When it comes to real estate transactions, the terms “title” and “deed” are often used interchangeably, which can cause confusion for clients and those unfamiliar with the industry. While both documents are essential in the buying and selling process, they serve different purposes. So, what’s the difference between a title and a deed, and why do we need both in real estate? Read on to learn more.
What is a Title in Real Estate?
In real estate, a title is a legal document that confirms a person’s ownership of a property. It includes details about the property such as its boundaries, any liens or mortgages, and any restrictions on its use. A title company or an attorney issues a house title after conducting a title search. This ensures that there are no outstanding claims or disputes over a property’s ownership.
What does this mean, exactly? One example of a restriction that may arise during a title search is an easement, or a right that allows a person or entity to use the property for a specific purpose. For example, a utility company may have an easement to run power lines through a property. While the property owner still owns the land, they must allow the utility company to have access to the easement area.
Title insurance is essential in a real estate transaction. It safeguards home buyers and mortgage lenders from title defects and potential financial losses. This can include things like outstanding liens, conflicting wills, and unpaid taxes.
What is a Deed in Real Estate?
A deed is a legal document. It transfers the ownership of a property from one party to another.
The sale document was signed by both the seller and the buyer. It detailed the property description, the names of the parties, and the terms of the sale. The deed will become a public record once the buyer becomes the legal owner of the property.
As a real estate agent, it is essential to have a full knowledge of deeds and their legal requirements. Deeds are a basic component of the purchase or sale of a property. Real estate agents often prepare or review documents related to ownership transfer. They make sure that the transfer is legally binding and accurate.
5 Types of Deeds
There are five types of deeds that can be used in a real estate transaction. While all serve a similar purpose, each type of deed offers differing levels of protection to the buyer and the seller.
General Warranty Deed: A General Warranty Deed provides the most comprehensive protection to the buyer. The seller guarantees clear title to the property. They will also defend the buyer against any claims or disputes regarding the property’s ownership.
Special Warranty Deed: With less protection than a General Warranty Deed, this type of deed means that a seller only guarantees that they have not done anything to harm the property’s title during the time they owned it.
Bargain and Sale Deed: A Bargain and Sale Deed does not provide any guarantees or warranties to the buyer whatsoever. It simply transfers ownership of the property from the seller to the buyer.
Grant Deed: A Grant Deed does include some limited warranties to the buyer. The seller guarantees that the property has not been transferred to anyone else. Additionally, they guarantee that any liens on the property have been disclosed in the deed.
Quitclaim Deed: Quitclaim Deeds provide the lowest level of protection to the buyer. This document transfers any interest the seller has in the property to the buyer. However, it does not guarantee that the seller has a legal right to the property.
What are the Main Differences Between a Title and a Deed?
The main difference between a title and deed is their purpose. A title confirms ownership of a property and provides details about any liens or restrictions on its use. A deed, on the other hand, transfers ownership of a property from the buyer to the seller.
Another difference between a title and a deed is the level of protection they offer. While a title provides information about the property’s ownership, including any liens, encumbrances, etc., it does not do anything to guarantee the property’s ownership. A deed, however, transfers ownership of the property to the buyer, and can also provide protection depending on the type of deed used.
The Physical Differences Between a Deed and a Title
Physically, a title and a deed look different. A title is usually a multi-page document that includes in-depth information about the property’s ownership. A deed, on the other hand, is a shorter document that only includes high-level information, like a description of the property and the names of the parties involved in the transaction.
The Requirements of a Deed Versus a Title
There are different requirements for a title and a deed in real estate. To obtain a title, a title search must first be conducted to ensure that there are no outstanding disputes or claims over the property’s ownership. This is typically done by a title company or an attorney. Once the title is issued, it’s important to have it reviewed carefully to ensure all information is accurate and there are no issues with the property’s ownership.
To prepare a deed, the seller must first provide a legal description of the property. This includes the property’s boundaries, and any known easements or restrictions. The deed must also include terms of the sale, including the names of the parties involved, the purchase price, and any other details specific to the transaction. Once the deed is signed and notarized, it must be recorded with the county or local land registry.
While the terms “title” and “deed” are often used interchangeably, both serve different purposes. As a real estate professional, understanding the difference between the two can help to ensure a smooth and successful real estate transaction for your clients.
Grow Your Real Estate Knowledge and Advance Your Career
A knowledgeable real estate agent can help their clients navigate the complexities of property ownership by advising them throughout the process of transferring a title and a deed throughout a transaction. A well-informed agent can ultimately prevent costly legal disputes, and ensure their clients have a smooth transaction from start to finish.
Colibri Real Estate School has a wide range of resources to help aspiring real estate agents and industry professionals advance their skill sets and become more knowledgeable in the field. With pre-licensing education to post-license courses, you’ll be armed with the tools you need to help clients through deed and title transactions and much more. Contact us today to learn more or get started.
