What Is A Deed of Trust?

A deed of trust, used in certain states (including Texas) in lieu of a mortgage, is an agreement between a lender, a borrower and a trustee in which a real property interest is transferred by the borrower to the third-party trustee. Initially, the lender lends money to the borrower and in exchange receives one or more promissory notes. The promissory note is, in effect, secured by the transfer of property interest to the trustee. In the case that the borrower defaults on the terms of the loan, the trustee may seize complete control of the property in question. 


A power-of-sale clause is typically included in a deed of trust. The clause grants the trustee the right to execute a non-judicial foreclosure, whereby the trustee may sell the property without first receiving a court order. These clauses are not present in traditional mortgages.


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