Definition of Deed of Trust
A Deed of Trust is a legal instrument in which the title to a property is transferred from an owner to a trustee. The trustee holds the title as security for the performance of certain obligations, which are often monetary, on behalf of the owner or a third party. In several U.S. states, a deed of trust serves a function that is virtually equivalent to a mortgage, which is used in other states.
Examples
- Home Purchase Financing: An individual purchasing a home might use a deed of trust where the title is transferred to a trustee as security for the repayment of a bank loan used to buy the house.
- Refinancing: A homeowner refinancing their mortgage could involve deeding the house title to a trustee as security for the new loan amount.
- Commercial Property Purchase: A business acquiring commercial real estate may execute a deed of trust to secure the funding from a financial institution.
Frequently Asked Questions
Q1: What is the difference between a deed of trust and a mortgage? A1: While both serve as security instruments for a loan involving real estate, they differ in the entities involved. A mortgage involves two parties: the borrower and the lender. A deed of trust involves three parties: the borrower (trustor), the lender (beneficiary), and an independent third party (trustee).
Q2: How does foreclosure work with a deed of trust? A2: Foreclosure under a deed of trust typically involves a non-judicial process, meaning the trustee can sell the property without court proceedings, which can be faster and less costly than a judicial foreclosure required under a mortgage.
Q3: Can a deed of trust be used for any type of property? A3: Yes, deeds of trust can be used for various types of properties, including residential, commercial, and even vacant land.
Q4: What happens once the loan is paid off? A4: Once the loan secured by a deed of trust is paid off, the trustee will reconvey the title back to the borrower, formally transferring full ownership back to the borrower.
Related Terms with Definitions
- Trustee: An individual or entity that holds the title to the property in trust as security for a loan or obligation.
- Trustor: The borrower who transfers the title to the trustee to be held as security.
- Beneficiary: The lender who is the recipient of the obligations and benefits from the deed of trust.
- Non-Judicial Foreclosure: A type of foreclosure that allows the trustee to sell the property without court proceedings in the case of loan default.
- Reconveyance: The act of transferring legal title from the trustee back to the borrower after the debt is paid off.
Online References to Online Resources
Suggested Books for Further Studies
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“Real Estate Law” by Marianne M. Jennings: A comprehensive resource on various aspects of real estate law, including deeds of trust.
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“The Law of Real Property” by Richard R. Powell: This book offers in-depth legal explanations on property law subjects, including the mechanisms and uses of deeds of trust.
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“Mortgage and Deed of Trust Practice” by Eugene R. Gaetke and Kevin C. Kennedy: A book specifically focused on the practical applications and legal considerations of mortgages and deeds of trust.
Fundamentals of Deed of Trust: Real Estate Law Basics Quiz
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