Idaho Real Estate Practice Exam

What security instrument must be used when financing a 60 acre farm in Idaho?

1. Deed of Trust

2. Mortgage

3. Security Agreement

4. Lease Agreement

The correct answer is: Mortgage

In the context of financing a 60-acre farm in Idaho, a mortgage functions as the appropriate security instrument. A mortgage is a legal agreement where the lender provides funds to the borrower for the purchase of real property, and the property itself serves as collateral for the loan. This means that if the borrower defaults, the lender has the right to foreclose on the property to recover the outstanding debt. A mortgage is particularly well-suited for substantial assets like a 60-acre farm, as it provides a clear framework for both the borrower and lender in terms of rights and responsibilities. It is widely recognized and used in real estate transactions for properties of this nature. Although a deed of trust performs a similar function and is also commonly used in real estate transactions, especially in some states, the term "mortgage" is often more universally recognized in Idaho for traditional real estate financing. A security agreement typically relates to personal property rather than real estate, and a lease agreement does not involve financing; instead, it pertains to the rental of property, which is not applicable in this scenario.