Understanding What Trustee Signifies in Real Estate

By Mabel Ekperen

A real estate trustee is not the same as someone who acts on behalf of or manages a living trust. In fact, some states employ a deed of trust rather than a mortgage to guarantee that home loans are paid.

If your house loan is secured by a deed of trust, you will have a trustee identified on the document and because the trustee has authority over your property, you should be aware of his responsibilities.

Conceptual Model

The trustee, the creditor, and the client are all involved in the deed of trust, therefore, when a borrower receives a home loan, he signs a deed of trust. The deed transfers ownership of the house to the trustee, a third party and in the event, the client fails on the loan, the trustee functions as the creditor’s agent and is responsible for securing the asset.

Duties of the Trustee

Until the loan is paid off, the trustee keeps legal possession of the consumer’s home in trust, such that when the lender tells the trustee that the debt has been paid off completely, the trustee transfers the property to the borrower.

And because the trustee is just serving as an arbitrator, the lending institution has a right to the residence if the borrower defaults on paying the loan before it is entirely paid off.

Usually, a power-of-sale clause is frequently included in a deed of trust, so that if a default occurs, the stipulation empowers the trustee to foreclose on the residence and sell it at public auction via state legal procedures.

Legal Responsibilities

A trustee is required by law to behave dispassionately and honestly. He can’t be biased in favor of the borrower or lender at the same time. If he needs to foreclose, he is accountable for implementing the appropriate procedures and attempting to retrieve as much of the creditor’s losses as practicable at the auction. And if the trustee violates his commitments, the other parties may prosecute him in civil court.

Choice of Candidate

The choice of a trustee is governed by state legislation. A trustee can be anyone or any legal entity in some states if they aren’t tied to the lending institution or applicant in any way, such as a title firm. Some states, however, mandate the use of an elected individual, known as a public trustee. The trustee is named by the lender in the deed of trust, and the trustee must agree to it.