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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