What's the difference? - Posted by peggy

Posted by Michael Morrongiello on June 03, 2007 at 12:18:31:

They are (2) two distinctly different instruments…

This is a good basic question that I’m sure will clear up some mystery for some others on this forum…

A Warranty Deed is an instrument which conveys the LEGAL TITLE to a property from one party (typically the Grantor) to another (typically the Grantee).

Its simply one form of deed instruments . There are several others as well;

Grant Deeds, Special Warranty Deeds or Special Deeds, Bargain & Sale Deeds, and the infamous Quit Claim Deeds.

A Deed of Trust is a form of a “security instrument”. It involves, Trustor(s) (the borrower(s)), a 3rd party Trustee, and the Benificiaries (the payees). They are the customary instrument used in many “title theory” states, however other states use mortgages.

Security instruments SECURE a promise, obligation, or performance (in most cases a Deed of Trust would be used to secure the PROMISSORY NOTE instrument which spells out the terms of repayment for a debt)

Another popular security Instrument would the mortgage security instrument- again used to secure mainly promissory Notes. Mortgages are used in what are called “Lien Theory” states as the mortgage creates a LIEN against the property, effectively encumbering the property.

When you elect to SELL a property and give LEGAL TITLE to the buyer- you would give them a DEED. If you are also going to seller financed or owner finance the sale, then they would in turn execute back to you a Promissory Note which spells out the terms of the seller financing to be provided. However to SECURE the promissory Note, the buyers would also execute a Deed of Trust (or Mortgage) back in favor of the Property Seller. That Deed of Trust (or Mortgage) security instrument gets recorded. Thus, now a seller financed transaction has taken place involving a deed, a deed of trust (or mortgage), and a promissory Note.

Hope this helps…

Best to your success;
Michael Morrongiello
Author of the Unity of Real Estate & “Paper” study course and Paper into Cash- the convertible currency study course

What’s the difference? - Posted by peggy

Posted by peggy on May 30, 2007 at 02:24:46:

Could someone please tell me the difference between a warrenty deed and a deed of trust? Do you need both when creating a note?