Also known as:purchase-money deed of trust · purchase money deeds of trust · purchase-money deeds of trust · purchase money mortgage
Written by attorneys · grounded in primary & secondary sources — see below
A security instrument given to a vendor of real estate or to a third-party lender to the extent that loan proceeds are used to acquire title to the real estate or to construct improvements on the real estate when the instrument is executed as part of the same transaction in which title is acquired.
Sources & Authorities
How it applies
Common Examples
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Vendor and Construction Financing at Closing
Patricia Patel contracted to purchase a vacant lot from Prosperity Investments. At the single closing, Patel delivered a deed of trust to Prosperity Investments securing part of the purchase price and simultaneously granted a second deed of trust to Pulse Media whose loan funds paid the balance of the price and financed immediate site grading. A preexisting judgment creditor of Patel later recorded a lien against the lot. Both deeds of trust take priority over the judgment lien because each was given as part of the transaction in which Patel acquired title.
Subordination and Waiver of Protection
Portia Price obtained a purchase money deed of trust from a seller to finance acquisition of a residence. Price later requested that the seller subordinate its deed of trust to a new construction loan so that Price could expand the home. After the expansion substantially altered the property's value and risk profile, Price defaulted. The seller's original purchase money deed of trust lost its statutory antideficiency protection because Price's request for subordination constituted a waiver.
Select any source to read its text and confirm it supports the definition.
Cases
Restatements
Casebooks
Coker v. JPMorgan Chase Bank, N.A.364 P.3d 176 (Cal. 2016)
Common questions
Frequently Asked
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What uses of loan proceeds qualify a deed of trust as purchase money?+
A deed of trust qualifies to the extent proceeds pay the purchase price at closing or fund construction improvements begun as part of the same transaction in which title passes. Funds diverted to unrelated personal expenses do not qualify for that portion of the loan.
Supporting sources
Does a purchase money deed of trust have priority over a preexisting judgment lien against the buyer?+
Yes. The deed of trust takes priority over any lien or claim that attached to the buyer before the buyer acquired title, even if the deed of trust is unrecorded and the judgment creditor had no notice.
Supporting sources
When does a vendor's purchase money deed of trust outrank a simultaneous third-party purchase money deed of trust?+
The vendor's deed of trust has priority over a non-vendor lender's deed of trust in the absence of contrary intent by the parties, subject to applicable recording acts.
Supporting sources
Does delayed recording destroy purchase money priority against pre-acquisition claims?+
No. Recording is unnecessary to preserve priority against claims that arose against the purchaser before title was acquired.
Supporting sources
585 S.W.2d 381Property
…v. Hauck , 314 Ky. 631, 236 S.W.2d 703 (1951). There is no practical distinction between the land sale contract and a purchase money mortgage, in which the seller conveys legal title to the buyer but retains a lien on the property to secure payment. The significant feature of each device is the seller’s financing the buyer’s…