There are lots of details and logistics for homeowners to consider when selling their Birmingham home. From listing to closing, there are a myriad of documents and details to consider. One document that is often part of closing paperwork is a trust deed, and many sellers wonder whether they need to sign a trust deed.
To answer this question, here’s an overview of what trust deeds are, when they are used, and what their purpose is.
What is a Trust Deed?
A deed of trust is a legal document that secures a home loan. It’s part of the loan paperwork and places legal title of a property in the hands of a third-party trustee until the loan is paid off.
A trust deed is similar to a mortgage in that it serves as a way to secure a home loan and provides a way for the lender to put a home in foreclosure if the borrower defaults on the loan. However, there are a couple of key differences between a trust deed and a mortgage.
The first difference is the number of parties involved in the contract. A mortgage involves two parties: the borrower and the lender. Yet, there are three parties involved with a trust deed: the trustor, or buyer; the beneficiary, which is the lender; and the trustee, for example, a title insurance company, that holds legal title of the property.
The second difference is the type of interest held by each party. With a mortgage, a lien is created against the property that gives the lender the option to seize the property and sell it if the borrower defaults. With a deed of trust, the title is placed in the hands of the trustee. If the trustor defaults on the loan, the trustee may initiate foreclosure proceedings. This distinction is important because a deed of trust enables a lender to initiate a nonjudicial foreclosure, which is faster and less expensive than a judicial disclosure, which is required with a mortgage.
Can You Use a Trust Deed in Alabama?
Alabama allows the use of both mortgages and trust deeds. While there are some states that require one of the other, lenders in Alabama have a choice of which to use.
A trust deed is often used when nontraditional lending services are used. Additionally, some lenders prefer to use a deed of trust instead of a mortgage because the foreclosure process is easier, less expensive, and faster.
However, because both contracts are allowed in Alabama, it’s ultimately up to the lender to determine which to use.
Does the Seller Need to Sign a Trust Deed?
A seller does not need to sign a trust deed. The trust deed is a contract that involves the buyer and lender and has no relevance to the seller.
As a seller, if you have a loan and deed of trust in place, both will be invalidated when the deal closes, and the loan amount is paid off. The one exception would be a short sale, where the purchase price does not cover the amount of the loan. In these situations, sellers must get approval before the sale.
Otherwise, any deed of trust you signed when you purchased the home will be invalidated when you sell it, and as a seller, you are not a party to a deed of trust signed by the buyer.
Are There Ways to Avoid Waiting for Buyers to Get Loan Approval and Sign a Deed of Trust?
Another common question from sellers is how to avoid waiting on buyers that are having trouble getting a loan or trust deed. The process can be slow, can hold up closings, and can cause deals to fall through.
If you’re in a rush to sell your home or want to avoid any delays, the best option is to find a cash buyer. Cash buyers don’t have to worry about getting approval for a loan or securing a loan. Instead, they can close in just a matter of days.
If you’re looking to sell your Birmingham home quickly, contact Home Buyers Birmingham. Our team of local property investors pays cash for homes and can close in as little as a week. Plus, we buy homes as-is, no matter the condition. This means no waiting for repairs, inspections, or financing issues.
Contact Home Buyers Birmingham today by completing this online form or calling us at (205) 687-0604 to learn more or to get your cash offer.
Home Buyers Birmingham
1821 11th Avenue South Suite #55331
Birmingham, Alabama 35205