Deed vs. title: Know the difference

When buying or selling a home, you may hear the words “title” and “deed” used. While these can often be used similarly and refer to similar things, there are some key differences between the two that you need to keep in mind.

We’ll break down what you need to know about the difference between a deed and a title so you can feel more confident when buying a home.

Title vs. deed, explained

In short, both titles and deeds are related to ownership of a piece of real estate and are part of the closing process.

A title is the concept or theory of ownership that describes the person who can use or benefit from the home. The title is used to convey the ownership of the home from the seller, sometimes referred to as the grantor, to the buyer, who is identified as grantee.

A deed is a physical, legal document that shows ownership of a property. You can use a deed to transfer ownership of a property to someone else.

Another way to think about it is that title describes the access to the rights and benefits of property ownership. Holding a deed to a property is one of the things that gives you title to it.

Typically, when you buy a home, you’ll hire someone to conduct a title search to confirm the seller has the right to sell the home. At closing, you’ll sign the deed, which documents your new ownership.

What is a house deed?

A house deed is a legal document that describes a property, such as by providing its address or a description of the geography of the property and the surrounding area.

Deeds are physical pieces of paper that you’ll sign during the process of closing on a home. Deeds transfer ownership from one person to another. You may need a notary or witness when signing.

Types of deeds

There are many different types of deed that can be used during the process of transferring home ownership. Which is used will depend on the circumstances of the transfer.

We’ll cover some of the most common types of deed and when they’re used.

Warranty deed

In general, a warranty deed contains a warranty by the seller to the buyer that the title is good and clear. A warranty deed provides the greatest assurance by the seller to the buyer as to the property’s title. The deed also ensures the absence of any outstanding mortgages, liens, or other claims against the property.

This is the most common type of deed used when going through the normal process of buying or selling a home.

Special warranty deed

Used more commonly with commercial real estate sales, this deed generally limits the warranty to a specific time, for example, against defects that arose when the seller owned the property.

Quitclaim deed

A quitclaim deed is most commonly used in situations where property is transferred from one owner to another, such as parents to adult children or spouse to spouse, without the exchange of money. A quitclaim deed conveys the property without any warranties as to the condition of the title of the property.

Bargain and sale deed

A less popular type of deed, the bargain and sale deed is most commonly used in the states of New York, Washington, Wyoming, Colorado, and Vermont during situations involving foreclosure, tax sales, or transferring property between family members.

Deed in lieu of foreclosure

When borrowers can’t keep up with their mortgage payments but want to avoid the negative impacts of foreclosure, they might agree to transfer the property to the lender through a deed in lieu of foreclosure.

What is a property title?

A property title isn’t a physical document or piece of paper like a deed is. Instead, the title refers to a theoretical concept of ownership and the rights that go along with that ownership of property.

The bundle of rights includes:

• Right of possession: This ensures that the title holder can possess or own the property.
• Right of control: This allows the title holder to use the property however they want, if they are not breaking the law.
• Right of exclusion: This ensures that the title holder can limit who is allowed to enter the property.
• Right of disposition: This allows the title holder to sell, rent, or transfer ownership of the property.
• Right of enjoyment: This ensures that the title holder can enjoy the property.

During the process of buying a home, you’ll be assigned title to the property after a process of verifying the previous owner’s title to the property.

House title terms to know

When buying or selling a home, you may hear these terms related to home title.

• Title insurance: Title insurance comes in two forms: lender’s title insurance and owner’s title insurance. The former protects the lender against potential losses, and the latter protects home buyers/soon-to-be-owners from unknown property issues. Lender’s title insurance is mandatory, and owner’s title insurance is optional.
• Title search: Typically conducted by a title company or real estate attorney, a title search involves the search of public records, including any former liens, deeds, mortgages, etc., that will impact the title of a property.
• Abstract of title: An abstract of title provides a home buyer with the entire legal history of a property, including any litigations, tax sales, deeds, title transfers, mortgages, and encumbrances.

How titles and deeds work during a sale

When you buy a home, you receive title, meaning the right to possess and use, the home. Transferring the title involves a process of verifying who currently has title to the property (hopefully the person selling it to you) and signing documents, including a deed, to complete the sale and transfer ownership.

The process looks something like this:

• Offer to buy. You make an offer to purchase a home, and the seller accepts.
• Title search. Your lender hires a company to conduct a title search, verifying that the seller has title to the home and there are no competing claims from other potential owners.
• Title commitment. The title search company submits a title commitment, offering to insure the title and listing the requirements, if any, that must be met by the seller, such as providing proof that a competing claim isn’t valid.
• Drawing up a deed. The seller or title company draws up a deed to transfer ownership.
• Prepare for closing. The deed, mortgage documents, and all other paperwork are prepared for closing.
• Lender will send loan documents to the title company. Prior to closing, the lender sends documents to the title company for final approval, and the title insurance is finalized.
• Title company confirms closing. The title company examines the loan documents and provides final approval.
• Seller and buyer sign deed at closing. During closing, both the buyer and seller sign the deed, and title is transferred to the new owner.

The bottom line: Deeds and titles are different, but both are integral to the closing process

Titles and deeds are both important to the idea of home ownership, but they are different things. Deeds are legal documents used to transfer ownership, while title to a home is the theory of legal rights conveyed by home ownership. Thankfully, your real estate agent, lawyer, or lender can help clarify things throughout the process of buying a home.

If you’re ready to buy a home, you can start your journey by filling out an application with Rocket Mortgage today.