Title vs. Deed

It’s important to understand the difference between a title and a deed.

A deed

is a legally binding document used to transfer property from one owner to another. When you close on your home, this is signed and witnessed before being given to you as the new homeowner. It contains a description of the property so that everyone knows exactly what’s being transferred, and it is filed with the property clerk and made available to the public.

The house title

refers to the rights held by parties with ownership interests. You can compare it to a book or movie title, in the sense that the title is a concept, not a physical object. It gives rise to intellectual property in the same way that ownership offers you certain property rights.

Perform A Title Search

The first thing a title company will do is perform a title search, which entails looking for potential obstacles to the clean transfer of ownership.

The main purpose of a title search is to find whether people other than the seller have ownership in or rights to the property. However, your title company also looks for other encumbrances that could interfere with your ownership of the property.

Outstanding Mortgages

Unless the previous home is owned free and clear, the current homeowner will have a mortgage lien on the property. This will need to be paid off at closing so that thx||e title can be transferred to you.

Other Debts Secured By The Home

The seller could have a lien on the property because they took out a home equity line of credit or financed the cost of solar panels, for example. These will need to be paid off or otherwise removed before you can close. You may also have the option to subordinate the lien.

Unpaid Homeowners Association Dues

While this will vary depending on what’s written in the HOA contract, associations often give themselves broad powers in these agreements to place a lien on – and even foreclose on your property – because of unpaid HOA dues. The home seller will need to resolve their dues balance so the lien can be lifted, or the buyer will become responsible for paying those dues if the sale goes forward.

Unpaid Property Or Income Tax Liens
  • Governments can place a lien on a deed if the homeowner fails to pay the required taxes. Usually, a local government places a lien on a property for unpaid property taxes. It can also bring an action in foreclosure to force the sale of the property for tax repayment.
  • The Internal Revenue Service (IRS) will also place liens on real estate and personal property when a taxpayer fails to pay owed income taxes. It too can force a sale of property to recoup those tax payments.
  • Both types of tax liens must be resolved before closing.
Mechanic’s Liens

If a contractor, their subcontractor or their employees weren’t paid for work that was completed, either on the property or the house itself, a mechanic’s lien might be imposed on the property.

Unpaid debts for repairs done on the property stay with the property.

Restrictions

Anything that restricts the free transfer of ownership of a property can cause problems in the future. For example, buying a home in a 55+ community or deed-restricted community means you can’t sell your home to anyone under 55, which is a restriction.

Easements

Easements are agreements that, although you own the property, you’re giving someone else the right to use your land for a specific purpose. An example of an easement might be the right-to-use space for parking.

Leases

Is the property rented out to anyone for a specified term? If it is, you can’t interfere with their lease rights when you buy the home.

A title search will reveal whether the property is encumbered with a lease.