Seven Essential Elements of Trust Deed Investments:

Knowledge, experience, and integrity of the MLB through whom the transaction may be made or arranged

Market value and equity in the Property and the security for your loan

Borrower’s financial standing and creditworthiness

Escrow process involving the funding of the loan or the purchase of the note

Documents and instruments describing, evidencing, and securing the loan

Loan servicing provisions, authority and compensation

Recovering your investment when the borrower fails to pay

The information that follows will assist you in considering the seven essential elements of a loan transaction which you should understand before funding a loan or purchasing a promissory note. Just read on!

1. Knowledge, experience, and integrity of the MLB through whom the transaction may be made or arranged

Before placing your trust and money with an MLB, you would be wise to call: (1) the Department of Real Estate (DRE) to determine if the MLB and his or her loan representatives are properly licensed, how long each has been licensed, and whether any of the licenses have been disciplined; and (2) the local Better Business Bureau to ask if any complaints have been lodged.

Ask the MLB to provide a professional profile for your review and information as to the approximate number and percentage of loans, if any, negotiated by the MLB which resulted in foreclosure (commenced and/or concluded) during the past few years.

Ask the MLB if he or she is the borrower or if he or she has any relationship to the borrower (e.g., if the MLB is a relative, a shareholder, an officer, a director, or a partner of the borrower). When the MLB is the borrower or related to the borrower, we refer to the transaction as “self-dealing.”

2. Market value and equity of the property and the security for your loan