Deed vs. Title: Know the Difference

When you are purchasing a home, there are many new concepts and terms that may be a little overwhelming to the first-time home buyer (or even someone with more experience).

Knowing the difference between deed and title can help you achieve your dreams of homeownership – read on to learn the difference between the concepts of title and deed as they relate to homebuying.

What is a Deed, and How Does it Differ from Title?

Here’s a quick summary from Brianna McGurran of Experian®: “A deed is a document that states you own a property, when a title is the concept of legal ownership that the deed grants. To own a home, you need both.” In other words, you will take possession of the title when the deed is signed over to you at closing.

General Warranty Deed, Quitclaim Deed, and Property Deed… What’s the Difference?

As you prepare to purchase or refinance your home with a mortgage lender, you may come across some of the following terms which may be related to the concept of deed and title. What is a “general warranty deed,” anyway, and is a quitclaim deed the same as a property deed? Let’s dive in.

• A “general warranty deed” is probably what you are thinking of when you refer to the “deed” of a home. According to Investopedia®, “A warranty deed is a legal real estate document that protects the buyer and ensures that the seller holds a clear title to the property, has no outstanding liens or mortgages, and there will be no future claim to the title of the property.” They go on to say that most home lenders will require a general warranty deed before they will allow you to close on your new residence.
• On the other hand, a “quitclaim deed” or “quit claim deed” is a different type of document, in which the signer attests that they are relinquishing any ownership in an existing property. According to Investopedia®,“A quitclaim deed makes no assurance that the grantor actually has an ownership interest in a property; it merely states that if the grantor does, they release those ownership rights. As a result, when accepting a quitclaim deed, the buyer of a property accepts the risk that the grantor of the deed may not have a valid ownership interest and/or that there may be additional ownership interests in the property. Title insurance is not issued in conjunction with a quitclaim deed.”
  • Imagine Kayla owns a single-family home outright, but wants to release her claim on her home and grant it to her son Sam when she moves out. In this case, she may sign and notarize a quitclaim deed so her son may assume her ownership.
• Both types of deeds fall under the umbrella of property deeds.

How Do You Insure Title? Related Concepts: Title Insurance and Title Search

As you learn more and more about the homebuying process, you may have come across references to “title insurance” and “title searches.” Now that we know “title” refers to the conceptual ownership that an individual has over a property, you may be asking yourself, how does someone insure a concept?

Title insurance may be purchased by a home lender or home buyer to hedge against the possibility that defects in the title will cause them material losses. For example: Judith has just purchased a home, but now she is being sued by an individual who claims that they inherited the property instead of the seller, and that Judith had no right to purchase it. If the litigant’s claim is found to be valid, a title insurance policy would cover legal and other costs associated with this dispute up to the amount specified by the policy.

A title search is the process used to make sure title is in order before a real estate transaction closes. This means consulting public records in order to make sure that the seller has full ownership of the property they are selling, and that there are no outstanding liens or other defects in title that may cause trouble down the road. For example, Hector is trying to purchase a mixed-use investment property, but when a title search is run on his behalf he learns that the seller owes five years of unpaid property taxes on the land. Identifying this problem early, and demanding the seller resolve the situation before the sale, may help keep Hector from becoming liable for this other party’s back taxes down the line.

Though individuals may run title searches of their own, in many cases your title search may be run by a title search company. A breakdown of the projected costs of your title search can be found on your loan estimate. If you have a preference as to which title company you would like to use for your real estate transaction, let your loan officer know ahead of time so they can furnish you with an accurate estimate of that company’s fees.

What Else Do I Need to Know About Real Estate Financing?

Now that you know the difference between title and deed, are you interested in learning more about home buying and home mortgages? Your loan officer is a great source of knowledge for plenty of real estate financing topics. Check with them to see what other resources they can provide.