A trust deed investment is utilized to raise the yield on your funds above that which you would get from CD or a savings account. If you would like to get involved such investments, you need to understand the use of an assignment of deed of trust. In many states, for example California, a deed of trust is recorded from real property to secure repayment of a promissory note. A trust deed investment essentially involves buying a promissory note with the deed of trust securing the note assigned to you within the trade.
Promissory Note and Deed of Trust
A note is used when you are given a loan to buy property. The promissory note will say the repayment provisions for your loan, like the quantity of monthly payment and interest rate. A deed of trust is used to secure payment of the promissory note when it’s listed as a lien against the real estate bought with the loan.
Purchasing the Note and Deed
A note can be sold by the lender. This often happens between banks, but can be carried out by anybody who would like to buy the promissory note as an investment. When a promissory note is sold, the deed of trust securing the note is sold with that.
Escrow Process
You should only buy a promissory note through an escrow that’s opened with the right directions which should include, among other items, the recording and delivery of an assignment of the deed of trust securing the note. The escrow instructions must also say the original note and deed of trust have been given to you within the trade.
Transaction Records
The trade documents for buying a promissory note and deed of trust must include not only the assignment of deed of trust, but several other document to ensure your investment at the note and deed is solid. You should have already obtained a credit report on the borrower to verify his credit worthiness and the likelihood he will keep on paying the promissory note. A preliminary title report ought to be obtained to check the possession of the property and the presence of any additional exemptions. An appraisal is also advisable to determine that there is adequate equity in the property to secure the promissory note.
Recovering Your Investment
If the borrower fails to repay the promissory note according to its provisions, the deed of trust securing the note gives you a powerful legal treatment –non-judicial foreclosure. The distinguishing quality of a deed of trust will be the”power of sale” clause which authorizes the trustee named in the trust deed (usually a title company or mortgage agent ) to market the land at public auction once you notify the trustee which the borrower has defaulted on the promissory note. The power of sale clause is located in the original deed of trust which has been assigned to you when you created your investment by buying the promissory note. A non-judicial foreclosure is a desirable remedy, because it doesn’t require going to court and requires less time and is much less expensive than suing the borrower.