Legal
Deed of Trust
A legal document used in many states instead of a traditional mortgage that involves three parties: the borrower, the lender, and a neutral trustee who holds the property title until the loan is paid off. If the borrower defaults, the trustee can sell the property without going through the lengthy court foreclosure process. Whether your state uses a deed of trust or a mortgage affects how foreclosure works if things go wrong.
Why It Matters
Deed of Trust carries legal significance in real estate transactions. Property law, contract law, and lending regulations all intersect when buying a home, and terms like deed of trust have specific legal definitions that affect your rights and obligations as a buyer or homeowner.
While real estate agents and lenders can explain general concepts, for questions about deed of trust that could have significant financial or legal consequences, consulting a real estate attorney is worth the $200-$500 cost. In some states, attorney involvement in real estate closings is mandatory.
Real-World Example
Legal issues related to deed of trust can surface during title searches, contract negotiations, or closing. Catching problems early is far less expensive than resolving them after you've closed on the property.
Pro Tip
If you're buying in a state that requires attorney closings (CT, DE, GA, MA, NY, SC, WV, and others), your attorney will handle deed of trust-related legal matters. In other states, consider hiring one independently for a review of your purchase contract.