Are Deeds of Trust used and insurable in the State of Alabama?

[Michael Morrongiello]

We've been offered the opportunity to purchase a Seller Financed -Purchase money 1st lien DOT - Deed of Trust securing a promissory Note involving a property in the State of Alabama. We will fund this internally for our fund and take an assignment of the security instrument and endorsement of the promissory Note. There NEVER as a LOAN Title insurance policy issued. TWO (2) Title companies we've approached
have told us that Deeds of Trust are NOT used in the State of Alabama and the commonly used security instrument used to secure
"A Promise" promissory Note involving real estate is a MORTGAGE security instrument. They are RELUCTANT to issue a loan title insurance policy insuring the DOT - Deed of Trust  and have stated that we may have COLLECT ABILITY  issues IF the Note goes BAD in the future and we have enforce our rights as a creditor against the Debtor  to collect.

A quick check online using AI - says that "Yes, Alabama is considered both a mortgage and a deed of trust state. This means that when securing a loan with real estate, Alabama allows the use of either a mortgage or a deed of trust, unlike some states that exclusively use one or the other. "

Q- Does anyone have REAL EXPERIENCE with this issue? Have you used a DOT -Deed of Trust to secure a Promissory note or were you able to obtain a Lender Title insurance policy insuring the DOT and its assignment to you?

Puzzled for sure.....

[Priyanka Verma]

One of my friends lives in Alabama and has been involved in real estate deals there. He confirmed that mortgages are the standard security instrument used in the state, not Deeds of Trust. Even though some sources say Alabama allows both, title companies and local practices heavily favor mortgages.

He also mentioned that title companies are usually hesitant to insure a DOT because enforcement through the courts can get complicated. If the note goes bad, you might face collectability or foreclosure issues since the legal system is more aligned with mortgages.

So based on his experience, you’re better off securing the note with a recorded mortgage if possible. That way, you’ll have stronger legal footing and fewer issues with getting lender title insurance.