Grant Deed vs. Deed of Trust

Understanding Documents in Your Loan Package

I have been a notary for quite some time now with a whole lot of experience in auditing loan files for mortgage companies. But, I will admit that if I had no background in the originations side of real estate transactions, my head would be spinning if I was a consumer, trying to understand what some of the documents mean!  Especially, when there can be upward of 150+ pages in a loan closing package.

The two documents I’m talking about today though are very common and should be understood if you own or are about to own “real property.”

(I found this information very easily on the “plethora of information,” the mighty old web! )

Grant Deed

A grant deed is used to transfer real estate ownership from one person to another. The transfer of ownership can be for a full parcel of real estate or just a portion of the real estate. Grant deeds are most often used in real estate sales between an unrelated buyer and seller. However, a grant deed may also be used to transfer ownership as a gift. When a grant deed is used, the person transferring ownership rights is promising to the person receiving ownership rights that these rights have not been previously transferred to anyone else.

Deed of Trust

A deed of trust is used in a three-party transaction involving the repayment of a debt. The first party is a real estate owner or buyer who is borrowing money that can be used for any purpose, but is typically used to fund the purchase of the real estate. The second party is the lender, such as a bank or other financial institution, providing the funds to the borrower. To secure repayment of the loan, the borrower signs a deed of trust which transfers legal title to his real estate to a third party, called the trustee, who can be any individual or company that does not have any interest in the loan or real estate. The borrower continues to have the beneficial use of the property with the trustee only taking action if the borrower defaults on his loan. If the lender and borrow cannot work out a resolution of the default, the lender can instruct the trustee to conduct a foreclosure sale of the real estate and deliver the sale proceeds to the lender to repay the loan.

Sources:

·         FindLaw: What Are Property Deeds?

·         EscrowHelp.com: Must I Record My Deed?

·         Sacramento County Law Library: Grant Deed

·         Cornell University Law School Legal Information Institute: Deed of Trust

·         California Department of Real Estate: Trust Deed Investments -- What You Should Know?