Every real estate transaction involves title, but many buyers, agents, and even newer attorneys aren’t always familiar with all of the terminology. Misunderstanding these terms can create confusion, delays, and unnecessary concern. By knowing the basics, buyers can approach the transaction with knowledge and know-how, and professionals can empower their clients to make confident decisions.
This article serves as a plain-English “dictionary” for the most commonly used title terms, and is broken down by section to make the terms easy to understand within the context of a transaction. In part one of this series, we’ll cover title vs. deed, title search and examination terms, and the title commitment. In part two, we’ll look at terms associated with liens and encumbrances, boundaries and property rights, the title insurance itself, and the closing process.
Title vs. Deed
The title is the legal concept representing ownership rights to a property — not the physical document, which is known as the deed. You will need both a title and a deed to legally own and sell property.
Title search & examination terms
Before a property’s title can be transferred to a new owner, its legal ownership must be verified, and any potential issues must be identified before the sale. Below are some terms commonly associated with this stage of the process.
Title search
A title search is the process of reviewing historical records to confirm a property’s legal owner and determine whether any issues could affect ownership before the property is sold or refinanced.
Public records
Public records are official documents that are accessible to the public. In real estate, these include deeds, mortgages, tax records, court records, liens, and other filings that show a property’s ownership history and legal status.
Chain of title
The chain of title is the chronological record of all previous owners of a property. It shows the transfer of ownership from one party to another, starting from the original owner to the current owner.
Abstract of title
An abstract of title is a summarized written history of all recorded documents and legal actions related to a property.
Title examination
A title examination is the detailed review and legal analysis of the title search results, often including the abstract of title. It is typically performed by a real estate attorney or title professional to determine whether the title is clear and marketable.
Defect (or cloud) on title
A defect (or cloud) on title is any issue or claim that may limit or challenge the owner’s legal rights to the property. These issues can exist even if the home has sold many times, and include things like old mortgages, unpaid taxes, recording mistakes, and undisclosed heirs.
Title commitment
A title commitment is one of the most misunderstood documents in a real estate transaction. Many professionals confuse it with the policy itself, but it is a document issued by a title insurance company stating a promise to provide title insurance after closing, once certain requirements are met. A title commitment is divided into three main sections.
- Schedule A (basic information) – This section includes essential details about the transaction, such as the buyer and seller’s names, loan amount, and the legal description of the property.
- Schedule B-I (requirements) – This section lists the conditions that must be fulfilled before closing, like paying off existing liens or resolving ownership issues.
- Schedule B-II (exceptions) – This section specifies any items that will not be covered by the title insurance policy.
Together, if these conditions are met, then the title company will fulfill its obligation to provide title insurance after closing.
The importance of understanding title terminology
Understanding title terminology helps reduce stress and improves communication throughout a transaction, and real estate professionals who can effectively “translate” title language provide meaningful value and clarity to their clients. With this basic title glossary as a foundation, you’ll be better equipped to navigate the details of a transaction with confidence. In the next part of this series, we’ll take a deeper dive into key terms related to title issues, surveys, boundary matters, property rights, and title insurance itself.
Title companies do more than simply process paperwork — they play an important role in managing risk and protecting property ownership rights. If you ever have questions or would like assistance explaining title concepts to your clients, reach out to Landtrust Title.