what is a trust deed 
a trust deed also known as a deed of trust is a document sometimes used in real estate transactions in the u s it is a document that comes into play when one party has taken out a loan from another party to purchase a property the trust deed represents an agreement between the borrower and a lender to have the property held in trust by a neutral and independent third party until the loan is paid off although trust deeds are less common than they once were some 20 states still mandate the use of one rather than a mortgage when financing is involved in the purchase of real estate trust deeds are common in alaska arizona california colorado idaho illinois mississippi missouri montana north carolina tennessee texas virginia and west virginia a few states such as kentucky maryland and south dakota allow the use of both trust deeds and mortgages 1investopedia danie drankwalterunderstanding trust deedsa trust deed is a transaction between three parties in a real estate transaction the purchase of a home say a lender gives the borrower money in exchange for one or more promissory notes linked to a trust deed this deed transfers legal title to the real property to an impartial trustee typically a title company escrow company or bank which holds it as collateral for the promissory notes the equitable title the right to obtain full ownership remains with the borrower as does full use of and responsibility for the property this state of affairs continues throughout the repayment period of the loan the trustee holds the legal title until the borrower pays the debt in full at which point the title to the property transfers to the borrower if the borrower defaults on the loan the trustee takes full control of the property trust deed vs mortgagetrust deeds and mortgages are both used in bank and private loans for creating liens on real estate and both are typically recorded as debt in the county where the property is located however there are some differences a mortgage involves two parties a borrower or mortgagor and a lender or mortgagee when a borrower signs a mortgage they pledge the property as security to the lender to ensure repayment in contrast a trust deed involves three parties a borrower or trustor a lender or beneficiary and the trustee the trustee holds title to the lien for the lender s benefit if the borrower defaults the trustee will initiate and complete the foreclosure process at the lender s request in the event of default a deed of trust will result in different foreclosure procedures than a mortgage a defaulted mortgage will result in a judicial foreclosure meaning that the lender will have to secure a court order trust deeds go through a non judicial foreclosure provided that they include a power of sale clause 2judicial foreclosures are more expensive and time consuming than non judicial foreclosures this means that in states that allow them a deed of trust is preferable to a mortgage from the lender s point of view contrary to popular usage a mortgage is not technically a loan to buy a property it s an agreement that pledges the property as collateral for the loan 