Difference Between Deed and Deed of Trust

Deed vs Deed of Trust

When someone buys a property, a settlement is signed by the buyer. The settlement is considered the last phase of the buying process, and it is the first step in owning a home or property. Many legal documents have to be signed during the settlement, and one of them is called the deed.

Deed
A deed is a legal document which conveys, confirms, or transfers the ownership or title from one person, the seller, to another, the buyer. Both buyer and seller should read and review the deed very carefully as it is recorded in the jurisdiction where the property bought or sold is located.
A deed can be either unilateral or bilateral. They include powers of attorney, licenses, patents, conveyances, diplomas, or commissions. In the U.S., deeds are synonymous with a title deed or deed of title.
There are three main things which need to be reviewed in a deed:

Whether the legal description is correct. The deed should be compared with the description provided in the title binder obtained by the settlement company from the land records.
The names of the “grantor,” or seller, and the names of the “grantee,” the buyer, should be spelled correctly.
What will be the title given to the property? There are many titles like “sole owner” when the property is in your name. “As tenants by the entirety” if you are taking property with your spouse. “Tenants in common” if you are taking title with a friend. It is also referred to as “joint tenants with rights of survivorship.”

Deed of trust
In some U.S. jurisdictions a deed of trust is considered as a mortgage alternative. The main thing about a deed of trust is that it does not directly transfer or convey property directly from a seller to a buyer. The title of the property is transferred to a trustee, which is a company or trust that holds the property title as loan security. This is also called “in escrow.”
Once the loan is paid in full, the title is transferred to the buyer from the trustee, and a release is signed from the loan obligation. If the loan is not paid, the property is liquidated by the trustee.
Each state has different laws on a deed of trust. This document is very important and has the following clauses:

Due on sale

This clause means that once the property is transferred to another, the loan automatically becomes due. No one else can assume a loan on that property anymore.

Prepayment penalty

The buyer is charged a penalty if he pays the loan in full before the due date.

Summary:

A deed is a legal document which transfers the ownership of a property from a seller to a buyer; whereas a deed of trust is a document or mortgage alternative in many states which does not transfer the property directly to the buyer but transfers it to a trustee or company which holds the title as security until the loan is paid in full.

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