Deeds FAQ

Is a trust deed or a contract for deed an actual deed?

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Answer:

Is a trust deed or a contract for deed an actual deed?

A trust deed (also called a deed of trust) isn't like the other types of deeds; it's not used to transfer property. It's really just a version of a mortgage, commonly used in some states (California, for example). A trust deed transfers title to land to a "trustee," usually a trust or title company, which holds the land as security for a loan. When the loan is paid off, title is transferred to the borrower. The trustee has no powers unless the borrower defaults on the loan; then the trustee can sell the property and pay the lender back from the proceeds, without first going to court.

A contract for deed is not really a deed at all. Also known as a "contract of sale," "land sale contract," or "installment sales contract," it's used when a seller finances a property for a buyer. The contract states that the seller will keep title to the property until the buyer pays off the loan. For more information, see How does seller financing work in a home sale?

Want more information on buying a home? See Nolo's Essential Guide to Buying Your First Home, by Ilona Bray, Alayna Schroeder and Marcia Stewart (Nolo), which provides everything you need to select the right house, the right mortgage, the right agent, the right inspections, and much more.

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