When purchasing a property, it’s important to know the difference between a deed and a deed of trust. A deed is the document that transfers ownership of the property from the seller to the buyer. A deed of trust, on the other hand, is used as security for a loan. It’s important to understand which one is being used in your transaction, as they have different legal consequences. For more information on this topic, keep reading!
What is Deed?
Deed is a legal document that transfers ownership of real property from one person to another. The document is signed by the seller and the buyer, and then recorded with the local government. Deeds typically include the names of the parties involved, a description of the property, and any conditions or restrictions that apply to the transfer of ownership. Once the deed is recorded, it becomes a matter of public record, and can be used to establish ownership of the property. Deeds are an important part of any real estate transaction, and should be carefully reviewed before being signed.
What is a Deed Of Trust?
A Deed of Trust is a document used to transfer the legal title of real property from one person to another. The Deed of Trust is used in conjunction with a promissory note, and gives the lender (the trustee) the power to sell the property if the borrower defaults on the loan. The Deed of Trust is a common security instrument in the United States, and is typically used in situations where the borrower does not have enough equity to obtain a conventional mortgage.
Difference between Deed and Deed Of Trust
- Deed and Deed Of Trust are both legal documents. Deed is a written instrument that conveys title to real property. Deed of Trust, on the other hand, is a three-party security instrument that conveys the title to real property to a trustee as security for the performance of an obligation. The key difference between Deed and Deed Of Trust is that Deeds are usual conveyances of real property while Deeds of Trust are used as security for repayment of debt through sale of property.
Both Deeds and Deeds of Trust are usually recorded in the public records. The person who owns the real property after the recording is called the grantee. For a Deed, the grantee is usually the person who buys or receives the real property from another person. - In case of a Deed of Trust, the grantee is always a trustee, who holds the title to real property for the benefit of another person called the beneficiary.
The beneficiary in a Deed of Trust can be a bank or any other lending institution that has loaned money to the debtor. The debtor in a Deed of Trust is always the person who borrows money from the lender and uses his/her interest in real property as collateral for the loan. - In case of a Default in repayment, the trustee can sell the real property according to the terms specified in the Deed of Trust and apply proceeds towards payment of debts.A deed must be signed by both parties to be legally valid while a Deed Of Trust requires only the signature of trustor since trustor is appointing a trustee to hold title on his/her behalf.
Conclusion
The deed is the document that transfers ownership of a property from one person to another. A deed of trust, on the other hand, creates a security interest in the property for the lender. This means that if the borrower defaults on their loan, the lender has legal recourse to take possession of the property and sell it to repay the debt. So, which one do you need for your real estate transaction? If you are buying or selling a home, you will likely need a deed.
