Trust Deed

Clients Rate Lawyers on our Platform 4.9/5 Stars
based on 2,665 reviews

Jump to Section

Need help with a Trust Deed?

Post Project Now

Post Your Project (It's Free)

Get Bids to Compare

 Hire Your Lawyer

Trust deeds are alternatives to traditional mortgages in states that allow them. They offer lenders protection to take swift legal action if the home loan defaults. It’s essential to have the correct language in place to serve this document’s intended purpose.

In this article, we examine what to know about drafting and using trust deeds:

What is a Trust Deed?

A trust deed, also known as deeds of trust, is a real estate agreement between a borrower and a lender when transferring a property’s title to a neutral third party for purposes of future ownership. They are usually signed alongside loan documents outlining repayment terms while guaranteeing ownership upon satisfactory repayment. Some states use trust deeds instead of mortgages.

Ordinarily, trust deeds will record the following information:

  • Consideration for the home’s purchase
  • Amount of money held in trust
  • Force of sale rights
  • Foreclosure procedures

Also, they can describe the home purchase details and the owner’s intention regarding the trust. For more information, this web page also defines trust deeds.

Meet some lawyers on our platform

Daehoon P.

72 projects on CC
View Profile

Tina R.

14 projects on CC
View Profile

Benjamin W.

40 projects on CC
View Profile

Max M.

102 projects on CC
View Profile

How do Trust Deeds work?

Trust deeds work by providing a real estate transaction lender with legal protections. Typically, the borrower must sign a promissory note for a trust deed to become effective. Promissory notes are legal contracts signed by the trustor and signify an agreement to repay a home loan while detailing the loan’s terms and conditions .

These are primarily the three parties involved in trust deeds:

  • Beneficiaries : Lenders are the beneficiaries. They are beneficiaries since the established trust seeks to protect their interests. Of the three parties, investors or lenders have the most to lose in real estate transactions, and a trust deed provides reassurance.
  • Trustees : Third-party trustees hold the property ownership title until the home loan is paid in full. A title insurance company or bank usually fulfills this role. Lenders facilitate this relationship and often have authority over selecting the party. Trustees must stay impartial throughout the transaction.
  • Trustors : Borrowers are designated as trustees. They can legally retain this designation as long as they meet the terms and conditions contained within the promissory note. This payment consistency gives them an equitable title, meaning that they claim equity while making loan payments.

The trustee is generally the party that prepares the trust deeds, promissory notes, and other documentation involved in a real estate transaction.

Example of How Trust Deeds Work

More than twenty states require the use of trust deeds versus mortgages. If you live in one of these states, it’s critical to understand the transaction clearly when investing, buying, or selling property. Each state follows various procedures and laws, which means that you should first determine which ones apply to your trust deeds.

Let’s solidify our understanding of how trust deeds work with a concrete example:

  • Jack, a prospective borrower, wants to buy a home
  • Jack visits his banker to apply for a home loan
  • His bank, Horizon Financial, approves Jack
  • Horizon Financial drafts a trust deed as a beneficiary
  • They also prepare a promissory note to set the terms of the loan
  • Horizon Financial names First Title & Trust as the trustee
  • Jack agrees to the loan’s terms and signs as the trustor
  • Jack repays the loan after 15 years
  • Horizon Financial informs First Title & Trust of term completion
  • First Title & Trust initiates the trust deed transfer process
  • First Title & Trust presents Jack a quitclaim or warranty deed
  • First Title & Trust is the grantor during the transfer
  • Jack signs the documents as the grantee
  • Jack now owns the property outright

All parties must follow the terms of the loan documents explicitly to avoid legal issues. Poorly drafted documents can also create unwanted problems, so it’s a good idea to seek legal advice during the legal drafting phase from a real estate lawyer. They can also give you valuable advice regarding situations they represented in the past to make the process more efficient for you.

ContractsCounsel Trust Deed Image

Image via Pexels by Andrea

Purpose of a Trust Deed

The purpose of a trust deed is to protect the beneficiary lender if the borrower does not repay the home loan. In the event of default, the trust deed gives the lender authority to resell the home and pay off the debt. Trust deeds also act as a property lien when registered with the county clerk & recorder’s office.

