![]() The act of recording provides constructive notice to the world that the property has been encumbered. Ī deed of trust is normally recorded with the recorder or county clerk for the county where the property is located as evidence of and security for the debt. This confusing situation is a legacy of the archaic (and now-obsolete) common law requirement of livery of seisin, under which English common law courts had refused to enforce shifting fees or springing freehold interests (that is, a gage for years that was supposed to automatically expand to fee simple title if the underlying debt was not repaid). Both mortgages and deeds of trust are essentially security instruments in the form of conveyances that is, they appear to provide on their face for absolute conveyances of legal title, but it is implicitly understood that the borrower is retaining equitable title and the conveyance is intended to merely create a security interest. In either case, equitable title always remains with the borrower. ![]() This ensures the transaction can be easily rescinded if one party is unable to complete its part of the deal.ĭeeds of trust differ from mortgages in that deeds of trust always involve at least three parties, where the third party holds the legal title, while in the context of mortgages, the mortgagor gives legal title directly to the mortgagee. In reality, an escrow holder is always used so that the transaction does not close until the escrow holder has the funds, grant deed, and deed of trust in their possession. Transactions involving deeds of trust are normally structured, at least in theory, so that the lender/beneficiary gives the borrower/trustor the money to buy the property the borrower/trustor tenders the money to the seller the seller executes a grant deed giving the property to the borrower/trustor and the borrower/trustor immediately executes a deed of trust giving the property to the trustee to be held in trust for the lender/beneficiary. ![]() The borrower is referred to as the trustor, while the lender is referred to as the beneficiary. ![]() The equitable title remains with the borrower. In real estate in the United States, a deed of trust or trust deed is a legal instrument which is used to create a security interest in real property wherein legal title in real property is transferred to a trustee, which holds it as security for a loan ( debt) between a borrower and lender. ![]()
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