Deed vs. Deed of Trust: Is There a Difference?
Over the years, I have found that my clients frequently confuse the term “Deed” with “Deed of Trust”. Sometimes I have even heard clients use the terms interchangeably, without realizing the important distinctions between the two legal terms.
What is a deed?
A deed is a document that transfers ownership of real estate. It contains the names of the old and new owners and a common and legal description of the property, and is signed by the person transferring the property. You can’t transfer real estate without having something in writing, which is almost always a deed. In the next blog post, I will discuss the different types of deeds and the ramifications of each. But, for now, the important thing to remember is that a deed is a written instrument that transfers property.
What is a deed of trust?
A deed of trust, on the other hand, is frequently utilized in Colorado in place of mortgage. It is a transfer of interest in land by a borrower to a lender to secure the payment of the borrower’s debt. Although a deed of trust serves the same purpose as a type of security, it differs from a mortgage. A deed of trust is an arrangement among three parties: the borrower, the lender, and an impartial trustee. In exchange for a loan of money from the lender, the borrower places legal title to real property in the hands of the trustee who holds it for the benefit of the lender, named in the deed as the beneficiary. The borrower retains equitable title to, and possession of, the property. In Colorado, most lenders prefer to use deeds of trust to secure their interest for a loan, and legal title to properties are held by the public trustee in the county where the secured property is located. If a borrower defaults on a loan, it is relatively easy and straightforward process for the lender to pursue a public trustee foreclosure.
A reputable real estate lawyer can help you navigate through the transfer of real estate.