A deed of trust is a legal instrument that creates a security interest in real property to secure repayment of a debt. It functions as an alternative to a mortgage, with a critical structural difference: where a mortgage is a two-party contract between borrower and lender, a deed of trust introduces a neutral third party — the trustee — who holds bare legal title to the property until the underlying obligation is satisfied.
Washington State
Washington is a deed-of-trust state. The Deed of Trust Act, codified at RCW 61.24, governs trustee qualifications, nonjudicial foreclosure procedures, and reconveyance of deeds of trust.
The Three Participants
A deed of trust involves three parties, each with a distinct role:
The trustor is the borrower. The trustor conveys bare legal title to the trustee as security for the loan but retains equitable title.
The beneficiary is the lender. The beneficiary provides the funds and receives the benefit of the security interest.
The trustee is a third party that holds bare legal title to the property as security for the debt. The trustee’s role is largely passive. It takes no action until the loan is either satisfied or in default. In most jurisdictions, the trustee must be an entity authorized by statute to serve in that capacity, typically a title insurance company, bank, savings institution, credit union, or attorney. The lender typically selects the trustee at origination. The trustee’s two principal functions are to conduct a nonjudicial foreclosure sale if the trustor defaults and to execute a reconveyance once the debt is fully satisfied. In Washington, the trustee owes a statutory duty of good faith to the borrower, beneficiary, and grantor under RCW 61.24.010(4), but the same statute expressly disclaims any fiduciary obligation.
How a Deed of Trust Works
When the trustor borrows money to acquire or refinance real property, the trustor signs two instruments: a promissory note, which is the personal obligation to repay the debt, and a deed of trust, which pledges the real property as collateral. The deed of trust is recorded in the county where the property is located, giving constructive notice to the world of the beneficiary’s security interest.
The deed of trust typically contains several provisions of legal significance:
- A power of sale clause granting the trustee authority to sell the property at a nonjudicial foreclosure sale upon the trustor’s default.
- An acceleration clause permitting the beneficiary to declare the entire balance due upon default.
- An alienation clause (or due-on-sale clause) allowing the beneficiary to accelerate the loan if the trustor transfers the property without the beneficiary’s consent.
When the trustor satisfies the obligation in full, the beneficiary directs the trustee to execute and record a deed of reconveyance, which releases the security interest and restores full legal title to the trustor.
Deed of Trust vs. Mortgage
The fundamental distinction between a deed of trust and a mortgage lies in the foreclosure mechanism. Because the trustee holds legal title with a power of sale, foreclosure under a deed of trust typically proceeds nonjudicially: the trustee, after satisfying statutory notice requirements, sells the property at a public auction without court involvement. Mortgage foreclosure, by contrast, is ordinarily judicial. The lender must file a lawsuit, obtain a court order, and proceed through the court system before the property can be sold.
Nonjudicial foreclosure is generally faster and less expensive than a judicial foreclosure.
Roughly twenty states use deeds of trust as the primary security instrument in real estate lending, including Washington, California, Texas, Colorado, Virginia, and Oregon. Some states permit both instruments, and lenders in those jurisdictions typically prefer the deed of trust because of the streamlined foreclosure process. The remaining states rely on mortgages.