Title Side

On the title side there are two types of deeds used throughout the country to convey the property title from one owner to the next: grant deeds and warranty deeds. To find out which deed is used in your state please see Appendix A.

Grant Deed A grant deed is a deed using the word grant in the clause that awards ownership. This written document is used by the grantor (seller) to transfer the title of their property to the grantee (buyer). Grant deeds have two implied warranties. One is that the grantor has not previously transferred the title. The other is that the title is free from encumbrances that are not visible to the grantee. This deed also transfers title acquired after delivery of the deed from the seller to the buyer.

Warranty Deed A warranty deed is a deed in which the grantor (usually the seller) guarantees the title to the property to be in the condition indicated in the deed. The grantor agrees to protect the grantee (usually the buyer) against all claims to the property made by anyone other than holders of recorded liens (matters of record). A warranty deed gives a warranty to the title holder.

Grant and Warranty Deeds Grant Deed Warranty Deed

Grantor Grantee (Seller (Buyer)

or Owner)

Grantor Grantee (Seller (Buyer)

or Owner)

Financing Side

The paperwork involved on the financing side is the evidence of the debt. The two types of paperwork that are used as evidence of the debt are the promissory note and the mortgage note. This paperwork is used by lenders and borrowers to create a written agreement about the terms and conditions for the real estate loan.

Promissory Note A promissory note is the written contract a borrower signs promising to pay back a definite amount of money by a definite future date to a lender. A promissory note has four basic elements: the amount of the note, the interest rate of the note, the term of the note, and the payments, if any, on the note. A promissory note that has no payments till the due date of the note is called a straight note.

Mortgage Note A mortgage note is a written contract signed by a borrower in which the borrower agrees to pay back a lender the amount of money the lender loaned the borrower. Similar to a promissory note, a mortgage note specifies the amount of the note, the interest rate of the note, the term of the note, and the payments on the note.

Promissory and Mortgage Notes Promissory Note Mortgage Note

Borrower (Maker of the Note)

Lender (Holder of the Note)

Borrower (Maker of the Note)

Lender (Holder of the Note)

Security Side

The paperwork involved on the security side includes trust deeds and mortgages. They are regarded as security devices for the promissory notes and mortgage notes, respectively. Another way to say this is that the trust deed and mortgages are the collateral for the lender in the event a borrower defaults on the loan.

They become liens against the property title when they are officially recorded at the county recorders office in the county in which the property that is the security or collateral for the lien is located. To find out which security device is used in your state, please see Appendix B.

Trust Deed A trust deed is a document, used as a security device for a loan on a property, by which the owner transfers bare (naked) legal title with the power of sale to a trustee. This transfer is in effect until the owner totally pays off the loan.

There are three parties to a trust deed: the trustor, the trustee, and the beneficiary. The trustor is the owner/borrower who transfers the bare legal title with a power of sale to the trustee.The trustee is a person who holds the bare legal title to a property without being the actual owner of the property.The trustee has the power of sale for the lenders benefit. The beneficiary is the lender of money on a property used in a trust deed type of loan.

Trust Deed

1. Trustor 2. Trustee

(Borrower) (Power of Sale)

3. Beneficiary (Lender)

Mortgage Contract A mortgage contract is a document, used as a security device for a loan on a property, by which the owner/borrower promises their property as security or collateral without giving up possession of or title to the property.

There are two parties to a mortgage contract. These two parties are the mortgagor and the mortgagee. The mortgagor is the owner/ borrower who uses a mortgage contract to borrow money. The mortgagee is the lender of money on a property used in a mortgage contract type of loan.

Mortgage Contract

1. Mortgagor 2. Mortgagee (Borrower) (Lender)

What It All Means

Foreclosure is possible because of the paperwork of real estate. The relationship of the title paperwork, the financing paperwork, and the security paperwork protects lenders when they loan money to a borrower.

The security paperwork-trust deeds and mortgages-is the bridge between the ownership, or title, side and the finance side. The