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Foreclosure process

Trustee

Also called Foreclosure trustee, Deed of trust trustee

In short

In real estate, a trustee is the neutral third party named in a deed of trust who holds legal title for the lender and can sell the property at a trustee sale if the borrower defaults.

Named in
The deed of trust
Often
A title company or attorney
Main job
Conducts the trustee sale
When loan is paid
Releases title (reconveyance)

The trustee's role

A deed of trust has three parties: the borrower, the lender (the beneficiary) and the trustee. The trustee holds limited legal title as security for the loan. It has two main jobs: release the lien when the loan is paid off, and carry out a non-judicial foreclosure if the borrower defaults.

The trustee in foreclosure

When the lender declares a default, the trustee records the required notices, such as the notice of default and notice of trustee sale, conducts the auction and issues a trustee's deed to the winning bidder. Lenders can often substitute a new trustee, typically a company that specializes in foreclosures. Trustee duties are set by state law and vary by state.

Other kinds of trustees

The word also appears in other contexts, such as a bankruptcy trustee who manages a debtor's estate or the trustee of a living trust who holds property for beneficiaries. These roles are different from a deed-of-trust trustee.

Example

Working with a foreclosure trustee

An investor sees a notice of trustee sale listing a trustee services company. The investor calls the trustee's sale line the day before and confirms the sale is on, the lender's opening bid is $172,500 and the trustee accepts cashier's checks only. After winning at $181,000, the investor receives a trustee's deed a few days later.

Frequently Asked Questions

Related terms

Deed of TrustTitle & legalA deed of trust is a security instrument used instead of a mortgage in many states. The borrower gives a neutral trustee legal title as security for the loan until it is paid off.Non-Judicial ForeclosureForeclosure processA non-judicial foreclosure is a foreclosure carried out without a lawsuit. A trustee sells the property at auction under the power-of-sale clause in the deed of trust or mortgage.Notice of Trustee SaleForeclosure processA notice of trustee sale is the public notice, in a non-judicial foreclosure, that sets the date, time and place a trustee will auction a property to repay the defaulted loan.Foreclosure AuctionForeclosure processA foreclosure auction is the public sale of a property after a borrower defaults, where the highest bidder buys it, usually with cash and as-is. If no one outbids the lender, it becomes bank-owned.Opening BidForeclosure processAn opening bid is the first bid at a foreclosure auction, usually placed by the lender. Other bidders must exceed it to buy the property; otherwise the lender takes it back.Notice of DefaultForeclosure processA notice of default (NOD) is a public notice, recorded with the county, stating that a borrower has fallen behind on a mortgage or deed of trust and that the lender may move toward foreclosure.Credit BidForeclosure processA credit bid is a bid at a foreclosure auction that the lender places using the debt it is owed instead of cash. The lender can bid up to the amount of its debt without paying any money.MortgageMortgages & financingA mortgage is a loan used to buy real estate, secured by the property itself. If the borrower stops paying, the lender can take the property through foreclosure to recover what is owed.

Learn more in the knowledge base

How Foreclosure Auctions Work: A Guide for First-Time BiddersGuide · 8 min readA foreclosure auction is the public sale where a lender's collateral is sold to repay a defaulted loan. Rules on notice, payment, title and redemption are set by state law, and buyers usually pay cash for a home they have never been inside. This guide explains how the process works so you know what you are bidding on.Researching a Foreclosure Property Before the AuctionGuide · 6 min readAt a foreclosure auction you usually buy as-is, unseen and without contingencies, so research done before the sale is your only protection. This guide covers how to confirm the sale details, check title and liens, estimate value and repairs from the outside and turn it all into a maximum bid.After You Win a Foreclosure Auction: Closing, Title and PossessionGuide · 7 min readWinning the bid starts the purchase rather than finishing it. This guide walks through paying the balance, receiving and recording a trustee's or sheriff's deed, getting title insurance after the sale, living with a redemption period, lawfully gaining possession of an occupied home and securing the property once it is yours.
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Disclaimer: The information on this page is for general educational purposes only and is not legal, financial, tax or investment advice. Laws, lending rules and market conditions vary by state and change over time, and any figures shown are estimates. Before you buy, sell, finance or bid on a property, consult a qualified attorney, financial advisor, lender or licensed real estate professional about your situation.