
When you buy real estate and take out a loan, there are three key documents you will either sign or receive: a promissory note, a grant or warranty deed and a trust deed. Notes and deeds are both legal documents, but that's about the only thing they have in common.
Notes
A promissory note, usually referred to as a note, is a document that describes the terms of a loan. It's a private document that you sign to promise to pay back your lender. The note contains information like the amount of the loan, the interest rate, the monthly payment, and what happens if you don't pay your loan. Interestingly, your lender doesn't have to sign the note -- it's a one-way agreement that details the promise that you make to the bank.
Deeds in General
Deeds are legal documents that transfer property rights such as ownership. The party giving up the rights creates the deed with a description of the property that is being deeded and a description of the rights that are being transferred by the deed. That party signs the deed and gives it to the recipient. Once the recipient has the deed, they have ownership of whatever rights that deed conveys. They can then have the deed placed into the public record -- a process referred to as recording -- to secure the interest.
Grant and Warranty Deeds
When you buy a piece of property, the seller will usually give you a grant deed. The grant deed is a relatively simple document that names the property and notes that the seller grants it to you. When you get a grant deed, you're receiving it under the assumption that the seller hasn't already given the property to anyone else, and that he isn't transferring the property with any limitations or encumbrances. A warranty deed is like a grant deed, but contains specific promises, rather than implied ones, that the title's property is clear.
Trust Deed or Mortgage
When you get ownership of a property with a grant deed and pay for it with a loan covered by a promissory note, your lender also gets a deed from you. Depending on where you live, you will either give the lender a mortgage, which is technically a deed, or a trust deed. These deeds give your lender a limited right to your property, letting it take the title from you if you don't meet your obligations under the promissory note. Without a trust deed or mortgage, the lender would have to sue you in court to take your house, and might not prevail since many courts won't award ownership of your house to a creditor. The deed you give them to secure your loan puts them in position to foreclose on your house if you don't pay.
References
- Sacramento County Public Law Library: Promissory Note Secured by Deed of Trust
- Nolo: Deeds FAQ
- Wake County Register of Deeds: Satisfactions
- Superior Court of California, County of Alameda. "What Are the Advantages of a Living Trust?" Accessed May 15, 2020.
- AARP. "Transfer on Death Deed (TODD)," Page 1. Accessed May 15, 2020.
- Alaska Court System. "Transfer on Death Deed - What Does the Transfer on Death (TOD) Deed Do?" Accessed May 15, 2020.
- Alaska Court System. "Transfer on Death Deed - Do I Have to File the TOD Deed in Court?" Accessed May 15, 2020.
- Alaska Court System. "Transfer on Death Deed - How Do I Revoke the TOD Deed After It Is Recorded?" Accessed May 15, 2020.
- Internal Revenue Service. "Estate and Gift Taxes." Accessed May 15, 2020.
- FindLaw. "Transfer on Death Tax Implications." Accessed May 15, 2020.
- Alaska Court System. "Transfer on Death Deed." Accessed May 15, 2020.
- Arizona State Legislature. "33-405. Beneficiary Deeds; Recording; Definitions." Accessed May 15, 2020.
- FindLaw. "Arkansas Code Title 18. Property § 18-12-608. Beneficiary Deeds--Terms--Recording Required." Accessed May 15, 2020.
- Sacramento County Public Law Library & Civil Self Help Center. "Transfer on Death (TOD) Deeds," Page 1. Accessed May 15, 2020.
- Colorado General Assembly. "Probate, Trusts, and Fiduciaries," Pages 1-2. Accessed May 15, 2020.
- District of Colombia, Office of Tax and Revenue. "Revocable Transfer-on-Death Deed," Pages 1-3. Accessed May 15, 2020.
- Hawaii State Legislature. "Uniform Real Property Transfer on Death Act." Accessed May 15, 2020.
- Illinois General Assembly. "(755 ILCS 27/) Illinois Residential Real Property Transfer on Death Instrument Act." Accessed May 15, 2020.
- FindLaw. "Indiana Code Title 32. Property § 32-17-14-11." Accessed May 15, 2020.
- Kansas Legislative Sessions. "Article 35 - Transfer-on-Death." Accessed May 15, 2020.
- Minnesota Legislature, Office of the Revisor of Statutes. "507.071 Transfer on Death Deeds." Accessed May 15, 2020.
- Missouri Revisor of Statutes. "461.025. Deeds Effective on Death of Owner — Recording, Effect." Accessed May 15, 2020.
- Montana Code Annotated 2019. "72-6-415. Optional Form of Transfer on Death Deed." Accessed May 15, 2020.
- Nebraska Legislature. "Nebraska Revised Statute 76-3402." Accessed May 15, 2020.
- Nevada Legislature. "NRS 111.771 Property Held in Beneficiary Form; Registration in Beneficiary Form; Transfer-on-Death Directions." Accessed May 15, 2020.
- State Bar of New Mexico. "Transfer on Death Deed," Pages 1-2. Accessed May 15, 2020.
- North Dakota Legislative Branch. "Chapter 30.1-32.1 Uniform Real Property Transfer on Death Act," Pages 1-3. Accessed May 15, 2020.
- Ohio Laws and Rules. "5302.23 Designating Transfer on Death Beneficiary." Accessed May 15, 2020.
- Oklahoma Tax Commission. "'Non-Testamentary Transfer–on-Death-Deed’. Title 58, §1251-§1258. Eff. Nov. 1, 2008," Pages 1-7. Accessed May 15, 2020.
- Oregon State Legislature. "Uniform Real Property Transfer on Death Act." Accessed May 15, 2020.
- South Dakota Legislature. "Part 4. Uniform Real Property Transfer on Death Act - 29A-6-403." Accessed May 15, 2020.
- Texas Constitution and Statutes. "Texas Real Property Transfer on Death Act." Accessed May 15, 2020.
- Virginia General Assembly. "§ 64.2-635. Optional Form of Transfer on Death Deed." Accessed May 15, 2020.
- Washington State Legislature. "Chapter 64.80 RCW Uniform Real Property Transfer on Death Act." Accessed May 15, 2020.
- West Virginia Legislature. "Chapter 36. Estates and Property." Accessed May 15, 2020.
- Wisconsin State Legislature. "705.15 Nonprobate Transfer of Real Property on Death." Accessed May 15, 2020.
- State of Wyoming Legislature. "HB0201 - Transfer on Death Deed." Accessed May 15, 2020.
- Gibbs Law Office. "Using a Lady Bird Deed in Florida [Overview, Pros and Cons]." Accessed May 15, 2020.
- State Bar of Michigan. "Ladybird Deed," Pages 31-32. Accessed May 15, 2020.
- Sacramento County Public Law Library & Civil Self Help Center. "Transfer on Death (TOD) Deeds," Page 3. Accessed May 15, 2020.
- Sacramento County Public Law Library & Civil Self Help Center. "Transfer on Death (TOD) Deeds," Page 5. Accessed May 15, 2020.
- Sacramento County Public Law Library & Civil Self Help Center. "Transfer on Death (TOD) Deeds," Page 4. Accessed May 15, 2020.
Writer Bio
Steve Lander has been a writer since 1996, with experience in the fields of financial services, real estate and technology. His work has appeared in trade publications such as the "Minnesota Real Estate Journal" and "Minnesota Multi-Housing Association Advocate." Lander holds a Bachelor of Arts in political science from Columbia University.