Escrow & Title
A Washington property has both a first and second deed of trust. The first deed of trust is foreclosed. What happens to the second deed of trust?
AThe second deed of trust becomes the first lien on the property
BThe second deed of trust is extinguished if foreclosure proceeds are insufficient to satisfy it✓ Correct
CThe second deed of trust survives the foreclosure and remains on the property
DThe second deed of trust holder can stop the first foreclosure
Explanation
When a senior (first) deed of trust is foreclosed, junior liens (second deed of trust) are extinguished if the sale proceeds are insufficient to pay them. The foreclosure of the senior lien 'wipes out' junior liens.
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Key Terms to Know
Deed of Trust
A security instrument used in many states instead of a mortgage, involving three parties: borrower (trustor), lender (beneficiary), and a neutral trustee.
DeedA written legal instrument used to transfer ownership of real property from one party (grantor) to another (grantee).
LienA financial claim against a property that serves as security for a debt or obligation, giving the creditor the right to foreclose if unpaid.
Short SaleA sale of real property where the sale proceeds are less than the outstanding mortgage balance, requiring lender approval.
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