<--Back to Wiki Home
A trust deed is an agreement between a person who borrows money (the borrower) and the person who lends the money (the lender). In this agreement, a third person (the trustee) holds the ownership of the borrower's property until the borrower pays back the money to the lender. If the borrower can't pay back the money, the lender has the right to take the property through a process called foreclosure.
For example, let's say you want to buy a house, but you need to borrow money from the bank. You sign a trust deed with the bank, and a trustee holds the ownership of your house until you pay back the loan. If you can't make the payments, the bank has the right to take your house through foreclosure.
"A Deep Dive for Real Estate Agents"
A few more essential points about trust deeds:
Promissory Note: Along with the trust deed, there's usually a promissory note, which is a written promise by the borrower to pay back the loan. The promissory note includes details like the loan amount, interest rate, payment schedule, and terms of repayment.
Non-Judicial Foreclosure: Trust deeds typically allow for a non-judicial foreclosure process. This means that the lender can foreclose on the property without going to court, which can be faster and less expensive than a judicial foreclosure. The specific process and requirements for non-judicial foreclosure vary by state.
Redemption Period: In some states, after a foreclosure sale, the borrower may have a redemption period. During this time, the borrower can reclaim their property by paying off the full loan amount, plus any additional costs and fees.
Deed of Trust vs. Mortgage: Trust deeds and mortgages are both used to secure a loan on a property, but they work differently. A trust deed involves three parties (borrower, lender, and trustee), while a mortgage involves only two parties (borrower and lender). Additionally, the foreclosure process for trust deeds is usually non-judicial, while mortgages often require a judicial foreclosure process.
Understanding trust deeds is essential for a real estate agent, as they play a crucial role in property transactions and financing.
"Wit & Whimsy with the Dumb Ox: Unlocking Knowledge with Rhyme:"
In the land of Borrow-Lend, where money's exchanged,
A trust deed's the deal that keeps things arranged.
The borrower, the lender, a trustee - all three,
They join in agreement, as happy as can be.
The title is held, by the trustee with care,
Until the debt's paid, then the borrower's in the clear.
But if payments are missed, and the borrower's in strife,
The lender can take the property, changing their life.
So when in Borrow-Lend, a trust deed's the key,
To protect all involved, in a land fair and free.