Which of the following is a characteristic of a deed of trust?

Which of the following is a characteristic of a deed of trust?

• A. Involvement of a borrower and a lender only
• B. Involvement of a third-party trustee holding the title
• C. It is considered a lease agreement
• D. It is a direct sale of the property

Answer: (B)

A deed of trust is a legal instrument that involves three parties: the borrower, the lender, and a third-party trustee. The primary purpose of a deed of trust is to secure a loan by transferring the title of the property to the trustee, who holds it on behalf of the lender until the loan is repaid. This arrangement provides security to the lender while allowing the borrower to retain possession and use of the property. The involvement of the third-party trustee is crucial as they serve as a neutral party responsible for managing the trust and facilitating the process if the borrower defaults on the loan. This feature distinguishes a deed of trust from other agreements, such as mortgages, which typically involve only the borrower and the lender. The other options do not accurately define the nature of a deed of trust. For instance, involving only a borrower and lender overlooks the essential role of the trustee. Similarly, characterizing it as a lease agreement or a direct sale of the property misrepresents its function and purpose in securing financing for real estate transactions.

A deed of trust is a legal instrument that involves three parties: the borrower, the lender, and a third-party trustee. The primary purpose of a deed of trust is to secure a loan by transferring the title of the property to the trustee, who holds it on behalf of the lender until the loan is repaid. This arrangement provides security to the lender while allowing the borrower to retain possession and use of the property.

The involvement of the third-party trustee is crucial as they serve as a neutral party responsible for managing the trust and facilitating the process if the borrower defaults on the loan. This feature distinguishes a deed of trust from other agreements, such as mortgages, which typically involve only the borrower and the lender.

The other options do not accurately define the nature of a deed of trust. For instance, involving only a borrower and lender overlooks the essential role of the trustee. Similarly, characterizing it as a lease agreement or a direct sale of the property misrepresents its function and purpose in securing financing for real estate transactions.