YOU ASK:

Is there a difference between a deed and a deed of trust?

WE ANSWER:

Yes, there are key differences between the two.

With a deed, you transfer the ownership of the property to one party. When a property is bought, the deed is drawn up and signed by both the seller and the buyer, and, if the conditions of the contract are all met, the seller transfers the title and all the attached rights in the name of the buyer. The deed contains a legal description of the property, as well as the name of the previous owner and the conditions as to how he will transfer the property to the buyer. The deed should then be notarized and recorded in the county records section. There, the abstract of title is updated to add the new owner.

In contrast, a deed of trust does not mean the holder owns the property. In an arrangement involving a deed of trust, the borrower signs a contract with the lender with details regarding the loan. The holder of the deed of trust is an accredited third party, and holds the property until all the conditions of the contract are met. That is, until the loan is fully paid. When the loan is paid, the deed of trust is released and the borrower gets the full ownership of the property.

However, in the event that the borrower is unable to keep up with the payments of the loan, the holder of the deed of trust has the right to foreclose and sell the property. What happens is that the lender presents proof that the borrower has been delinquent in his payments.

The deed of trust simplifies the foreclosure process in that the lender does not have to go through a court proceeding to start the foreclosure. What happens is that the holder of the deed of trust sells the property in behalf of the lender.

Some of the key elements of the deed of trust include:

  • The names of the borrower and the lender
  • The amount being borrowed
  • When the loan is started
  • Interest rates
  • The loan maturity date
  • Penalties and late fees
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