PSI Virginia Real Estate Practice Exam

The correct answer is the Deed of Trust, which uniquely involves three parties: the Beneficiary, the Trustor, and the Trustee. In this arrangement, the Trustor is the borrower who creates the Deed of Trust, the Beneficiary is the lender or the entity to whom the money is owed, and the Trustee is a neutral third party that holds the legal title to the property until the debt is paid off. This tri-party involvement is significant because it adds a layer of security for the lender, who can initiate a non-judicial foreclosure process through the Trustee if the Trustor defaults. In contrast, a Mortgage typically only involves two parties—the borrower and the lender—without the need for a third-party Trustee, which limits the options available in the event of a default. Promissory Notes serve as evidence of the borrower's promise to repay a loan but do not involve a third-party trustee or a deed arrangement and are not secured by the property itself. Lastly, a Real Property Sales Contract is an agreement between a buyer and seller and does not pertain to financing, making it irrelevant to this specific context. Thus, the Deed of Trust stands out as the financing instrument that includes all three key parties, ensuring a more