The clerk will notify the lender that they have a record of their security interests on file. If more than one lender funded the home loan, then they receive repayment from a lien based on the order in which it was recorded.

Difference between a Mortgage and Trust Deed

Trust deeds are similar to traditional mortgages, but they are also two very different documents with exclusive legal implications. The most significant differences between a mortgage and trust deed include party designations, default loan terms, redemption rights, availability, contract types, securities backing, cost,

Let’s take a much closer look at each of the differences between mortgages and trust deeds:

Difference 1. Party Designations

Mortgages utilize the terms mortgagors and mortgagees, when referring to lenders and borrowers, respectively. In contrast, trust deeds name three parties, including trustors, trustees, and beneficiaries. Title companies typically serve as trustees, while lenders function as beneficiaries and borrowers as trustors.

Difference 2. Default Loan Terms

Each type of real estate transaction enacts a unique foreclosure procedure. Typically, trust deeds utilize a non-judicial foreclosure process, whereas a mortgage follows a judicial foreclosure process. As such, lenders must obtain a formal court order before they can foreclose on one’s home.

Difference 3. Redemption Rights

If a foreclosure procedure occurs, a property auction is a final step in remedying a defaulted loan. Generally, borrowers have ample opportunity to save the house, but it cannot be repurchased once sold. On the other hand, mortgages recognize a redemption period, which means that borrowers could reclaim their property within several months or years.

Difference 4. Availability

There are more than thirty states that permit the use of trust deeds. Some of these states enable the use of both trust deeds and mortgages. Speak with real estate lawyers in your state to determine which laws apply to your specific situation.

Difference 5. Contracts Types

The types of repayment contracts also differ when it comes to mortgages vs. trust deeds. Trust deeds utilize promissory notes to facilitate the transaction. In contrast, lenders offer mortgage notes to manage it.

Difference 6. Securities Backing

People erroneously refer to all home loans like mortgages. However, a mortgage is only genuine when a mortgage note backs it. Trust deeds are the legal instruments that support a non-mortgage home loan.

Difference 7. Cost

Due to a lender’s responsibility to seek judicial foreclosure, mortgages often utilize more resources than trust deeds. Consequently, mortgagors favor trust deeds in states that permit them. They will always spend less money, time, and attention on trust deeds over mortgages.

Get Help With A Trust Deed

Whether you’re investing in a property or lending to a prospective buyer, it’s critical to get legal help when working with trust deeds. These transactions are significant, and vulnerable parties need to protect their financial interests. Real estate lawyers in your state can offer legal advice and guidance throughout the drafting or negotiating process. Post a project in ContractsCounsel’s marketplace to get free bids from vetted lawyers.

How ContractsCounsel Works
Hiring a lawyer on ContractsCounsel is easy, transparent and affordable.
1. Post a Free Project
Complete our 4-step process to provide info on what you need done.
2. Get Bids to Review
Receive flat-fee bids from lawyers in our marketplace to compare.
3. Start Your Project
Securely pay to start working with the lawyer you select.

Meet some of our Trust Deed Lawyers

View Kristen
Member Since:
January 10, 2022

Kristen R.

Freelance Attorney
Free Consultation
Get Free Proposal
Wyoming
14 Yrs Experience
Licensed in WY
University of Wyoming

Transactional and Employment Attorney and Small Business Owner. I do inside counsel work from the outside. I demystify the law for my clients.

View Amos
Member Since:
January 13, 2022

Amos M.

Principal
Free Consultation
Get Free Proposal
Nashville, TN
14 Yrs Experience
Licensed in GA, TN
Mississippi College School of Law

Since 2008, I have worked to assist clients in solving problems and addressing challenges that inevitably arise as a business grows - both anticipated and unexpected. My experience in Georgia and Tennessee in both drafting contracts and enforcing them via litigation and/or arbitration has provided clients with unique insights that help them anticipate problems and inform their decisions from start to finish.

View Leah
Member Since:
January 18, 2022

Leah C.

