Becoming a first-time homeowner, especially in uncertain times like these, can be a bit daunting. There is a lot of confusion around terms like "deed," and "title," because the Google-cached definitions are, well, uncannily similar.
You may have heard that a deed is that special piece of paper you get to show off at your closing – along with your keys – but what is it, exactly? Is it different from a title? What is a title? Fear not – we're here to help.
When the grantor (seller) transfers ownership of a house to the grantee (buyer), the deed and the title officially change hands, too. The major difference between a deed and a title is conceptual. A deed is a document – a physical piece of paper – that describes the property, the sale, and the transfer of ownership. Both the grantor and grantee must sign this document at the closing. The deed serves as physical evidence of property ownership. Holding a title is simply the legal right to say you own your property.
Different types of deeds are used with property changes ownership without a transfer of money, such as in the case of parents passing down property to their children.
While a deed is a physical piece of paper, a title is simply a "bundle of rights" that dictate your rights to control your property. These include your right to choose who is allowed on the property, what alterations are made to the property, and your right to transfer ownership of the property, temporarily or permanently. Titles are transferred by deeds.
To make it simple: titles aren't just for real estate, and they also aren't just for people. Titles also apply to vehicles, yachts, or any other asset – and they can be held by multiple people, such as married couples, or entities, such as corporations.
To mitigate the risks of assuming a new property, such as disputes over ownership, your mortgage lender may order or recommend a title search and title insurance. A title search is a search of public records that may affect the ownership of the property, such as liens, wills, and previous deeds. Any such risks must be mitigated by the grantor. Title insurance is purchased by the seller, and protects lenders and homebuyers from problems that may arise with the property itself, such as damage to the property.
Although title insurance is not required, it is highly recommended, especially for first-time homebuyers, to protect you from any potential title problems and risks. With title insurance and a title search, you will be able to maintain, modify, and enjoy your property for many years to come.