‘Deed’ or ‘Title’ — Homeowners Are Confused About Ownership Instruments

You can blame “Monopoly” for some of the confusion. That board game taught us all that there is such as thing as a “deed” to a property. With a “deed” to Boardwalk and some houses or a hotel on it, you could charge rent to those who landed on it — and hopefully win the game.

Meanwhile, the Department of Motor Vehicles has taught us that there is such a thing as a “title.” Meanwhile, when you purchase a home, you receive a “title policy” which guarantees “clear title” to your property.

But surprise! There is no such document as a “title” to your home the way there is a title to your car. There is a document called a “deed” but that is the document which transfers ownership, it is not proof of ownership. Sorry, I know this is confusing!

So where is the proof that you own your home? It is held by the Clerk & Recorder of your county, and it’s based on the most recent deed recorded with the county. The only proof that Rita and I own our home in Golden is that the most recently recorded deed transferred the property to us. There is no other document which we have or can produce to prove we own our home.

Last year the state-mandated contract for the purchase and sale of real property changed the way deeds are specified. The agent preparing the contract specifies whether the buyer wants to obtain ownership through one of several deeds.

First is the “Special Warranty Deed,” by which the seller warrants that he is transferring ownership of his property free of any known lien or claim of ownership during the time he/she or they owned the property. That is the most limited type of deed.

The buyer might, however, demand a “General Warranty Deed,” by which the seller is warranting that there is no other claim of ownership (or lien against the property) going back to the beginning of time. 

What you need to know, however, is that, regardless of which type of deed is used to transfer ownership, the buyer should receive an “owner’s title policy” (typically paid for by the seller) guaranteeing free and clear title to the buyer. In other words, it hardly matters which type of deed is used to transfer the property. You’re still protected.

Title insurance differs from other kinds of insurance because it has no term. It is a one-time purchase that covers the new owner of the property forever. It never has to be renewed.

Prior to issuing the title policy, the title company does a “title search” looking for any recorded claim of ownership or lien against the property in question. If a claim or lien is not recorded with the county in which the property is located, it can’t be enforced.

It is possible, of course, that a claim or lien might be overlooked during the title search, but it’s pretty rare. I recall once in 1991 I purchased an older (1905) office building in Denver, receiving a title policy from Land Title Guaranty Company. Within a year or so, I was notified of a lis pendens against the property, but the lawyers for Land Title did whatever they had to do in order to clear it, costing me nothing. Since that time I can’t think of any claims against any title policy held by me or any of my clients — and I’ve had quite a few!

There are other types of deeds beside Special Warranty and General Warranty. If the property is owned by the estate of a deceased person, the property is transferred by a “Personal Representative’s Deed.”  If the property is purchased at a foreclosure auction, it is transferred by a “Public Trustee’s Deed.” If a property is purchased out of bankruptcy, it is transferred via a “Trustee’s Deed.” 

A “Quit Claim Deed” is used when real estate is transferred without being sold for money.  For example, if John Doe were to marry Jane Doe and wanted to put a home he owned in both their names, he could “quit claim” it from John Doe (as “grantor”) to John & Jane Doe (as “grantees”). If they divorce later on, John & Jane Doe might quit claim the house to either John or Jane, with or without a monetary settlement on the side.

With such examples, I hope you now understand that a “deed” is in fact an instrument of transfer, and not a title to property.

Because there is no physical title to real estate, the first thing that a title company does when asked to execute a contract to sell a parcel of real estate is to issue a “title commitment,” which is a document asserting who the recorded owner of the property is and to whom it is to be transferred.

There is one other use of the word “deed,” and that’s for the “Deed of Trust” which a mortgage or other lender has you sign when you take out a loan of any kind which is secured by your home. That document is recorded with the County Clerk & Recorder and is the basis for that official to hold a foreclosure auction if you default on the loan.

I am not a lawyer, and I am providing this information as I understand it from real estate classes and from my experience as a real estate licensee. You’ll want to engage a lawyer if you require further explanation, and I, like any real estate licensee, can refer you to one.

Cars Have Titles Which Are Transferred Upon Sale. Homes Do Not. So, What’s a ‘Deed’?

One of my sellers whose closing is fast approaching called me in a panic last week because she couldn’t find the deed to her house, which she thought she’d need to bring to closing.

I explained to her that a deed is not the same thing as a title, and that all she needs to bring to closing is her driver’s license or similar ID to prove who she is.

In fact, there is no “title” to her house. A deed is a legal document which transfers property. It is not proof of ownership. When a deed is recorded by the county clerk, it results in the county changing its records to reflect the new owner’s name, and the deed, once recorded in the clerk & recorder’s database, is then mailed back to the new owner. At that point, it doesn’t matter if you lose or misplace your deed, because the county has the proof of your ownership.

This is different from how motor vehicles are transferred, where you have a title to your car and must sign it over to the new owner when you sell your car. If you lose your title, there’s a procedure for replacing it, but you need that physical title to sell your car.  Not so with real estate.

Many people share my seller’s misunderstanding about deeds And there are different kinds of deeds. The deed used most often is a “warranty deed,” meaning that the seller warrants that they are the owner of the property and, with that deed, transfer it to the buyer.

There are “general” and “special” warranty deeds. I won’t go into the difference here, since the purpose of title insurance is to provide the buyer with a guarantee (regardless of the type of deed) that they are receiving the property free and clear of any claims of ownership or indebtedness by anyone other than the seller.

When a property being sold is in the estate of a deceased seller, it is sold by the “personal representative” of the estate (called an “executor” in other states), and the property is transferred via a “personal representative’s deed.” If the property is purchased at a foreclosure auction conducted by the Public Trustee (who enforces the “deed of trust” securing the mortgage for the lender), then the transfer is via a “trustee’s deed.” 

Whichever kind of deed is used, the fact remains that the deed only exists as evidence of the sale, and it does not need to be presented ever again.

I am not a lawyer, and I am providing this information as I understand it from real estate classes and from my experience as a real estate professional. You’ll want to engage a lawyer if you require further explanation, and I, like any real estate licensee, can refer you to one or more real estate lawyers.