Attorney
Free Consultation
Get Free Proposal
Alabama
7 Yrs Experience
Licensed in AL
Birmingham School of Law

I am an attorney licensed in Alabama and have been in solo practice for 7 years. I have experience in Contracts drafting and review, Litigation and Immigration practice areas. I am available for new projects.

View Meghan
Member Since:
January 31, 2022

Meghan T.

Partner
Free Consultation
Get Free Proposal
Atlanta
3 Yrs Experience
Licensed in GA
Emory University

Meghan Thomas is an accomplished transactional attorney. She specializes in real estate transactional matters, property disputes, IP, tech and media contracts. Meghan's innovative leadership style has attributed to the firm's rapid development and presence in the metro-Atlanta market. She obtained her Doctor of Law from Emory University where she worked with the State Attorney General and litigated property disputes for disadvantaged clients. ​ Prior to practicing, Meghan negotiated complex transactions for Fortune 500 tech and healthcare companies. She lives with her family in Southwest Atlanta, enjoys cooking, travel, dance and continues to develop her research in the areas of transactional law and legal sustainability.

View Cecilia
Member Since:
January 31, 2022

Cecilia O.

Contracts Attorney
Free Consultation
Get Free Proposal
San Antonio
15 Yrs Experience
Licensed in CT, MD
Ghana School of Law

With 15 years of extensive transactional/contracts experience reviewing and negotiating commercial contracts including a wide variety of purchase orders and contracts and non-disclosure agreements (NDA), I believe I can immediately contribute to the continued success of your team. I have been commended for a range of valuable skills—excellent contract management and contract administration, legal research, risk analysis, drafting and negotiations, and strategic thinking. I have worked as a legal consultant for 10+ years and I have reviewed over 7,500 contracts through this position. Contracts I have reviewed include but not limited to purchase orders, commercial and construction contracts, equipment rental agreements, non-disclosure, confidentiality, vendor agreements, service agreements, site access agreements, international agreements, request for proposals (RFP), bids and government contracts. These experiences have enabled me to master the ability to work independently and expeditiously to identify and assess issues and provide legally sound recommendations, consistent with good business practices. I have led teams (sales, insurance and management) to successfully negotiate contract terms with customers. Effective Communicator and Negotiator. I am a people person, and for the past 13 years, I have acquired excellent oral and written communication skills that enable me to interact and negotiate effectively with stakeholders at all levels. I am a self-starter with a strong work ethic. I have a high degree of resourcefulness, diligence, and dependability. Most important, I adapt to changing priorities quickly, thriving in an environment with high volume and short turnaround deadlines. My experience over the years allows me to transfer my skills to all types of contracts to meet the client’s needs. I am hopeful to provide similar legal expertise, effective contract administration and leadership to your organization. It would be a pleasure to meet within the next few weeks and discuss how my qualifications, experience, and capabilities will best fit the needs of your outfit.

View Mathew
Member Since:
February 1, 2022

Mathew K.

Founding Attorney
Free Consultation
Get Free Proposal
Illinois
7 Yrs Experience
Licensed in IL
DePaul University College of Law

Kerbis' practice includes business and real estate transactions, estate planning, and limited scope litigation consulting. Mathew has negotiated deals involving multinational corporate franchises and has collectively helped hundreds of clients with their transactional, civil litigation, and appellate legal needs. Throughout his tenure as an American Bar Association leader, Mathew has advocated for legal education reform, interviewed ABA Presidents and State Appellate and Supreme Court Justices, and lobbied Congress on behalf of the legal profession. As a law student, Mathew served as an extern for the Honorable Justice Robert E. Gordon of the Illinois Appellate Court, First District.

View Tina
Member Since:
February 17, 2022

Tina R.

AGC
Free Consultation
Get Free Proposal
Arlington, VA
15 Yrs Experience
Licensed in DC, IL, VA
Loyola University Chicago

15 years for legal experience; expertise in contracts, healthcare, ERISA, physicians, financial services, commercial contracts, employment agreements, etc. I am adept at all contracts and can provide you with efficient and quality services. I have worked at a law firm, financial services company, consulting ,and non-profit.

Find the best lawyer for your project

Browse Lawyers Now

Want to speak to someone?

Get in touch below and we will schedule a time to connect!

Request a call