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In California, suppose the Beneficiary of a Deed of Trust wants to buy the parcel from the Trustor, but the Trustor still owes some money.

What deeds would get recorded to make this happen? My instinct is that there would first be a Full Reconveyance, then a Grant Deed. Is this correct? Does the order in which those instruments are recorded matter, and if so, how?

I'm interested in learning both about standard practice for escrow officers, and about general legal theory.

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There would be a closing at which the settlement sheet would credit the outstanding balance on the obligation secured by the deed of trust against the purchase price.

The beneficiary of the deed of trust would execute a release of the deed of trust, and the owner of the property would execute a deed to the beneficiary of the deed of trust.

Strictly speaking, a deed from the owner to the beneficiary might extinguish the deed of trust anyway due to the doctrine of merger and if there was a desire to keep the deed of trust with the priority it affords to the lender in place, the owner might convey not to the beneficiary of the deed of trust but to another entity related to and owned by the beneficiary.

Conceptually, for the most part, deeds of trust are conceived of as mortgages with a lien theory (which was invented in California), in modern commerce, whatever the legal fictions associated with the deed of trust concept at its inception originally imagined.

A lengthy scholarly treatment of the questions you are asking can be found in this law review article from the California Law Review in July of 1915, but it is (obviously) out of date.

  • What does "releasing the deed of trust" mean in this context? Is it the same as recording a reconveyance? Also, does it matter whether the grant/quitclaim deed is filed before the reconveyance, or the other way around? – Diogenes Creosote Nov 6 '17 at 15:04
  • A release of deed of trust is a common document in many places with deeds of trust. The order of recording never matters for the purpose you are getting at, only the order of execution, but it generally wouldn't matter and wouldn't be the same as recording a reconveyance. – ohwilleke Nov 6 '17 at 15:11
  • What I'm trying to determine is: what is the difference between a reconveyance and a release of deed of trust? – Diogenes Creosote Nov 28 '17 at 22:05
  • @DiogenesCreosote I have not seen people do a reconveyance as oposed to a release of a deed of trust, but I mostly practice in Colorado and only rarely deal with California real estate security payoffs, so I may be out of touch with standard practice there which is a bit quirky. – ohwilleke Nov 28 '17 at 22:24

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