Question

Differentiate among 4 various legal documents used in business transactions. Example: What is the difference between a Warranty deed and a Mortgage? That question counts as one document.

Answer 1

What is the difference between a Warranty deed and a Mortgage?

Characteristics of a Deed

Real property can only be transferred by use of a written instrument. A deed is the document that transfers ownership of real estate. In addition to stating the names of the new and old owners and how title will be held, the deed will contain a written description of the property being conveyed.

Characteristics of a Mortgage

A mortgage is a document used to secure the performance of an obligation. A mortgage creates a lien on property and gives the lender the right to take the property by foreclosure if the borrower defaults. Once the borrower pays the loan in full, the mortgage lien should be released.

What is the difference between Assignment of Deed of Trust and Deed or 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.

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.

Assignment of Deed of Trust

Loans that are secured by a deed of trust often include repayment terms that extend for several years or more. From a lender’s perspective, a loan secured by a deed of trust is a fairly safe investment when the value of the real estate is sufficient to repay the loan in the event of a borrower's default. This aspect makes existing loans secured by a deed of trust suitable for sale from the original lender to another lender during the life of the loan. To complete the sale of a loan secured by a deed of trust, the original lender uses a document called an assignment of deed of trust to transfer its rights in the deed of trust to a new lender.

What is the difference between Land Sale Contract and Trust Deed?

Under a land sale contract, the title to the property is split. The buyer receives equitable title, which is the right to do just about anything with the property, but the seller retains legal title and technically owns the property. Full title gets transferred to the buyer only after he completes the terms of the contract.

In a trust deed transaction, title to the property passes to the buyer at the sale. The buyer signs a promissory note, promising to pay back the trust deed; to make it stick, she puts the title of the property in trust with a third party, called the trustee. If she doesn't make her note payments, the trustee will transfer ownership of the property to the lender, who is also the beneficiary of the trust.

What is the difference between Warranty Deed and Deed of Trust?

Warranty deeds are commonly used in many states when a property is sold. The warranty deed offers a guarantee to the buyer that the seller rightfully owns the property free and clear of any liens or other defects to the title.

The deed of trust document is prepared by the lender, and the borrower signs it at the closing of the mortgage loan. The deed of trust explains the complete details, terms and conditions of the mortgage loan.

Differences Between the Two

The warranty deed acts to transfer property ownership from the current owner – the "grantor" – to the new buyer, the "grantee." By signing the deed, the grantor gives his rights to the property to the grantee. A deed of trust is a type of lending document stating the borrower's evidence of debt. The document secures the lender's interest in the property by naming a "trustee" – a third party who has the right to sell the property should the buyer default. For example, when you purchase a house, the seller signs a warranty deed granting you ownership. You then sign the deed of trust as a promise to repay the lender for the loan