Should I Sign a Trust Deed When Selling My House?
Closing a house sale can be a long, drawn-out process filled with stacks of paperwork. The process is so involved that a lot of homeowners don’t bother finding out what it is they’re signing. While some documents may not be crucial to the sale, others are central to its success. One document that you need to pay attention to is the Trust deed.
The trust deed is associated with the buyer’s mortgage loan. The trust deed identifies the seller and their attempt to own the property. So, it’s in your best interest to learn what a trust deed is and the implications for both the buyer and the seller.
What Is a Trust Deed?
A deed of trust is an agreement between a home buyer and a lender at the closing of a property. The agreement states that the home buyer will repay the home loan and the mortgage lender will hold the property's legal title until the loan is paid in full.
So, in essence, a trust deed represents a lien against the property until the current buyer pays off the loan. If you sell your house the traditional way, the new buyer may have to sign the trust deed. However, if you sell your house for cash, the buyer may not need a loan to secure the property. So, a trust deed is not necessary to close the deal.
Does the Home Seller Need to Sign the Trust Deed?
The answer is no. If you are the seller, you do not need to sign the trust deed. There are three parties involved in a trust deed:
1. The Borrower
If the buyer takes out a loan to secure the property, they have to sign the trust deed, which recognizes their commitment to paying the loan before they receive the property title.
2. Lender
Also known as the beneficiary, the lender is the primary party on the trust deed. As such, the lender must sign the trust deed to lay claim on the property until the borrower pays the mortgage in full.
Third-Party Trustee
The trustee acts as the moderator between the borrower and lender. They validate the document and ensure that both parties honor the contract. They also obtain the deed and keep it secure.
Determining the Trust Deed Status
Part of researching the trust deed meaning is determining whether you have a deed of trust or a mortgage. If you’re in Alaska, California, Colorado, Washington, D.C., Georgia, Hawaii, Idaho, Maine, Massachusetts, Minnesota, Mississippi, Missouri, Nebraska, Nevada, New Hampshire, New Mexico, North Carolina, Oregon, Rhode Island, Tennessee, Texas, Utah, Virginia, Washington, West Virginia or Wyoming, only deeds of trust are allowed.
In Alabama, Arizona, Arkansas, Illinois, Kentucky, Maryland, Michigan, Montana or South Dakota, you can have either a mortgage or a deed of trust. In states not mentioned, a mortgage is the only allowed option.
If you live in one of the states where you can have either, you may be interested in finding out which you have. Tracking down your copy of your home’s closing paperwork is the easiest way. You’ll find both a promissory note and a deed of trust. If you can’t locate the documents you need, you can also check with your county since the deed will be recorded there.
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