New homeowners or those individuals and couples who are aspiring homeowners in Massachusetts are often confused about terms used in real estate and the process of purchasing and selling property. Two typically confusing terms are “title” and “deed”. This blog will help to explain just what these terms mean and what the differences are between them.
What is meant by the term “title”?
When an individual, couple, group of people, company or any other entity has title to a property, it means that they own that property and have the right to do what they want with it (within local, state and federal rules) or sell it.
Having the title to a property also means that there are responsibilities attached to that ownership. For example, the owner of a particular property, i.e. the entity that has the title to that property, will be responsible for paying local property taxes. For example, a new home owner in Boston will be responsible for paying $10.88 for every $1,000 worth of their property. So, if they have purchased a $400,000 home, the fact that they have title to that property means they will be expected to pay $4,352 a year to the Boston City Council in property tax. Commercial title holders will pay more than double that rate.
What is meant by the term “deed”?
While both title and deed are connected whenever a property changes hands, they are actually quite distinctly different from each other. The term “deed” refers to the physical document that confirms ownership of a property. Copies of deeds are normally stored by local courts or government offices in the county where the property is located. The deed gives details about who sold title to the property (another real estate term: the “grantor”) and who bought the property (the “grantee”), the date of the transfer, the description of the property (e.g. the address).
Note that while it seems that when ownership of a property changes hands, both the deed and the title are also being transferred, this is not quite the truth. The deed is the legal document that “documents” change of ownership, i.e. the transfer of title from one owner to another. The title is not a physical object. It is more a concept which defines the person, more than one person, business or other entity who owns the property.
The process of transferring ownership of property changes who has the title and is recorded by a deed
It may be useful to go through what happens when a prospective homeowner buys a property. Real estate agents are most often used to sell a property on behalf of the current owner and are also used to help prospective buyers search for a property to buy. They are basically “matchmakers” who do their best to match the needs and wants of the buyer to the properties that they are attempting to sell o behalf of those they presume to have title on them.
Note that real estate agents, while subject to rules that apply to them made by the state government, do not normally check whether a person who wants to sell a property actually has what is called “clear title” of that property. They assume that a seller actually has the legal right to sell it. If the property gets to the point of a sale being made, then the checking will be left to a lawyer who does a “title search”. The sale cannot go through unless the seller has clear title of the property. This depends on whether the existing deeds to the property as have been examined held by a courthouse show that the title holder is the same as the seller and whether there were debts still to be paid, e.g. a mortgage or other liens, such as unpaid local property taxes.
Once the title search determines that the seller has clear title, then a new deed can be prepared by the lawyer. The deed must be signed by both seller and buyer either on a paper deed or in an electronic form. The deed is not prepared until payment for the property has been finalized, but once it has been issued, a copy is officially stored by the local Register of Deeds in the city, county or administrative jurisdiction in which the property is located.
Changing the title on a deed in Massachusetts
Who owns the property is recorded on the deed, i.e. who has title to that property. Things do change, such as marriages, divorces and deaths, as well as changes in business organization through mergers and acquisitions. Any desired change in title, e.g. if a couple divorces, it may be part of the divorce agreement that only one spouse retains ownership of the property, must be recorded by a new deed being prepared by a lawyer and the new deed replacing the original one in the Register of Deeds.
Conclusion
Every aspect of human life has its own terminology and vocabulary. Often we are not aware of many of these terms until we have to. At some time in their life or another, most people in Massachusetts, as they are anywhere else in the U.S., are in a position to think about buying a property of their own. That’s where terms like “title” and “deed” start to become important. To sum up what has been described above, a property owner or owners have title to their property, while proof of their legal title is recorded as a deed in physical (or digital) form and stored in the local Register of Deeds.
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