Question: I just moved to California from the East Coast. I bought a new home in a large subdivision that is about ten years old. I was very confused about the process.

I went to escrow instead of an attorney for the closing. The seller did not give me a survey of the property. Instead, I received a preliminary report of title with a map attached. Best of all, I did not sign a note and mortgage. Instead, the lender gave me a note and Deed of Trust, which I had to sign to close my purchase. I think I understand the differences in using an escrow vs. an attorney to do the closing. I even think I understand why it is not customary to have a survey on a subdivision tract home. However, I do not understand why I did not sign a mortgage document. What is a Deed of Trust? Why is it sometimes called a Trust Deed? Have I created a trust for my family and not know it?

Answer: I understand your confusion and can assure you that you are not the only one who is frustrated by regional differences in real estate loan and closing practices across these United States. Indeed, in California, there are regional differences between the northern and southern parts of the state.

Thus, if you now closed escrow on your home in Orange County and later purchased a property in San Francisco, you may find yourself paying the costs usually paid by the seller in southern California on your new northern California property. It is best to ask your real estate professional for information regarding which party customarily pays which fees when you buy or sell a home.

A Deed of Trust (sometimes called a Trust Deed as the terms are interchangeable) is a security instrument and functions for all practical purposes just like a mortgage although in California they usually contain a power of sale reposing in the trustee in the event of default.

The Deed of Trust is a three-party instrument securing a loan or other obligation, which lenders usually record against real property as security for payment of the obligation due them. When it recorded, the Trust Deed you, the Trustor, signed granted to the lender/beneficiary a lien interest in your home. Technically, the title to your real property passed to a third person called a trustee whose job it is to hold the bare legal title as well as to foreclose in the event of a default in the underlying obligation or to reconvey the title to you when you pay the obligation in full.

Even though a trustee was named in the Trust Deed you signed, a true trust was not created and you did not create a family trust for your estate planning purposes. You gave your home as security for the loan the lender made to you to enable you to purchase your new home.

Trust Deeds must comply with the formalities necessary for grants of real property in California under Civil Code §2922 because they are technically a grant of title. Under Civil Code §1091, they must be in the form of a writing that adequately identifies the parties and the real property. They must also be signed and delivered. Although Trust Deeds do not have to be recorded to be effective between the lender and borrower, to protect the lender against intervening encumbrances, they are almost always recorded with the County Recorder in the county where is located the real property Under Civil Code §2952, the Trust Deed must be notarized before being recorded.

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