A Deed of Trust owner finance option is becoming a more popular way to finance a real estate property. In the past a Deed of Trust owner finance option was not popular and every home buyer borrowed from the banks or finance companies. Nowadays, there are more real estate investors and more privately held mortgages, it is very common to see a Deed of Trust owner finance option available.
What is a Deed of Trust owner finance option?
Just like the bank Deed of Trust, a Deed of Trust owner finance is where the home seller sells the home to a home buyer, but the buyer does not pay for the real estate property in full. Instead, the buyer 'borrows' money from the seller to buy the house. The seller then retains the legal title of the house in a Deed of Trust owner finance. The buyer has the equitable title.
Who owns the title to the house in a Deed of Trust owner finance situation?
Similar to the Deed of Trust agreement with other lenders, in the case of a Deed of Trust owner finance, your seller is your lender. That means you holds the equitable title to the home but the legal title of the home remains with the home seller.
When will I gain the full title (including legal title) in a deed of trust owner finance situation?
As with a Deed Of Trust Agreement with banks, you get the full title of the real estate property including the legal title of the property when the debt is paid in full. The home seller acts like a bank and when the debt is settled in full, he or she will do a quit claim deed to transfer the legal title of the home to you. Once the debt is paid in full, the deed of trust owner finance is a voided one since the owner can no longer exercise his power to take the home.
Deed of trust owner finance foreclosure
There are cases where the beneficiary of the deed of trust owner finance is not paid according to the terms set forth in the deed of trust owner finance. In these cases, the beneficiary (previous owner of the property) will have to exercise his or her power and foreclose on the home. The deed of trust owner finance allows him or her to foreclose without having to go through the court system.