DEED vs NOTE vs DEED OF TRUST

When purchasing property, it is important to know the different documents that a buyer will be signing at the closing table. Listed below are 3 important documents that a buyer of commercial property should be aware of:

  1. DEED – A deed is a legal document that transfers the title of ownership.  It usually has a description of the property, the names of the Seller & Buyer and the signature of the person who is transferring/selling the property.
  2. NOTE – When a party promises to pay a sum of money to another party for a specific property, the promissory note is the legal contract that binds the borrower to repay the mortgage. The Note usually contains the interest rates, loan amount, late charges and mortgage terms.
  3. DEED OF TRUST – the deed of trust is security for a loan that names a third party called the trustee to hold the legal title until the loan is paid off. The title is then transferred back to the borrower once the loan/mortgage is paid off.

Documents that establish ownership should be drafted by a professional.  Working with a local real estate attorney can help clarify things when making a real estate investment.