The world of real estate is full of jargon unique to the industry. When I first entered into the world of real estate my time was heavily spent Googling terms or asking colleagues to further explain terms. I wasn’t surprised to learn that a common area of confusion is often surrounding the terms title and deed.
These two terms are very closely connected, which causes a lot of uncertainty in their definition and also how they differ. Understanding these terms can help you better navigate the home buying process.
What is a title?
A title is very important in real estate. In short, title is a legal term that refers to ownership of something. For example, a job title means your have ownership over your role and specific set of responsibilities. You can also think of the word “entitle,” where you have ownership or control over something.
In real estate, that something is property. By holding a title to a home, you have legal rights, ownership control, and responsibility over that home. Titles can held by individuals or by two or more people, in the case of a married couple, for example. Titles can also be held by corporations, partnerships, organizations, and trusts where all parties would share these “title rights” of ownership and responsibility.
What is a deed?
Titles are transferred by deeds. A deed is the actual legal document that would transfer the ownership (title) of a property from one person to another. A deed is signed by the person selling or transferring the property rights, called the grantor. The person purchasing or taking possession of the property rights is called the grantee.
Simple enough, right? But where is the mixup, and how can we distinguish the two terms?
Actual physical document versus concept
A deed is the physical legal document whereas title is the name that describes a person’s legal position regarding something. Deeds are official written documents, and in most states are required to be recorded in a courthouse or assessor’s office. Title is not a document on file in public record, but is a term that is conceptual.
In short, a deed is something you can hold in your hand, whereas a title is just the term for the person or persons who own the property. The way I like to remember the difference between the two is based off of their first letters. Title, is a term for saying you have ownership rights over something, whereas deed is the official legal document.
A deed is evidence of a specific event of transferring the title of the property from one person to another. A title is the legal right to use and modify the property how you see fit, or transfer interest or any portion that you own to others via a deed.
A deed represents the right of the owner to claim the property. As opposed to the title, that describes who is the ultimate holder of the property.
To better understand title and deed, let’s walk through the process where these two terms will apply. During the closing process, a “title search” will be ordered. This is a search of public records that affect the ownership (title) of the property.
The public records that will be searched are previous deeds, mortgages, paving assessments, liens, wills, divorce settlements, etc. After the search is conducted, a title examiner will determine and verify the property’s legal owner as well as what debts are owed against the property. The examiner will use all of the aforementioned data to then create what is called the “title abstract.” The title abstract is used to determine if the property has a clear title, which means the seller has the right to transfer the property.
The settlement agent will then prepare all documents and schedule the closing. Included in these closing documents is the deed. During closing the seller signs the deed, transferring the title and ownership of the property. Additionally, the buyer will sign the new note and mortgage and the old loan is paid off.
Questions about deciphering the difference between title and deed? A mortgage banker can help you every step of the way.