you.
What Is A Title?
A title is a legal right to ownership of a property, including the right to sell. It’s not just real estate that comes with titles– boats, cars and many other property items of value do as well. Legal purchase of a house transfers the title to the buyer, so if you buy a house, the house title will be yours along with the deed.
Title Insurance
Title insurance is meant to protect the buyer from unknown property issues or encumbrances. Lenders will always require title insurance, but buyers can also take out title insurance.
Most experts recommend that home buyers purchase this insurance or negotiate with the seller to have them purchase it for the buyer (this isn’t uncommon). Title insurance is a crucial protection with any kind of ownership dispute. If a dispute arises without insurance to protect the buyer, in a worst-case scenario, the buyer could lose their property and the money they’ve invested in their mortgage.
- To-do for the buyer/grantee: Decide whether you would like to have title insurance. Decide whether you’regoing to try to negotiate with the seller to have them pay for your title insurance.
- To-do for seller/grantor: Decide whether you’re willing to pay for the buyer’s title insurance.
Title Search
A title search seeks to uncover any limitations on property use. These limitations include easements and any unresolved payments tied to the property, such as liens. A title search also helps determine that the seller truly has a legal right to transfer ownership.
Although anyone may legally conduct a title search, a title company or real estate attorney typically handles this. You can have a title search done as part of the process of securing title insurance, but it isn’t necessary. It is possible to have a purely informational search conducted.
- To-do for the buyer/grantee: Decide whether your title search will be part of the process of purchasing a title warranty. Decide who you would like to conduct your title search (or if you’ll take it on).
Abstract Of Title
An abstract of title is a document listing the property’s previous owners and any past encumbrances, such as liens. It'd typically the end result of a title company researching a property's chain of title.
- To-do for the buyer/grantee: This is another paper document that you should keep handy and store safely along with the deed after your home purchase.
The Bottom Line: It’s Important To Know The Difference Between A House Deed Vs. A Title
It’s crucial to fully understand the terminology that comes with the process of buying a house. Remember that a title is a legal right to ownership, while the deed is the physical object documenting that rightful ownership. Both titles and deeds come with to-do lists.
With deeds, it’s important to make sure you physically have your deed and read up on your local laws to ensure you’redisclosing all property issues. With titles, it’s important to decide whether you want title insurance, conduct a title search, and make sure you physically possess the abstract of title.
If you’re at the beginning of this home-buying process, starting your approval is the next step to finding out what you can expect financially when buying a home.
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Patrick Chism