What is a deed of trust?

A deed of trust is fundamentally a document that secures a loan by transferring title to a trustee, thereby establishing a security interest in the property. This instrument involves three parties: the borrower (trustor), the lender (beneficiary), and the trustee. When a borrower takes out a loan to purchase real property, the deed of trust provides the lender with collateral for the loan.

Through this arrangement, the title to the property is placed in the hands of the trustee, who holds it until the loan is repaid. If the borrower defaults on the loan, the trustee has the authority to sell the property to recover the loan amount for the lender. This process does not require court intervention, making it typically faster and less costly than traditional mortgage foreclosure processes.

This structure is distinctive to a deed of trust compared to other property transfer documents or agreements, which either lack the feature of securing the loan or do not involve a trustee in the transaction. Understanding how a deed of trust operates is crucial for comprehending the broader dynamics of real estate financing and lending practices.