Deed vs Deed of Trust: Difference and Comparison

The terms deed and deed of trust are confused as they appear to mean the same thing in the real estate business. But they are entirely different.

These two legal documents serve two different purposes. However, both these documents carry equal importance in real estate business transactions.

Key Takeaways

  1. A deed is a legal document that transfers ownership of real property, while a deed of trust is a document that secures a loan using real property as collateral.
  2. Deeds involve two parties, the grantor and grantee, while deeds of trust involve three parties: the borrower, lender, and trustee.
  3. A deed becomes effective when delivered and accepted, while a deed of trust becomes effective when recorded in the county records.

Deed vs Deed of Trust

A deed is a signed and delivered legal document that transfers property ownership or legal rights from a seller to a buyer. An act of trust is a document that creates a trust by transferring property to a trustee or company that holds the property for the buyer instead of the buyer.

Deed vs Deed of Trust

A deed is a legal document used in the real estate business to transfer the legal rights of a property from one person to another. It proves the new owner has full legal title to the real estate property.

There are many types of deeds, and the classification is done based on the warranty the seller gives the buyer.

A deed of trust is used for financing a real estate business. It is a document used in most real estate transactions. It protects the lender’s investment.

Essentially the deed of trust allows the lender to foreclose the property if the borrower fails to pay within time or even breaches any of the terms mentioned in the document.

Comparison Table

Parameters of ComparisonDeedDeed of Trust
DefinitionA deed of trust is a legal document between the lender and the borrower.Transferring full legal rights of a property from one person to the other
PurposeThere are many types of deeds, such as deeds without warranty, general warranty deeds etc.Financing real estate properties.
TypesHere, the borrower pays the money after the deed is signed.There are no clasifications.
OwnershipFullPartial
MoneyHere, the buyer pays the money before the deed is signed.Here, the money is paid by the borrower after the deed is signed.

What is Deed?

A deed is a title document used in the real estate business to legalize purchases of properties. It proves that the owner has legal rights over the property that has been handed over.

Also Read:  Trial vs Appellate Courts: Difference and Comparison

This document deals with real property, transferring it from one person or entity to another.

Certain criteria make this document legal. Those requirements are the grantor‘s name, the person or entity handing over the property, or any term used instead.

Apart from it, the person receiving the property, his name, and the grantor’s signature should also be listed in the document. A deed must contain the description of the property handed from one person to the other.

The term used for this handing over a property from one to the other is conveyance and is specially used in the real estate circle.

To be effective and valid in the eye of the law, the document of the deed must contain and follow all the rules, terms, and language mentioned. However, this does not mean that these are not the only information that must be there in the document. 

Now one needs to be cautious while listing down the terms of the document and should get it done by a professional so that other problems do not arise.

However, deeds can be of different types, like trust deeds, grant deeds, fiduciary deeds, etc. The difference between all these deeds lies in the kind of warranty the owner uses to sell the property to the buyer.

What is a Deed of Trust?

A deed of trust is a legal contract where the lender sells the property rights to another party apart from the borrower. For example, when a home is bought, it is executed through a financing method.

The deed of trust is mainly formed to protect the lender’s investment. Thus, a deed of trust can be seen as a loan or mortgage

This document thus gives the lender the power to sell the property if the borrower fails to fulfil all the terms and conditions or even breaches them.

This is called the power of sale. But in no way does it indicate that without a deed of trust, you cannot foreclose a property.

Also Read:  Articles of Confederation vs Declaration of Independence: Difference and Comparison

Necessarily, the problem arises when the lender does not obtain a deed of trust as, without it, they cannot file a lawsuit in court and ends up in a process that costs a considerable amount of money and time.

So the document of the deed of trust can prove the lender’s rights in this situation and gives them the legal ground to proceed further.

The lender’s legal rights remain intact until the borrower does not pay the debt or loan. After the full payment, the borrower receives all the rights over the property and becomes the new owner.

Thus, the full ownership of the property goes to the borrower.

Main Differences Between Deed and Deed of Trust 

  1. A deed is an official certified by the state’s law that allows the seller to sell the complete rights of a real estate property to the buyer. But a deed of trust is a sort of agreement between the lender and the borrower. 
  2. In a deed, the person who transfers the property is called a seller, and the one who receives it is called a buyer. However, in a deed of trust, the former is the lender, and the latter is the borrower. 
  3. A deed fully transfers all the legal rights from the seller to the buyer. But in a deed of trust, the rights are transferred after the payment is fully made. 
  4. After signing a deed, the buyer can fully use the property. But in a deed of trust, it depends on the terms the lender mentions whether the borrower can fully use the property. 
  5. In a deed, the receiver needs to pay no amount of money. But the borrower must pay the decided money in a deed of trust. 
Difference Between Deed and Deed of Trust
References
  1. https://heinonline.org/hol-cgi-bin/get_pdf.cgi?handle=hein.journals/washlr41&section=12
  2. https://heinonline.org/hol-cgi-bin/get_pdf.cgi?handle=hein.journals/amlr61&section=51

Last Updated : 13 July, 2023

dot 1
One request?

I’ve put so much effort writing this blog post to provide value to you. It’ll be very helpful for me, if you consider sharing it on social media or with your friends/family. SHARING IS ♥️

Leave a Comment

Want to save this article for later? Click the heart in the bottom right corner to save to your own articles box!