Buying a house can be a stressful, daunting process that’s full of legal terms and research most people aren’t familiar with. Having a realtor can greatly ease the process for you, but there are some things you should be educated on as the homebuyer so you aren’t totally unaware of what’s being discussed and going on.
One of the most confusing topics is property deeds and titles, and you’ll be dealing with both – so it’s important to understand what they are, how they relate to each other and how they differ from one another.
Deed and Registry of Deeds
A property deed is a legal document that affirms the interest or right to a property. The deed outlines who owns the property and is registered with the local county courthouse in a registry of deeds. Any member of the public who wants to request a property records search can do so with their local Recorder or Court Clerk’s office.
A deed typically contains a legal description of the property in question, as well as names and signatures of the people who are transferring the property.
Types of deeds can include the following:
- Gift deed
- Trust deed
- Lease deed
- Property deed
- Partnership deed
Other information that will be included on the deed includes:
- The date of transfer
- The place of transfer
- Addresses and names of parties involved
- Terms and conditions
Furthermore, deeds are typically stamped and signed by the grantor, then witnessed by at least one or more parties before being transferred to the grantee.
What is a Title?
A title is different from a deed in that it contains ownership information that is transferred by the deed. The party that holds interest on a title can transfer that right to another party, but only up to the maximum amount of their interest (such as when a mortgage company will sell accounts to another bank or financial institution). This is typically used in real estate to show any lien holders, such as mortgages, that are on the property. Title details are often, but not always, included on a deed. Rights a title owner can exercise include:
- Using the property
- Selling the property
- Control of the property
- Disposal of the property
Deed vs. Title: The Differences
- Deeds actually transfer title from one party to another.
- Deeds are recorded at the local courthouse.
- A deed transfers a person’s interest in a property; a title gives the person the legal right to use the property.
- A deed may give someone the right to claim ownership, but the title names the ultimate holder of the property.
- A deed is a written legal document that is signed by the concerned parties; the title is typically abstract.
Why It Matters When Buying a House
It’s important to understand the differences between title and deed because though they are closely related, they are still not the same thing. You may be buying a house, but if you’re financing anything, the mortgage company will hold the title to it. This allows them to foreclose and/or sell the property in the event of non-payment, even though you are on the deed.
You must also perform a title search on a home you’re thinking of purchasing to determine who holds the ownership rights to it. Many properties that go to auction, for example, could have a finance company or other party on the title that you would have to purchase the ownership rights from. There are often legal ramifications if you purchase a property at auction that a titleholder later discovers they were never compensated for and still hold the ownership rights to it. This is why it’s so valuable to pay a title company to perform the search for you.
When you’re asked to pay for a title search, it’s in your own best interest. A search at the local courthouse may provide deed information, but not always title details. You don’t want to find yourself owning an old lender for their interest in a property without having knowledge of all liens on a property and how that works in conjunction with the deed.
In addition, the title company working with your sale will offer title insurance at a reasonable cost. It’s always a good idea to purchase this insurance, as it covers you in the event an additional title holder or legal interest is found in the future.