If you are looking to buy your first home, the industry jargon may often be unclear. It’s normal to have to research and look up terms you may not know or have only heard in passing. If you are unsure about the difference between a deed and a title, you’re not alone. These two terms are often confusing to new homebuyers and some people even think they are interchangeable. The first thing you should know is that a deed and a title are not the same and understanding the difference is important in order to make the homebuying process easier.
What is a Deed?
In simple terms a deed is a physical legal document that proves the ownership of a piece of property. This is commonly seen with homes and vehicles, but a deed can be used to prove ownership over many different things. Many states require a deed to be recorded within a courthouse so the information is logged and legally binding.
What is a Title?
Titles are different from deeds in that they are not an actual legal document but more a conceptual idea of who is the owner of a property. By holding a title to a home, you have legal rights, ownership control, and responsibility over that home. Title insurance is usually required when purchasing a home as there are a number of issues that can arise from a title and without insurance you would be financially responsible for resolving those issues.
Risks of Not Having Title Insurance
Forgoing title insurance opens the home buyer to significant risk if a title defect pops up after closing on the home. Consider a buyer who purchases their new home, only to find out that there is unpaid property tax from a prior owner. A surprise financial burden like this can be devastating, but with title insurance you would be able to mitigate any problems like this should they come up. Given that most people purchase a home to spend their life in, it’s no surprise that people may not be familiar with the immense benefit of title insurance. Speak to a title company early in the home buying process to eliminate these risks.