Understanding these key concepts is crucial for anyone involved in buying, selling, or owning property. In this blog, we'll break down the distinctions between a deed and a title so you can approach your real estate transactions with confidence and clarity.

What is a deed?

A deed is a legal document that transfers property ownership from the grantor (the seller or current owner) to the grantee (the buyer or new owner). It serves as the written proof of a transfer of ownership, detailing the specifics of the property being conveyed and identifying the parties involved.

A deed typically includes a thorough description of the property, ensuring there’s no ambiguity about what’s being transferred. Once signed, sealed, and delivered (often in the presence of a notary), the deed is recorded with the local government office, cementing the transfer of ownership. Without a deed, there’s no official record that the property has changed hands, making it a crucial document in any real estate transaction.

The grantee receives the deed and the title to the property at the closing of the home purchase. It's important to keep the deed in a safe place after purchasing a property. 

What is a title?

While a deed is a physical document, a title is a legal concept that represents the rights and ownership interests in a property. Having "title" to a property means that you legally own it, with all the rights, privileges, and responsibilities that come with ownership. The title encompasses not just the right to use the property but also the ability to sell, lease, or transfer it to others.

However, a clear title is essential—meaning there are no legal disputes, liens, or claims against the property that could challenge your ownership. Title searches are conducted to verify that the seller has the legal right to transfer the property, ensuring that the buyer receives a title free of hidden issues.

What’s the difference between “deed” and “title?”

While the deed is the physical document that transfers ownership, the title is a legal concept representing the bundle of rights that come with property ownership.

Here’s a way to remember the difference: You can own a physical copy of a book, but you can’t hold the book’s title in your hand. A book title and a property title work the same—both are concepts, and neither is a physical object.

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Types of Deeds

There are several types of deeds, each serving a different purpose. Different types of deeds offer varying levels of protection and carry different implications for the ownership and title of the property.

General Warranty Deed

A general warranty deed is the most common and comprehensive deed used in real estate transactions. It offers the buyer the highest level of protection because the seller guarantees that they hold a clear title to the property and have the legal right to sell it.

The deed also guarantees that the seller is unaware of any property issues that might arise in the future and ensures the absence of any outstanding mortgages, liens, or other claims against the property.

Special Warranty Deed

A special warranty deed is more commonly used with commercial real estate sales and offers a more limited guarantee. With a special warranty deed, the seller only warrants that they have not incurred any title issues during their period of ownership. However, they only guarantee that the title is clear after they have acquired the property.

For example, if a bank sells a foreclosed property, they might use a special warranty deed to guarantee that no title defects occurred while they owned the property and do not take responsibility for issues that arose before their ownership.

Quitclaim Deed

A quitclaim deed offers the least amount of protection for the buyer. With a quitclaim deed, the seller transfers whatever interest they may have in the property without making any guarantees about the quality of the title. Essentially, the seller is “quitting” any claim to the property, and they don’t provide any warranties that they own it or that the title is clear.

A quitclaim deed is most commonly used when property is transferred from one owner to another – such as parents to adult children or spouse to spouse – without the exchange of money.

Bargain and Sale Deed

A bargain and sale deed is a middle ground between a quitclaim deed and a warranty deed. It implies that the seller has the right to transfer the property, but it doesn’t include the same level of warranty protection as a general warranty deed. The seller does not guarantee that the title is free of encumbrances, but they imply that they own the property and have the authority to sell it.

Bargain and sale deeds are often used in real estate transactions where the buyer is aware of potential title issues and is willing to accept them, possibly at a lower purchase price. For example, in some cases of estate sales or auctions, a bargain and sale deed might be used, particularly when the seller is a government entity or an executor of an estate who doesn’t want to take on the liability of guaranteeing the title.

Grant Deed

A grant deed is commonly used in some states and provides a limited warranty similar to a special warranty deed. The seller guarantees that they have not sold the property to anyone else and that the property is free of encumbrances made during their ownership. However, it does not provide a warranty against issues that may have existed before the seller's ownership.

Grant deeds are often used in regular residential sales, particularly in California. For instance, when selling a home in California, the seller might use a grant deed to transfer ownership, offering the buyer a limited warranty that protects against title issues arising from the seller’s period of ownership.

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Title Search and Insurance

When purchasing property, one of the most critical steps in the process is conducting a title search and securing title insurance.

Importance of Conducting a Title Search

Typically conducted by a title company or real estate attorney, a title search is a thorough examination of public records to verify the legal ownership of a property and to uncover any liens, deeds, mortgages, or other issues that might affect the title. A title search aims to ensure that the seller has the legal right to transfer ownership and that the property is free from any undisclosed claims or legal disputes.

Title Insurance: Protection Against Title Defects

While a title search is essential, it’s not foolproof. There’s always a possibility that certain issues could be missed or arise after the purchase. This is where title insurance comes in—offering additional protection for both the buyer and the lender.

Title insurance is a policy that protects the insured party (either the buyer or the lender) from financial loss due to title defects that were not discovered during the title search or that arise after the purchase.

If a claim or defect is later found—such as a previously undisclosed lien or a claim from a long-lost heir—the title insurance company will cover the associated legal fees, defend the insured’s ownership rights, and compensate any financial losses.

Owner’s Title Insurance

This policy protects the buyer’s ownership interest in the property. It covers the buyer for the property's full value against any claims that challenge their ownership. Once purchased, it remains in effect for as long as the buyer or their heirs own the property.

Lender’s Title Insurance

This policy protects the lender’s interest in the property, typically required by mortgage companies as a loan condition. It ensures that the lender’s mortgage lien is valid and that their investment is protected if a title issue arises. Unlike owner’s title insurance, this policy only protects the lender, not the buyer.

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When you buy a home, it’s essential to understand that both the deed and title are crucial components of your property ownership. The deed is the physical document that transfers ownership, while the title represents your legal right to own and use the property. Together, they work in harmony to ensure that your ownership is complete and legally recognized.

We understand the importance of finding the best place to call home and are committed to helping you every step of the way. Check out the Brookfield Residential blog for design advice, homebuying insights, mortgage tips, and more.

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