on Wednesday, October 10th, 2018 at 1:31pm.
Oh, where to start!…The Deed of Trust is probably one of the most important pieces of paper you will get at the closing table, and yet one of the most undervalued documents.Why is this?Well, because you’ve closed on your home and you’re excited, so when someone from the Title company says “here’s the deed to your house” you are typically so glazed over from the stack of documents you just shake your head yes and then went on to celebrate you new purchase. So note to self: remember that the Deed of Trust is important and you're going to want to understand why before you sign on the dotted line. Another reason it gets lost is because there are actually two deeds. The General (or Special) Warranty Deed is used between seller and buyer to state that their are no liens on the property (we will go into further detail about these in a later blog). Whereas, the Deed of Trust, also referred to as a Trust Deed is between three parties: the Lender, Title or Trustee, and the Buyer. Essentially this document adds an extra layer of security to the funds they are lending the buyer. So how exactly does it make the lender feel more secure? Investopedia explains it perfectly:
“A trust deed lets the lender commence a faster and less-expensive non-judicial foreclosure, bypassing the court system and adhering to the procedures outlined in the trust deed and state law. If the borrower does not make the loan current, the property is put up for auction through a trustee's sale. If the real estate is sold, the title is transferred from the trustee to the new owner through a trustee's deed. If there are no bidders at the trustee sale, the property reverts back to the lender through a trustee's deed. Once the property is sold, the borrower has no right of redemption.”
Essentially, if you stop making payments the lender gets to follow a process to get the deed back or it can be transferred to a new owner through a foreclosure, short-sale or auction. Below are the important parts of the Deed of Trust that you will want to review.
The Deed of Trust is an instrument that identifies the following:
Original loan amount
Legal description of the property being used as security for the mortgage
The parties to the instrument
Inception and maturity date of the loan
Provisions of the mortgage and requirements
Legal procedures in the event of default
Acceleration and alienation clauses
Riders, if any, regarding such clauses as prepayment penalties or terms of an adjustable rate mortgage
Moral of the story is that the Deed of Trust is very important and deserves a bit more attention at the closing table. Before signing this document please review it thoroughly as humans prepare this document and humans make mistakes. So please don't hesitate to reach out with any questions you may have about the Deed of Trust or any other Real Estate needs. firstname.lastname@example.org