What is the purpose of a deed of trust?

The purpose of a deed of trust is to secure debt involving three parties: the borrower, the lender, and the trustee. In a deed of trust agreement, the borrower conveys the property to a trustee, who holds the title as security for the loan provided by the lender. This arrangement establishes a legal framework whereby if the borrower defaults on the loan, the trustee has the authority to sell the property to recover the owed funds for the lender.

This three-party arrangement is a crucial aspect of a deed of trust, as it creates a security interest in the property and outlines the respective responsibilities and rights concerning the loan and property. Understanding this structure is essential for real estate professionals, as it plays a significant role in financing transactions and property management.