What is a Deed of Trust in Real Estate?

A deed of trust (also called a trust deed) is a legal document used in many states as an alternative to a mortgage to secure a real estate loan. In a deed of trust arrangement, three parties are involved: the trustor (borrower) who conveys the property title to a trustee (a neutral third party, often a title company) to hold as security for the benefit of the beneficiary (lender). The key advantage of a deed of trust over a traditional mortgage is the foreclosure process.

In deed of trust states, the trustee can conduct a non-judicial foreclosure (also called a trustee's sale or power of sale foreclosure) if the borrower defaults, which is significantly faster and less expensive than judicial foreclosure required in mortgage states. The non-judicial process typically takes 90 to 120 days compared to 6 to 18 months for judicial foreclosure. When the loan is fully paid, the trustee issues a deed of reconveyance to the borrower, releasing the lien.

If the borrower defaults, the trustee can sell the property at a public auction after providing proper notice. States are generally categorized as "mortgage states" or "deed of trust states" (also called "title theory states" vs. "lien theory states"), though some states allow both instruments.

California, Texas, Virginia, and Colorado are examples of deed of trust states.