A deed of trust is a legal document commonly used in real estate transactions in some states in the United States. Its primary purpose is to create a security interest in the property being purchased.
It involves three parties: the borrower (also known as the trustor), the lender (also known as the beneficiary), and a neutral third party known as the trustee. The borrower conveys the legal title of the property to the trustee, who holds it on behalf of the lender until the loan is fully paid off.
This document allows the lender to have a security interest in the property, serving as collateral for the loan. In case the borrower defaults on the loan, the trustee can initiate a non-judicial foreclosure process, allowing the lender to sell the property to recover the outstanding loan amount.
The deed of trust provides protections for both the borrower and the lender, outlining the terms and conditions of the loan and the procedures for handling default. It helps streamline the foreclosure process compared to a mortgage, as it typically doesn’t require court involvement for the sale of the property.
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