What is a deed of trust?

A deed of trust is a document in California real estate law that grants a third-party lender, such as a bank or mortgage company, the right to take ownership of a property if the borrower fails to pay the loan. This arrangement is different from a mortgage, where the borrower pledges their property as security for the loan. When a borrower takes out a loan secured by a deed of trust, the borrower is referred to as the trustor, the lender is the beneficiary, and the third-party holding the deed of trust is the trustee. The trustee is responsible for holding the deed of trust until the loan is paid off, at which point the deed of trust is dissolved. The trustor must sign the deed in front of a notary and the document must be filed with the county recorder’s office to become valid. The deed of trust will usually include a power of sale clause, which states that if the borrower defaults on the loan, the trustee can sell the property to satisfy the debt. In California, a deed of trust also allows for nonjudicial foreclosure, which is a legal process that allows the lender to foreclose on the property without going to court. This process can take up to seven months, during which time the borrower is allowed to pay off the loan to avoid foreclosure. If the loan is not paid off, the property will be sold at a public auction.

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What is a deed of trust?

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