What does a promissory note represent?

A promissory note is a financial instrument that serves as a written promise to pay a specified amount of money at a designated time or on demand. In real estate transactions, it represents a personal debt incurred by the borrower (the maker of the note) to the lender (the payee). The note outlines the terms of the loan, including the interest rate, repayment schedule, and consequences for default.

This means that the primary function of a promissory note is to signify that one party owes money to another, establishing an obligation that is enforceable under law. Unlike ownership of the property, which is indicated by a title or deed, a promissory note specifically denotes the borrower's commitment to repay the loan, thus directly relating to the concept of personal debt.

Other options fail to capture this essence of the promissory note. Ownership of a property would be represented by a deed, while a lease agreement pertains to rental situations without implying a debt. A deed of trust, on the other hand, is a separate document that secures the promissory note by placing the property as collateral for the loan, but it does not represent the debt itself.