Property rights in real estate are valuable and invariably the subject of a legal document called a deed. To transfer ownership rights in real estate, a grant deed is commonly used. When a loan is obtained to purchase real estate, a deed of trust is often used to give the lender rights in the real estate to secure repayment of the loan. An assignment of deed of trust is used by a lender when it sells its loan secured by a deed of trust.
Real estate transactions that involve the transfer of property rights require a deed to ensure the transfer of rights is effective. All deeds are written documents that include a description of the affected real estate and the names of the persons whose property rights are being transferred. Although not legally require to make the transfer effective, deeds are routinely recorded with the local government office responsible for recording real estate transactions. A recorded deed gives the public notice regarding property rights in a particular parcel of real estate, such as ownership, easements and liens. Recording a deed can also protect a property owner against future claims that his property rights are invalid.
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.
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.
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.
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