A title proves legal ownership of a tangible asset like a home or car. Unlike a deed or a vehicle title, a property title is conceptual and isn’t a physical document, although the deed conveys it. A property title includes a series of benefits, known as a “bundle of rights,” often included in a properly drafted deed.
As a homeowner with a valid deed, your bundle of rights includes:
- The right of control: Your ability to use the property legally.
- The right of disposition: Your right to permanently or temporarily transfer ownership of the property as long there are no loans, liens, or other encumbrances.
- The right of enjoyment: Your right to enjoy the property in any lawful manner. (This is distinct from the right of control.)
- The right of exclusion: Your right to choose who is allowed on the property.
- The right of possession: Your legal right to claim property ownership.
A single individual or multiple individuals/entities, such as a married couple or a corporation, can possess title to a property. It must be clear to transfer a property from the grantor to the grantee. A clear title is free of undisputed claims of ownership, which means it doesn’t have debts, liens, back taxes, or other creditor claims.
TIP
To protect yourself against these risks, you should purchase title insurance and perform a title search if you consider buying a property.
Deed vs Title: What’s the Difference?
A deed is a legal document used to confirm or convey the ownership rights to a property. A deed or property deed must be a physical document signed by both the buyer and the grantor or seller.
Title, however, is the legal way of saying you have property ownership. The title (or property title) is not a document, but a concept that says you have the right to use that property.
Title Insurance
Title insurance protects grantees from any hidden or unknown defects. The grantee purchases it for a one-time cost before the property sale.
Unlike other insurance policies that protect against future events, insurance offers protection against past events that blemished the real estate title.
Many potential issues can make a title “cloudy,” including the following:
- Ownership or disputed ownership by another party
- Judgments against the property, like lawsuits or mechanic’s liens
- Forgery and fraud
- Unresolved building code violations
- Back taxes
In addition to the standard form of insurance the buyer purchases, sellers can buy an owner’s policy for extra coverage.
The seller of the property purchases an owner’s insurance policy as another layer of protection against potential problems or if someone attempts to sue the property owner, stating they have a claim to ownership.
Lender’s title insurance essentially protects the lender’s interest in your property, which is typically until your mortgage is paid off.
Title Search
Title insurance covers the cost of a deep title search performed by a real estate attorney or title company. Experts carefully examine all public records and legal documents during this search to identify potential title defects, claims, and disputes.
If a search identifies any problems, the grantor is responsible for resolving the issues before the sale occurs.