If you’ve ever tried to refinance a home, purchase a new vehicle or plan your estate, you’ve likely heard the terms “title” and “deed.” Although they are often used interchangeably, there are key differences between them. In this article, the experts at McKesson Title Corp. explore the differences between a title and a deed. These differences start with when you need a title or deed.
- Property Purchase: When buying real estate, you will need a title or deed to establish legal ownership of the property. The seller will transfer the property’s ownership to you through a deed, which is evidence of the transfer.
- Mortgage or Financing: When obtaining a mortgage or financing for a property, the lender may require a title search and a deed to ensure the property is free from liens or legal issues, which helps protect their investment in the property.
- Property Sale or Transfer: If you sell or transfer property to another party, you must prepare and execute a deed to legally transfer the ownership rights to the buyer or recipient.
- Refinancing or Home Equity Loans: When refinancing a mortgage or obtaining a home equity loan, the lender may require a title search and a new deed to ensure their lien position and protect their interest in the property.
- Estate Planning and Inheritance: When passing down property as part of estate planning or inheritance, a title or deed is necessary to transfer ownership to the intended beneficiaries.
- Insurance Purposes: Insurance companies may require a clear and marketable title to insure properties, vehicles, boats or other valuable assets. The title helps establish ownership and legitimacy, ensuring proper coverage.
Title or Deed: Why Do You Need One?
Understanding a Title
In insurance, a title refers to the legal documentation establishing ownership rights and interests in a specific property or asset. It is an official record detailing the ownership history, any liens or encumbrances and other essential information regarding the property. Insurance companies require a clear title to issue policies. The title is necessary for asset protection and risk mitigation, allowing insurers to assess the property’s ownership history and identify any potential legal issues or competing claims that may impact the insurance coverage. Some common objects that hold titles include real estate properties, vehicles, boats, artwork and exceptionally valuable objects.
Understanding a Deed
A deed is a legal document that serves as tangible evidence of the transfer or conveyance of ownership rights from one party to another regarding a property or asset. It is a written document that outlines the transaction’s specifics, including the parties’ identities, a detailed description of the property and any conditions or restrictions attached to the transfer. Deeds are commonly used in real estate transactions to establish clear and valid ownership. They provide a comprehensive record of the transfer, ensuring the legal rights and obligations of the parties involved and serving as proof of ownership in the event of disputes or claims. Deeds are vital documents that provide security and certainty in property ownership and form an essential part of the legal framework in real estate transactions.
How a Title and Deed Are Connected
- Ownership Confirmation: A title is a legal concept that confirms ownership rights and interests in a property. It establishes who has the rightful claim to the property and includes details about ownership history, liens, and encumbrances. The title is essential for establishing ownership before a deed can be created.
- Transfer of Ownership: A deed is a specific legal document facilitating the transfer of ownership rights from one party to another. When a property is sold or transferred, a deed is executed to legally transfer the ownership from the seller to the buyer. The deed is tangible evidence of the transfer and must be recorded to update the title records.
- Recording and Title Updates: After the execution of a deed, it is typically recorded in the appropriate government office, such as the county recorder’s office. This record is crucial because it informs the public about the change in ownership. It also updates the title records to reflect the new ownership information and helps maintain a clear chain of title.
- Title Insurance: Title insurance is often obtained during the property purchase process. It protects the buyer and the lender from any issues with the title, such as ownership disputes, liens or other defects. Title insurance policies are typically issued after thoroughly examining the title records, including the deed, to ensure the property has a clear and marketable title.
A title establishes ownership rights, while a deed facilitates the transfer of those rights. The execution and recording of a deed help update the title records, and title insurance protects against potential title-related issues. The title and deed ensure property ownership’s clarity, legitimacy and transferability. Although understanding titles and deeds can be confusing, the experts at McKesson Title Corp. are here to help. Contact us today for help with all your title and deeds needs!