What is the purpose of a deed of trust?

The purpose of a deed of trust is primarily to function as collateral for a loan. In a deed of trust arrangement, the borrower (trustor) conveys an interest in the property to a third party (trustee) as security for a loan provided by the lender (beneficiary). This means that if the borrower defaults on the loan, the trustee has the power to sell the property to satisfy the outstanding debt, thus serving as a form of security for the lender.

This mechanism is common in real estate transactions where financing is involved, as it provides reassurance to the lender that they have a legal claim to the property until the loan is fully repaid. While other options may involve aspects of real estate transactions, such as transferring equitable title or facilitating joint tenancy, they do not align with the fundamental role of the deed of trust as a security instrument in lending transactions. The deed’s primary function is specifically tied to securing the loan rather than overseeing the title transfer or determining ownership structures.