Washington State Real Estate Practice Exam

What is the purpose of a deed of trust in real estate?

1. To transfer ownership of the property to a buyer

2. To secure a loan by transferring title to a trustee until the loan is paid

3. To cancel a previous deed

4. To detail the conditions of a lease

The correct answer is: To secure a loan by transferring title to a trustee until the loan is paid

A deed of trust serves a critical function in real estate by securing a loan. When a borrower takes out a mortgage, they promise to repay the loan, and the deed of trust is the legal document that facilitates that agreement. In this arrangement, the title of the property is transferred to a trustee, who holds it on behalf of the lender until the borrower repays the loan in full. This provides a layer of security for the lender because, in case of default, the trustee can sell the property to recover the loan amount without having to go through a lengthy judicial process. This mechanism allows borrowers to maintain possession and use of the property while ensuring that the lender has a secured interest in case of default. Since no ownership transfer to the lender occurs, the borrower retains the right to live in or use the property as desired, adding a degree of security for the borrower as well. The other choices do not accurately describe the function of a deed of trust. For example, the option that suggests it is for transferring ownership to a buyer pertains more to the role of a general deed in a sale transaction, not a deed of trust. Additionally, using it to cancel a previous deed or to detail lease conditions does not relate to its primary purpose in securing a