Idaho Real Estate Practice Exam

Which of the following options is correct regarding the role of a beneficiary in a deed of trust once the loan is paid?

1. They receive compensation

2. They must file a claim in court

3. They complete a deed of reconveyance

4. They can take possession of the property

The correct answer is: They complete a deed of reconveyance

When a loan secured by a deed of trust is paid in full, the beneficiary of the deed (usually the lender or financial institution) is responsible for executing a deed of reconveyance. This legal document serves to transfer the title back to the borrower, effectively releasing the borrower from the obligations of the loan and clearing the lien from the property. A deed of reconveyance is essential because it acknowledges that the borrower has fulfilled their payment obligations under the deed of trust. By completing this deed, the beneficiary confirms that they no longer have any claim to the property, thus allowing the former borrower to have clear ownership without any encumbrances related to that loan. Understanding this process is crucial in real estate transactions, especially when it comes to handling the end of a loan agreement and ensuring that the property title is clear for future transactions.