What Is the Difference Between Warranty Deed & Trustee Deed?

By Cindy Hill

A deed is the formal document used to transfer ownership of real estate from one person to another. Different types of deeds accomplish that objective in different ways, and are used in different types of real estate transactions. Warranty deeds are among the most common types of deeds used to convey land ownership, while trustee deeds are most often used in place of a mortgage deed in California and other states that allow nonjudicial foreclosures.

Warranty Deeds

A general warranty deed conveys full ownership of land, and is commonly used in purchase and sales transactions of real estate. The warranty deed is the gold standard, the most highly desired form of deed, because in addition to conveying property ownership, it contains the promise of clear title, meaning the property is free of encumbrances. Warranty deeds include a listing of any exceptions to the promise that the title is unencumbered, including utility easements or access rights-of-way. Warranty deeds are often used in conjunction with a quitclaim deed to related property rights, such as land under an adjoining highway or lake, where title history to the quitclaimed portion may not be as clear as necessary to qualify for warranty conveyance.

Trustee Deeds

A trustee deed, also called a trust deed or deed of trust, is an arrangement used in place of a mortgage deed in states like California that allow nonjudicial foreclosure, that is, foreclosure without going to court. An ordinary mortgage deed documents a transaction between two parties, a lender and a borrower. A trustee deed is an arrangement between three parties: the borrower, who is also called a trustor; the lender; and the trustee, who holds legal title to the property. The trustee is usually a title or escrow company. The lender in a deed of trust may be referred to as the "beneficiary" because the trustee holds title to the land in trust for the benefit of the lender.

Protect your loved ones. Start My Estate Plan

Promissory Note

Under the terms of a trustee deed, the borrower retains equitable title — what is commonly considered ownership of the property — and the right to possession of the property. The borrower gives the lender a promissory note — a legal pledge to pay money owed — in exchange for a loan. The borrower then transfers legal title of the property to the trustee as security for the promissory note, although in some states the trustee may simply place a lien on the real estate.

Foreclosure

In most instances a trustee has no power under a deed of trust unless the borrower defaults on his financing payments. In the event of default, the trustee under a trustee deed may foreclose on the property by power of sale and pay the lender with the proceeds. A power-of-sale foreclosure allows the trustee to sell the property without first getting a court order, which is otherwise required in an ordinary mortgage deed. Some states do reserve for homeowners the right to redeem a property sold at a deed-of-trust foreclosure.

Protect your loved ones. Start My Estate Plan
Title Vs. Deed of Trust
 

References

Related articles

What Is a Second Trust Deed?

A deed of trust is similar to a mortgage, allowing a borrower to secure a loan to buy a house by using the house as collateral. The difference is that in a mortgage there are two parties involved – the borrower and the lender -- while in a trust deed there are three parties involved – the borrower, the lender and a trustee. The trustee, who is generally a title insurance company or a bank, holds the legal title to the property until the loan is paid in full. Depending on where the property is located, state law determines which type of security instrument must be used.

What Is a Power of Attorney for a Trust?

A trust is a legal arrangement in which a grantor allows a trustee to manage the distribution of assets to trust beneficiaries. In some cases, the trustee cannot perform his duties unless the grantor uses a power of attorney to provide the trustee with special authorization to perform certain legal acts, such as selling assets titled in the grantor's name, that otherwise only the grantor would be able to perform.

Who Can Act As Trustee in a Texas Deed of Trust?

A deed of trust is a type of trust instrument that transfers interest in real property. In Texas, a deed of trust is most commonly used to secure a loan for the purchase of a home or other real property until that loan is repaid and the trust is voided, similar to how mortgages are used in other states. It can also be used, however, as a more permanent part of a comprehensive estate plan. The trustee, the person or entity who owns and manages the property, must meet Texas' legal requirements for trustees.

LegalZoom. Legal help is here. Start Here. Wills. Trusts. Attorney help.

Related articles

Trustee Qualifications for a Deed of Trust in Alaska

The term trustee is used in the law to describe very different roles. The qualifications of a trustee can be crucially ...

Texas Deed of Trust Laws

Most purchasers of real estate use a third-party lender, such as a bank, to finance the purchase. The lender requires ...

What Is a Deed of Trust With Assignment of Rents?

Some states refer to a voluntary lien against real property in exchange for money as a mortgage, while others refer to ...

Can a Property Owned by an Irrevocable Trust Be Foreclosed?

A living trust is an estate planning tool used to transfer property at death, allowing probate to be avoided. When you ...

Browse by category
Ready to Begin? GET STARTED