Greg is a Nebraska licensee representing a buyer who is purchasing a farm near Kearney. The seller has an existing deed of trust on the property. The buyer's lender will require a new deed of trust at closing. The seller's lender has agreed to a payoff. At closing, which sequence of events must occur to ensure the buyer takes title free and clear of the seller's existing deed of trust?
Correct Answer
B) The seller's deed of trust is paid off, the trustee executes and records a deed of reconveyance, and then the buyer's new deed of trust is recorded in first lien position.
Under the Nebraska Trust Deeds Act (Neb. Rev. Stat. § 76-1009), when the seller's deed of trust is paid off at closing, the beneficiary (seller's lender) directs the trustee to execute and record a deed of reconveyance. This instrument returns legal title to the trustor (seller) and extinguishes the lien. Only after this reconveyance is recorded can the buyer's new deed of trust be recorded and attach as a first lien. This sequence is critical to ensuring the buyer's lender has a clean first lien position and the buyer takes title free of the prior encumbrance.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Closing costs are the fees and expenses paid by the buyer and seller at the closing of a real estate transaction, beyond the purchase price. They typically range from 2-5% of the purchase price.
A conventional loan is a mortgage that is not insured or guaranteed by a government agency such as the FHA, VA, or USDA. It is originated and funded by private lenders and may be conforming or non-conforming.
The debt-to-income ratio (DTI) compares a borrower's monthly debt obligations to their gross monthly income. It is used by lenders to determine how much mortgage a borrower can afford.
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