There are many terms used in real estate transactions that home buyers and sellers may not completely understand. The terms title and deed often fall into that category. Buyers and sellers will often use the terms title and deed interchangeably. However, there is a distinguishable difference between the two. If you are buying a home in the near future, here's a crash course to help.
Property Title
Property title is the legal term used to say someone has legal ownership to a property and that they have rights to use the property. Buyers "take title" to a home. Taking title is a concept, not a document. When you close on a home, you will not receive a title document. However, you will receive a physical, legal document called a deed.
A Property Deed
When you close on a home, you receive an official document called a deed. A deed conveys ownership right to a property. A deed is a physical document that is signed by the seller and the buyer. To get the deed, your mortgage lender will do a title search. They search the public records to be sure the seller has the legal right to transfer ownership to you. According to an article on realtor.com, Deed vs. Title: What's the Difference? Terms Home Buyers Need to Know, the lender does a title search to make sure "that there are no liens, personal property disputes, or claim possessions against it." If everything is clear, meaning there is "clean title," the seller will transfer the title to you, and you will have legal ownership of the property. Once you are the legal owner of the property, you can start enjoying the rising home values that homeowners have been enjoying over the past couple years.
Depending on which state you live in, you may have a real estate attorney representing you in your real estate purchase. Either your attorney, the title company or the escrow company will make sure the deed is recorded and filed with the courthouse or your county's assessor's office. This usually occurs within a few weeks after closing. You can ask the real estate professional who takes care of recording and filing the deed to mail you a copy of the property deed.
Property Title Search
The property title search is an extremely important step in the home buying process. You want to be sure there are no judgments or liens on the property you are buying. If there are and they are not discovered, you could be financially responsible for these messy and potentially expensive issues after closing. Another article on realtor.com, What Is a Property Title Search? Why It Matters for Buyers and Sellers states, "Multiple sources are searched, including deeds, county land records, tax liens on the federal or state level, divorce cases, bankruptcy court records, and other financial judgments against an owner that could potentially attach to a property."
Title Insurance
You and your mortgage lender will also receive title insurance policies when you close on your home. You will receive "owner's title insurance" and your lender will receive "lender's title insurance." There are instances when a property title search does not reveal all liens or judgments on a property. These insurance policies will protect you and your lender from anything that may have been missed during the title search.
All in all, the deed is a legal document that states you have title to the property. The real estate professionals you work with, such as your attorney, the title company or escrow company representatives and your mortgage lender, will ensure that the property search is performed, and the title insurance policies are in place. With home values rising at the rate they have been over the past couple years, it is important to protect your property so no one can come after you for unpaid claims after closing.
