Texas Deed of Trust Laws

By David Carnes

Most purchasers of real estate use a third-party lender, such as a bank, to finance the purchase. The lender requires security for the loan so that if the borrower defaults, the lender can seize the real estate and sell it to repay the loan. Two legal devices are used in different states -- the mortgage and the deed of trust. Texas is a deed of trust state.

Most purchasers of real estate use a third-party lender, such as a bank, to finance the purchase. The lender requires security for the loan so that if the borrower defaults, the lender can seize the real estate and sell it to repay the loan. Two legal devices are used in different states -- the mortgage and the deed of trust. Texas is a deed of trust state.

Mortgage versus Deed of Trust

A mortgage is a legal security interest that the lender holds against the real estate to ensure repayment of the loan. If the buyer defaults, the bank can foreclose and sell the property. A deed of trust, by contrast, is a document that creates a legal trust the only asset of which is the purchased real estate.

Protect your loved ones. Start My Estate Plan

Parties

In a deed of trust created incident to a real estate transaction, the borrower is the trust grantor, the lender is the trust beneficiary and the trust is administered by a third party trustee, often an escrow company. The trustee holds legal title to the real estate. The terms of the trust deed set out the terms of the deed including installment payments, interest rates, late penalties and default provisions.

The Role of the Trustee

Texas uses a deed of trust system because the trustee is an independent, disinterested party. If the borrower defaults, the lender will notify the trustee and turn over the deed of trust to him. The trustee then administers the sale of the real estate. He uses the proceeds of the sale to pay the expenses of the sale and the remaining balance on the loan. If any proceeds remain, the trustee delivers them to the borrower. If the borrower completes all payments instead of defaulting, the trustee will deliver a release deed to the borrower. The borrower then uses the release deed to transfer title to the real estate into his own name.

Sale Procedure

In the event of default, the lender must post a notice of sale on the door of the local county courthouse and file a notice of sale with the court clerk at least 21 days before the date of sale. He must also notify the borrower of the sale. The sale is held as an auction on the county courthouse steps, on the first Tuesday of the month. The trustee administers the sale and transfers title to the new owner of the real estate. The sale price must be paid in cash, and the lender may bid on the property.

Protect your loved ones. Start My Estate Plan
What Is a Trust Deed Sale?

References

Related articles

What is an Assignment of Trust Deed?

If you own a home, you may have signed a trust deed that gives the mortgage lender a claim on the property. A default on the loan gives the lender the legal authority to foreclose on the loan and take possession of the house. An assignment of a trust deed conveys that claim to another party.

Trustee Qualifications for a Deed of Trust in Alaska

The term trustee is used in the law to describe very different roles. The qualifications of a trustee can be crucially important or much less important depending upon what kind of trustee is at issue. While trustees who manage express trusts can wield enormous power over trust assets, the trustee for a deed of trust is little more than a dual agent for parties involved in the purchase of real estate. Alaska imposes few restrictions on who can assume this role.

What Happens If I Inherit Property With a Mortgage?

Inheriting a home can become a troublesome financial burden, especially if the home comes with a mortgage. Under certain circumstances, you may be required to repay the entire loan in a very short time. The options available to you depend on your relationship to the person who named you as beneficiary of the home and the terms of the mortgage agreement they originally signed.

LegalZoom. Legal help is here. Start Here. Wills. Trusts. Attorney help.

Related articles

What Is the Difference Between Warranty Deed & Trustee Deed?

A deed is the formal document used to transfer ownership of real estate from one person to another. Different types of ...

Title Vs. Deed of Trust

The words "title" and "deed of trust" are often used in real estate. If you're buying a home, both ...

What Is a Second Trust Deed?

A deed of trust is similar to a mortgage, allowing a borrower to secure a loan to buy a house by using the house as ...

How to Fill Out the Deed of a Trust to Secure Assumption

A deed of trust to secure assumption is not a property ownership document. Some states, such as Texas and California, ...

Browse by category
Ready to Begin? GET STARTED