Deed vs. title: Know the difference

Home buyers and sellers, unfortunately, can become overwhelmed by everything that goes into the buying or selling process, and the extensive use of real estate jargon along the way doesn’t make matters any less intimidating.

Like much of the terminology associated with the real estate industry, “title” and “deed” can cause confusion among those looking to buy or sell a home. While the terms title and deed have some similarities, there are key differences that you'll want to be aware of as you navigate the home buying process. Understanding the features distinguishing a title from a deed can help you feel more confident about home buying.

Title vs. deed, explained

A title and deed are similar in that they both involve property ownership, but they differ in their appearance, overall intent and how they come into play during the closing process.

Title is the theory of ownership used to show who has interest or rights in the home, where the deed is a legal document used to convey the ownership and rights of the home from the seller (commonly referred to as the grantor) to the buyer (commonly referred to as the grantee).

The grantee will receive ownership with rights to the property and the associated deed at the closing phase of the home buying journey. The title company will take the original deed and send it to the recording authority in the municipality where the property is located. Recording the deed provides notice of the change in ownership. After the municipality records the deed, the municipality will mail it to the buyer.

House deed, defined

We’ve already covered the major difference between a house title and a deed, but it’s worth examining what both of these terms mean.

When you purchase a home, you’ll receive the property deed – a legal document that provides a description of the property and conveys the ownership (title) from the seller (grantor) to the buyer (grantee).

To complete the sale of the property both the grantor and in some states the grantee are required to sign the document at the end of the closing process. The signature(s) are also acknowledged before a notary, and depending on the state, witnesses.

Types of deeds

There are various types of deeds depending on the state the property is located in. Different deeds have different applications. You may want to consult a locally licensed attorney to help you decide which deed is right for you. They can provide you with a more detailed description of each deed type and discuss with you any tax and/or estate planning concerns you may have. Let’s take a look at a few of the popular types of deeds so you can decide which might be best for your situation.

Warranty deed

In general, a warranty deed contains a warranty by the seller to the buyer that 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.

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.

Property title, defined

Unlike a deed, a property title isn’t a tangible document. Instead, it’s the rights of ownership of the property, commonly referred to as the bundle of rights.

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.

House title terms to know

Additional real estate terms are closely related to a title, and home buyers and sellers should be aware of them.

• 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 are handled

The differences between a title and a deed become clearer during the home closing process when they are both used. Typically, when a lender or real estate agents are involved in a purchase, an owner’s and/or lender’s title policy will be ordered. Either the lender or real estate agents will order a title policy and settlement services from a title company. After receiving the order, the title company will search the title to the property and verify the current owner and any other interests or matters affecting title to the property. The title company will issue a title commitment which will list the current owner and any requirements needed to issue the insurance policy(ies).

One of the requirements will be a deed from the current owner to the purchaser (grantee). The parties can either provide their own deed or order one through the title company. The title company will also prepare additional documents required for the closing, when all the closing documents needed to complete the purchase are signed and the money is exchanged.

If there is a lender involved in the purchase the lender will prepare the loan documents and send them to the title company for the closing. The title company will then schedule and confirm closing between all parties. Generally, the deed is signed at the closing transferring title from the seller(grantor) to the buyer(grantee).

The bottom line: Key differences between a deed and a title

A deed and title both refer to the ownership of a property, but there are key differences as noted above. Remember that while a title refers to your ownership and rights in a property, a deed is a physical document used to transfer that ownership.

Once you decide which type of deed best suits your situation, take action and start your mortgage application online with the Home Loan Experts at Rocket Mortgage^®.