When buying or selling a home, ‘title’ and ‘deed’ are two terms that you will encounter a lot, and it’s crucial that you understand what they mean. The transfer of ownership of a house or property from a seller (grantor) to a buyer (grantee) requires both documents. This immediately tells you that they are not the same. So, Deed vs. Title: What’s the Difference? The answer to this question can help protect you from liability and ownership disputes that may arise after the sale or purchase of your home.
What Is a Deed?
A deed is a document used to transfer the ownership of a property from a seller to a buyer, otherwise called a grantor and grantee. To be deemed legal, enforceable, and valid, a deed must contain the following elements:
- Affirmation that the seller is the legal owner of the property and can legally transfer it.
- Affirmation that the buyer can legally receive the property.
- A detailed and accurate property description.
- The buyer and seller signatures.
Types of Deeds
The transfer of property can include one of the following three deeds:
1. General Warranty Deed
A general warranty deed requires that the seller make covenants or legally binding guarantees about the title of the property. This definition is why this deed is sometimes called a full covenant and warranty deed and is considered the deed that provides the most protection to buyers.
Every state has a different set of rules to govern how general warranty deeds work, but each one must contain the following covenants:
- Covenant of Seisin: The seller affirms that they are legally able to transfer the property.
- Covenant Against Encumbrances: The seller affirms that the property carries no debts, liens, or encumbrances.
- Covenant of Further Assurance: The seller commits to providing the buyer with all the documents required to make the title valid.
- Covenant of Quiet Enjoyment: The seller confirms that the buyer will remain on the property if the title is found to have a defect.
2. Quitclaim Deed
A quitclaim deed is also referred to as a non-warranty deed because it facilitates the transfer of a title from a buyer to the seller without any guarantees or warranties. It is the deed that offers the buyer the least protection unless the title confirms that the property has no liens or encumbrances (clean title).
If the title contains defects, however, the buyer cannot pursue legal action against the seller. This type of deed is thus only used in the following situations:
- When a seller wishes to avoid liability for the defects in a title after the sale.
- During official transfers such as sheriff sales, court proceedings, and defaulted mortgages.
Once a buyer signs a quitclaim deed, they are liable to pay a sales tax and the property taxes of the acquired real estate. You can talk to an attorney or tax expert about tax exemptions that might apply to your situation after the purchase.
3. Special Warranty Deed
Through a special warranty deed, a seller guarantees that the title did not obtain any defects during their time with it. This provides the buyer with limited defect protection as the guarantee does not mention or cover defects that arose before the seller obtained the title. As such, it doesn’t offer as little protection as a quitclaim deed but is not to the standard of the general warranty deed.
What Is a Title?
A title is a document that proves the legal ownership of an asset, such as a house or vehicle. A property title is unlike a deed (or car title) because it is not a physical document but conceptual and is actually conveyed in the deed. Additionally, it contains a list of rights called a bundle of rights that are included in the deed. These rights include:
- Right of disposition: Gives you the right to legally transfer ownership of the property temporarily or permanently minus any liens, debts, or encumbrances.
- Right of possession: Gives you the right to claim ownership of the property legally.
- Right of control: Gives you the right to use your property lawfully.
- Right of enjoyment: Gives you the right to enjoy your property within the law.
- Right of exclusion: Gives you the right to choose who can visit your property.
A property title may belong to one person or be held by several people like a couple or company. If the person holding it wishes to transfer it to a buyer, the title must be approved as having no debts, back taxes, loans, liens, or claims. This is called a clear title.
A clean title protects you from liability over debts you did not accrue yourself. You can ensure you only get a clear title by conducting a title search and acquiring title insurance.
Title insurance is a type of protection that shields property buyers from unknown or hidden defects in a property title. It differs from other insurance coverages because it protects the holder against past happenings that may have harmed the title and not possible future events.
If you are considering buying a property, you can purchase title insurance at a one-time cost to protect yourself from the title of a property that might:
- Involve fraud or forgery
- Feature an ownership dispute
- Have judgments against it, e.g., liens or lawsuits
- Owe back taxes
- Have unresolved code violations
Title insurance will protect you against title defects and add to the guarantees offered by the seller. In the event of a lawsuit, it can also affirm your right to claim ownership of the property.
A title search refers to a process undertaken to look for any defects associated with a property, such as debts, liens, and usage limitations. It can tell you if the seller can lawfully transfer the ownership of the property to you and whether the information provided in the deed is accurate. While typically done by real estate attorneys and title companies, you can also conduct a title search.
Key Difference Between Deed and Title
Generally, a deed is a document used to transfer the ownership of a property from a buyer or seller, while a title is a document that proves this ownership. The title is transferred through the deed as it is a conceptual document. Both these documents, although different, are connected and are very crucial to the sale and purchase of a property. If you have any questions or concerns about them, it is best to involve your real estate attorney.