On the other hand, a trust decision allows the lender to carry out an extrajudicial execution more quickly and at a lower cost, which bypasses the judicial system and respects the procedures described in the rules of treuhand and state law. If the borrower does not feed the loan, the property is auctioned off by the sale of an agent. Unlike common practice, a mortgage is not technically a loan to buy a property; it is an agreement that promises ownership as collateral for credit. An act of trust is required when a traditional credit service (i.e. a bank) is not put into service or when some states require acts of trust rather than mortgages. Whether you have a deed of trust or a mortgage, both are used to pay off a loan, either to a lender or to one person. A mortgage applies to only two parties – the borrower and the lender. An act of trust adds an additional part, an agent who holds the title of the house until the payment of the loan. In the event of a loan default, the agent is responsible for the start of the execution process.

In the case of a traditional mortgage, a lender is responsible for initiating enforcement, with or without judicial authorization, as required by state law. Invested parties can exploit all legal differences in the trust area, resulting in costly legal tangles that could jeopardize the investment. The typical investor with little experience may have difficulties, as he needs specific know-how to find credible and trustworthy developers, projects and brokers. The agent is authorized to sell the property in the event of a lack of legal proceedings. This is called non-judicial enforced execution and is an essential difference between an act of trust and a mortgage, in which a bank must go through the court to carry out a forced execution. As a general rule, this is the agreed purchase price of the house minus the down payment. This is important because it gives you the exact number that must be paid before the end of the repayment period to meet the credit requirements and dissolve the trust. The agent does not represent the borrower or the lender. The agent is usually an entity such as a securities company that holds „purchasing power“ in the event of a late payment from the borrower. Once the deed is fully paid, the agent transfers the property to the buyer. The beneficiary of the act of trust in a real estate transaction is the person or entity whose interest in the investment is protected. In most cases, it is a lender, but it could also be a person if you have a land contract with an individual to ultimately own a property directly.

In essence, a debt note is a promise of payment signed by the borrower for the benefit of the lender. It contains the terms of the loan, such as the . B interest and payment obligations.