The terms associated with property ownership can be confusing for beginners and veterans alike: however, the property title and a deed are not one and the same. A fee simple title refers to the way the property is vested, whereas a warranty deed completes the transfer of ownership. The two are interconnected because the deed establishes the vesting. However, they actually cannot be compared to one another.
A fee simple title and warranty deed are not comparable since both are necessary. The former refers to how the property is held with an absolute form of ownership, while the deed shows information that determines whether the owner has authority to transfer the property to someone else.
Title to a Property
The title to a property is not simply a document. It is actually a report listing the history of transactions that have occurred regarding the parcel. A title search is completed using information available on public record at the county courthouse where the property is located.
All the information obtained is compiled together to form the title report, or chain of title. The report lists the past and present owners, names of mortgage companies, amounts of the loans and any other information regarding liens or judgments against the property. It also shows how each owner was vested, or how they held the title. Common forms of vesting include sole ownership, community property and fee simple.
Fee Simple Title
Fee simple title refers to how the title to the property is held. This form of vesting implies an absolute form of ownership. The owner of a property held as fee simple has the right to grant the property to anyone via a deed.
If the owner keeps the property until his death, his heirs become the owners. When ownership is transferred, the fee simple title remains. Fee simple title can be impaired by liens and mortgages.
Understanding Warranty Deeds
Warranty deeds are legal documents acting to transfer property ownership between parties. They are generally used when a property is sold. Warranty deeds include three major components – the grantor's name, the grantee's name and a legal description of the property.
By signing a warranty deed, the grantor promises that he owns the property free and clear and has the right to transfer his ownership. In the event that an issue regarding the chain of title was discovered in the future, the grantor is responsible to resolve the issue for the grantee.
Importance of Title Insurance
Title searches are commonly completed when a property is being sold. Mortgage companies request a title search to ensure that they are funding a loan for a property that is owned free and clear by the sellers. Although the title search might come back clear, there may be overlooked or hidden issues. These might include forms of fraud or missing deed transactions.
To protect against any future claims made on the property by a third party, a title insurance policy is obtained. The policy is purchased for a one-time fee paid at closing. It will protect the buyers as long as they own the property.