By Lydia Blair
Special Contributor at Candy's Dirt
Deeds and titles go together like love and marriage. But like love and marriage, they aren’t the same thing. A deed is not a title and a title is not a deed.
Though they seem alike, deeds and titles serve different purposes. And in the real estate world, the references to them can be confusing.
What is a Deed?
When you buy or sell a home, one of the documents that you sign at closing is the deed for your property. A deed is used specifically for the transfer of real estate. It sets forth your right to claim ownership of the property. A deed must always be in writing, correctly executed, and recorded in land records. The deed lists the address, legal description, the parties transferring the property, etc. The deed may also contain items like the sales price, restrictions regarding use of the property, etc.
There are several different types of deeds and each relates to something specific regarding use of a property and in establishing legal ownership of a property. A few different types of deeds include:
A General Warranty Deed is where the seller warrants that the title is free and clear of any encumbrances and that they have the right to transfer title. With a Special Warranty Deed, the seller warrants that the title is free and clear only for the time that the seller has had the title.
A Deed of Trust typically references a mortgage. This document allows the lender or lienholder remedies if the borrower defaults in their payments to the lienholder. Despite the use of the word “deed,” this is not proof of clear ownership or title. Basically, this deed often contains a clause that gives the trustee (your lender) the right to act (foreclosure) if you default. Your lender still “holds the title” of your home until you’ve paid off your loan.
Deeds are used solely for the transfer of real estate. But it takes more than a deed with the new owner name to transfer a piece of real estate. Just because you received a deed, doesn’t mean the property is free and clear of other claims. It can be very complicated. For this process, most buyers and sellers use a title company as a third-party agent to convey both deed and title.
What is a Title?
Transferring title to real estate does not work in the same way as transferring title to an automobile. You can’t just hand a certificate of title over to a buyer, take their check and consider it transferred. While a deed tracks the legal ownership of the property, a certificate of title is the legal document that establishes full-and-clear rights to the property.
Generally, the certificate of title proves ownership of property. It will contain the property owner’s name and address, and identifying features of the property. In the most basic terms, a deed is required to change the ownership of a property. A “title” is a concept that describes who ultimately owns the property.
For example, when you pay off your mortgage, the lender files a release with either the court or a local authority where the property is located. After all liens and encumbrances are off a property, then the owner has ‘clear title.’
You can think of the title as the legal relationship between persons and property. It gives ownership rights that no one else can claim and it allows the owner to possess and dispose of the property. To make it even more complicated, there are a few different types of title. For example, tenancy is where each person on the title owns interest in the property. A tenant can sell only their interest in the property, but not the entire property.
If you want to know more details about deeds or titles, ask a real estate attorney or your favorite escrow officer. Both deeds and certificates of title provide some proof of ownership. Like love and marriage, they go hand in hand.