California Real Estate Practice Exam

A loan (trust deed) held by an individual is:

1. a chattel real.

2. a real chattel.

3. personal property.

4. real property.

The correct answer is: a chattel real.

A loan secured by a trust deed held by an individual is categorized as a chattel real. This designation originates from the nature of the interest held in the loan, which represents a personal property interest. In California and some other jurisdictions, a trust deed serves as a security interest in real estate, but because it is a loan and not a direct ownership of the real property itself, it is classified as a chattel real. A chattel real is a type of personal property that involves an interest in real property, such as the right to receive payment from a mortgage or trust deed. The property itself remains separate from the loan, which is why this classification is important in real estate practices. The borrowing party retains ownership of the real property while the lender holds the chattel real until the loan is repaid. Understanding this distinction is crucial for real estate transactions, as it impacts how loans are treated legally and financially.