Deed vs Title — What’s the Difference in Real Estate?

If you have just received your PCS orders and are looking to buy or sell a home, one of the first questions you may have about the process is likely to involve the extensive list of documents and paperwork that you can expect to use. Before you sign anything, it’s essential to understand the meaning of each step and its intended use.

The deed and title of a home are often confused because they tend to come up around the same time during the process, but they are not the same thing.

When buying or selling, you’ll need to have a deed prepared that shows the official transfer of ownership. A legal team preparing documents for closing generally does this. To be valid, the deed must include the names of all parties involved, a legal description of the property as found in tax records, and the signatures of all parties to the transaction. You also need to record how and when the deed was delivered and accepted.

Once the deed is signed, it becomes part of the public record and is recorded in your local county or jurisdiction. If the property is ever put up for sale, this recorded deed will be part of its history of ownership.

Different types of deeds can be used, depending on the exact situation. Understanding the pros and cons, as well as the limitations, of each is why working with an experienced team is so important.

• Warranty Deed: In most residential real estate transactions, a warranty deed is used to confirm that the property is free from liens and other encumbrances that may affect ownership. It legally shows that the ownership is transferred from the seller to the buyer. A special warranty deed is similar, but it limits the guarantee of ownership to just the most recent seller. This may be used when purchasing a foreclosure or bank-owned property.
• Quitclaim Deed: A quitclaim deed is typically simpler to research and prepare compared to the more comprehensive warranty deed. It doesn’t provide the same legal guarantee of ownership rights as a warranty deed, but it can still record the transfer of ownership. If you transfer property between family members or as a result of a divorce and already have an in-depth understanding of the past ownership, you may be able to use a quitclaim deed.
• Bargain and Sale Deed: This is the least inclusive in terms of guarantees, and it only records the transfer of ownership from the buyer to the seller. It is typically used in situations such as foreclosure, but it does not guarantee that no other claims to the title of the home exist. If you opt for a bargain and sale deed, consider also exploring title insurance.

While a deed shows the transfer of ownership, the title is the collection of documents, information, and records that show the current property ownership. While you can physically hold the deed to the property, you can’t hold the title in your hands because it does not refer to a single document.

Instead, the title is shown through evidence and records, including the deed, possession of the property, and history of sales. Much of this information is obtained from public records, which are gathered during the title search portion of the closing preparation process. If there were unrecorded or misrecorded deeds in the past that may impact future ownership, it can cause issues in the future, which is why getting deeds recorded to maintain the chain of title is so important in real estate.

There is a difference between legal and equitable title, however. Legal title refers to the public records, such as deeds, that show legal ownership of the property. Equitable title refers to the right to use and enjoy the property. For example, if you have a mortgage on your home, the lender still maintains the legal title until you pay off the mortgage; however, you have the equitable title because you have the right to occupy the home.

The most important difference to understand between the deed and the title is that one refers to the actual document that shows the transfer of ownership, and the other refers to the rights to the property.

When you purchase a home, you may get the deed to the property, but unless it is a warranty deed, you can’t be guaranteed that it has a clean title. For example, if the property has a lien due to unpaid taxes or a past judgment, it may impact ownership rights in the future. A warranty deed is the only type of deed that guarantees all records are free of potential disputes.

If questions do arise, you may need to address a cloud on the title. This refers to unresolved disputes or questions. Sometimes they are simple things to clear up, such as clerical errors or misrecording a previous deed. Other situations become more serious, such as a gap in the chain of title or defects. Working with an experienced team can help you understand the requirements to navigate from sale to closing, while ensuring and protecting your ownership rights.

When you buy or sell a home, the title search can be extensive and time-consuming, depending on the situation. Generally speaking, if the title search returns a clear title, all you have to do is sign and execute the deed, then have it recorded in the public records. The legal team or title company completes this process on your behalf, and the cost is usually included in closing costs.

If there are any disputes or discrepancies, however, you may need to take steps to resolve them before completing the sale. You can obtain a different type of deed with fewer guarantees, but you may want to consider purchasing title insurance to provide an additional layer of protection if this is the case. If problems come up after you purchase the home, your ownership may be called into question.

You may wonder what kinds of issues to look out for when conducting title research. Some of the most common problems include liens or judgments against the property, which may not always be revealed in the initial title search. Creditors and lenders may be able to go after the property if a former owner had a judgment against them at the time.

Prior ownership claims can also arise, particularly in cases involving heirs of a previous owner or in the context of divorce proceedings. Fraudulent deeds can be a problem in some cases. Easements or encumbrances on the property description may also call the deed into question. Misspellings or other clerical errors may be minor, but they can still cause problems when trying to obtain a clear title.

If you uncover issues, you can take steps to correct or remedy them, especially if they are minor, like clerical errors. Problems such as disputed ownership or liens may require more time and legal action to resolve, which can be costly.

Before completing the purchase, you should always request a title search. Most real estate closings include this, but it’s essential to confirm with your title company, real estate agent, and lender to ensure that everyone is aware of this requirement. If the title comes back clear, you should be able to get a warranty deed, which provides the greatest protection and guarantees.

If the title does not come back clear or you simply want extra protection, consider purchasing title insurance on the home as well. Once the purchase is complete, ensure that the deed is recorded accurately by verifying the public records. If you encounter issues later, consult with your closing attorney and review the existing records to determine what needs to be corrected or addressed.

Sometimes title problems come up even years after you purchase a home. An old lien or heir may come forward with questions about the property. You can request a title review or title search to get more information. Depending on the results, it can make sense to reissue the deed or correct discrepancies. In some cases, further legal action may be necessary to resolve issues such as liens or inheritances.

A deed refers to the physical document that shows the transfer of ownership, while a title refers to the legal status of property ownership and rights, based on public records and multiple sources of information.

Depending on the issue, you can request that it be corrected or resolved. For minor defects, such as clerical errors, corrections can be easy and quick. More complex questions, such as pre-existing liens or claims from heirs, can be resolved through legal action to resolve.

No, you must complete, sign, and record a deed to officially transfer legal ownership of a property.

Title insurance protects the buyer from future claims that may challenge the seller’s ownership. Title insurance can cover the costs associated with clearing liens, correcting errors, resolving boundary disputes, and all other legal expenses related to clearing a title.

The key point to remember about real estate purchase documentation is that the deed serves as the official and tangible legal record of ownership, while the title represents the legal framework that establishes ownership through public records. Understanding the meaning and requirements of each term when buying or purchasing a home ensures a smooth transaction. Sellers can walk away from closing with all their ducks in a row, and buyers can feel confident in their new purchase.

Talk to a real estate attorney to learn more about the homebuying process and how you can get into your new home (or sell your existing home) with as few legal hassles as possible. Not only are they experienced with conducting title searches and preparing deeds, but they can also answer questions about the entire closing process.

Navigating a home purchase can present its own challenges; that’s why connecting with an experienced lender can make all the difference. Using your hard-earned VA loan benefit is no different. Find a VA-savvy lender today to help guide you through every part of the homebuying process!