A trustee deed in the US transfers title of a foreclosed property to the highest bidder or lender. Out-of-court foreclosure is allowed in some states, where a trust deed is given to a trustee as security for loan payment. The trustee is responsible for selling the property to settle the debt. Title is transferred via a trust deed after a foreclosure auction, which does not guarantee title is free of liens or encumbrances, unlike a traditional sale. Industry experts recommend buying foreclosed properties from lenders after they take ownership.
In the United States, a trustee deed is a deed that confers title to a foreclosed real estate property on the highest bidder at the auction or lender if no bid matches or exceeds the outstanding debt. A trust deed is materially different from the deed of sale that transfers title from a seller to a buyer in a traditional real estate transaction, because it does not include most of the covenants and warranties found in a deed of sale and purchase.
Most home sales in the United States are financed by a loan, often secured by a mortgage and a bill of exchange. In the event that the buyer defaults on the loan, the lender’s recourse is to repossess the property and sell it at auction. About 20 states require the lender to file a lawsuit against the borrower to repossess, commonly called judicial foreclosure because the process is supervised by the court.
The remaining states, however, allow a procedure called out-of-court foreclosure, in which property can be expropriated and sold without having to obtain court permission. In these states, a trust deed is given to a third party – the trustee – as security for the loan payment. The trust deed authorizes the trustee to proceed with the attachment procedure subject to certification by the lender that the loan is in default, and is different from the trustee deed, which is created only after the property has been attached and sold at auction.
When a property is foreclosed in an out-of-court action, the trustee is responsible for selling the property to settle the debt. Each state has its own requirements, but typically the borrower must first be notified that the loan has defaulted. If no arrangements can be made between borrower and lender, the trustee proceeds with the sale, giving public notice and conducting the sale, which is usually an auction conducted by the trustee on the steps of the county courthouse where the property is located. The property is sold to the highest bidder, although it is usually the case that if the winning bid is less than the amount owed on the loan, title to the property will revert to the lender.
After a foreclosure auction, title to the property is transferred via a trust deed, which is a deed prepared by the trustee that transfers title to the successful bidder, or lender if the highest bid is less than the outstanding debt. This is different from the deed of sale that accompanies a traditional sale of real estate, which guarantees that title is free of any liens or other encumbrances, a representation usually guaranteed by title insurance.
A trust deed, on the other hand, transfers title to the estate without any representation or warranty as to the existence of other clouds over the title and is not covered by title insurance. That’s why industry experts recommend that beginning real estate investors don’t buy foreclosed properties at auction, but from the lenders themselves after they take ownership of the property, when title will be transferred in a deal and deed of sale.
Protect your devices with Threat Protection by NordVPN
