When buying a house, you might hear the seller or your real estate agent discussing the property's deed or title. While the two sound similar, there are key differences.
The property deed shows the change of ownership between parties, confirming a sale has occurred or issued in preparation for a sale. In contrast, a property title is the right of ownership and is not a physical document.
As you plan to close on a home, it's important to understand how both the deed and title play an important role in real estate ownership. Read on so you'll be prepared on closing day with the ins and outs of deed versus title.
What Is a House Deed?
A home or a property deed shows an ownership change. A deed will state the names of the seller and buyer of the property. The house deed must have the seller's signature confirming ownership to be valid. In certain states, both the buyer and seller must sign. Your real estate agent or real estate attorney will be able to confirm the requirements in your state.
Deeds are filed in the public record. You can find property deeds online or with the local tax assessor’s office. In many states, a deed is valid even before it is filed as a part of public record.
You might come across various types of deeds when buying or selling a property. Here's an overview.
General Warranty Deed
A general warranty deed is a legal document issued by the seller of a property promising that the property is free and clear of any financial obligation, both now and in the future. A general warranty deed is the strongest deed offered by a seller, including information about the sale to make it legally binding. Understand more about a grantor vs. grantee here.
Special Warranty Deed
A special warranty deed is issued by the seller of a property and warrants against anything that occurred during their ownership. The owner called the grantor, doesn't make any guarantees about defects or issues with the title that took place or existed before they owned the property.
Quitclaim Deed
A quitclaim deed is issued by an individual to "quit any claim" to a property and is a type of deed used to transfer the ownership interest or claim on a property to another person. Unlike a general or special warranty deed, a quitclaim deed doesn't make any guarantees or promises about the title.
Bargain and Sale Deed
A bargain and sale deed is similar to a quitclaim deed in that it doesn't offer protection over the title or guarantees. A bargain and sale deed is used in foreclosure auctions or bank sales of real estate. It does not guarantee that there are no other claims of ownership. The new owner takes on the responsibility to resolve any issues they uncover with the title.
Deed In Lieu Of Foreclosure
A deed in lieu of foreclosure occurs when the owner of a property voluntarily turns over the ownership of their property to their lender or bank. With this type of deed, the homeowner can avoid the foreclosure process and preserve their credit score — or at least reduce the negative impact on their credit score — while giving up ownership of the home.
What Is a House Title?
A house title, or property title, is the ownership of a property. It is not an actual document but a legal record of ownership. The titleholder has the legal right to transfer the property, use the property, or make other decisions about the property. The titleholder of a property is the owner. One person, multiple people or corporations, partnerships, limited liability corporations (LLCs) or other organizations can hold a house title.
When closing on a home, a title company will perform a title search. Homebuyers and lenders often purchase title insurance to protect against claims of ownership by other parties. A title insurance company will search the property's history to ensure no unresolved claims of ownership or liens. Here's what you need to know about a house title.
Title Search
A title search is performed by a title company or real estate attorney employed by either the property buyer or lender. During a title search, the title company will search the public records for any former liens, deeds, mortgages or encumbrances on the title that may impact property ownership.
Title Insurance
To protect your investment, lenders often require borrowers to purchase title insurance. Title insurance is either lender’s title insurance or owner’s title insurance. The first type protects the lender against potential title issues, while the owner's title insurance protects the property buyer from unknown title issues. For most real estate transactions, lender’s title insurance is required, while you can decide whether to purchase owner’s title insurance.
Abstract of Title
An abstract of the title gives you the entire property history, including any tax sales, deeds, title transfers, litigations, mortgages or encumbrances.
Deed vs. Title: Similarities and Differences
There are several similarities between a property deed and a title, although there are also key differences. The main similarity is that the deed and title relate to property ownership and are used in the closing process when buying a home. Here are some differences.
Legal Documents
House deeds are legal documents used to identify property ownership. A title is a legal concept rather than a specific document. The title gives the holder the legal right to own a home.
Proof of Ownership
Both house deeds and titles provide proof of ownership and can be used to transfer property ownership. However, a deed is used specifically to transfer ownership, while a title is used for proof of ownership.
Who Holds the Document
Who holds the document varies between deed versus title. A house deed is typically held by the property owner or their mortgage lender, while a title company or the local government typically holds a title.
Physical Appearance
A house deed is a physical document representing the legal ownership of a property and the owner's guarantees related to the transfer. A title refers to the legal concept of ownership.
Specific Information
A house deed contains specific details about the property, such as its legal description. These specific details are used in the legal transfer of a property. The title also includes the address and other key details of the property but refers to the overall legal ownership of the property.
Do You Need a Deed or a Title?
If you're buying or selling a property, you'll need both. A deed is used to transfer ownership of a property. It's a legal document that includes a description of the property, along with details like the names of the buyer and seller. The title is the actual ownership of the property rather than a specific legal document. Ready to get started? Learn when to sell a rental property, how to make an offer on a house or check out the purchase and refinance mortgage finder here.
Frequently Asked Questions
Do I need a lawyer to handle the deed or title transfer?
You do not need an attorney to create a deed if you already have all the information, but it can be advisable to consult a lawyer for title transfer.
Are there any fees or taxes associated with transferring a deed or title?
Yes, fees and/or taxes are associated with transferring a deed or title, depending on where you live. Whether a property is subject to deed transfer tax depends on the state where the property is located and local laws.
What happens if there is a discrepancy between the deed and title?
If there is a discrepancy between the deed and title, it’s worth consulting a real estate attorney to resolve the issue. While the title records the ownership, a deed transfers the ownership and, depending on the type of deed, may make guarantees about the state of the title or its history.
About Alison Plaut
Alison Plaut is a personal finance and investing writer with a sustainable MBA, passionate about helping people learn more about wealth building and responsible debt for financial freedom. She has more than 17 years of writing experience, focused on real estate and mortgages, business, personal finance, and investing. Her work has been published in The Motley Fool, MoneyLion, and she regularly contributes to Benzinga.