We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

What is a Trust Deed?

By Daphne Mallory
Updated: May 17, 2024

A trust deed transfers the title of property to a trustee responsible for holding it in trust until a loan is paid off. It’s often referred to as a deed of trust and sometimes a Potomac mortgage. The trustee must transfer the title to the borrower when the balance of the mortgage is paid off. It’s widely used in some regions in lieu of a mortgage, but in other areas the borrower receives the title to the property and takes out a mortgage. A trust deed is not a contract for deed, where the seller keeps the title until the buyer pays off the loan to the seller.

The three parties to a trust deed are the trustor, the trustee, and the beneficiary. The trustor is the borrower, who is entitled to possess the property. The beneficiary of the trust is the mortgage company. The trustee is the company that holds the title in trust for the trustor and the borrower. Its primary duty is to transfer the deed when it receives proof that the loan is paid in full. The secondary duty of the trustee is to sell the property if the borrower defaults on the loan and to distribute the proceeds sufficient to pay off the loan to the beneficiary.

The basic contents of a trust deed include a legal description of the real estate, the original loan amount, and acceleration clauses. It should also detail the mortgage terms as well as the legal recourses available to both parties if there is a legal dispute. Any prepayment penalty is often included in the trust deed, along with the monthly payment amount. The deed will also state that the trustee has the legal right to sell the property upon the trustor’s default on the loan.

The trustee can sell the property without going to court through a power of sale. The process is referred to as a foreclosure by power of sale. Even though a court does not oversee the proceedings, there are often laws that govern the sale, such as those that require a public notice of the foreclosure. In regions where mortgages are issued instead of a trust deed, it’s necessary for the lender to initiate foreclosure proceedings in court before it can foreclose on a property. It’s often risky for someone interested in purchasing a property that has been sold through a power of sale because there is more likely to be litigation over the title.

WiseGeek is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Discussion Comments
WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.

WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.