Legal Definitions - deed of trust

A deed of trust is a legal document used in some states to secure a real estatetransaction. It involves three parties: a lender, a borrower, and a trustee. The lender gives the borrower money, and in exchange, the borrower gives the lender one or more promissory notes. As security for the promissory notes, the borrower transfers a real property interest to a third-party trustee. If the borrower defaults on the loan, the trustee may take control of the property to correct the borrower's default.

For example, when a person buys a home with a loan from a bank, the bank becomes the lender, and the borrower is the person buying the home. The trustee is usually a title company. The borrower makes monthly payments to the bank, and if they fail to make payments, the title company can initiate a non-judicial foreclosure as the bank's agent.

Deeds of trust usually include a power-of-sale clause, which allows the trustee to sell the property without first getting a court order. This is called a non-judicial foreclosure.

Overall, a deed of trust is a way to secure a real estate transaction and protect the lender's investment in case the borrower defaults on the loan.