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

A deed of trust is primarily used as a security instrument in real estate transactions, where it secures a loan by using the property as collateral. When a borrower takes out a loan to purchase real estate, the lender typically requires assurance that they will be able to recover the loan amount in case of default. The deed of trust fulfills this function by establishing a legal claim against the property, giving the lender the right to foreclose if the borrower fails to meet their obligations under the loan agreement.

In this arrangement, the borrower conveys a security interest in the property to a third-party trustee, who holds the title until the loan is fully paid. This effectively protects the lender's interests while allowing the borrower to retain possession and use of the property during the loan term.

The alternatives offered reflect different aspects of real estate transactions but do not capture the primary function of a deed of trust. While transferring property ownership is a critical aspect of real estate (typically done through a deed), it is not the purpose of the deed of trust. Similarly, while warranties can be included in property transactions to guarantee the condition of a property, that function is unrelated to the role of a deed of trust. Lastly, outlining the sales agreement pertains to the contract between buyer and seller,