Deed of Trust States

In a deed of trust state, when a borrower buys a property, the title of the real estate property is conveyed to a Trustee. The trustee is a neutral third party. The borrower has the equitable title to the property while the lender has the legal title.

In a deed of trust state, lenders can use either the judicial or non-judicial foreclosure.

Trustee's Sale

A trustee's sale is a form of non-judicial foreclosure. It is used most frequently because it is not as cumbersome and is less expensive. The homeowner cannot redeem the property after the sale.

On the plus side, if the sale of the house brings enough money to pay off the lender's debt, the lender cannot collect any deficiency.

Judicial Foreclosure

Judicial foreclosure, on the other hand, allows the lender to collect a deficiency after the auction, but the homeowner is allowed to redeem the property after the sale.

Although you may have no plans redeem your house, the possibility of redemption hampers the lender. Because you can potentially come back after the foreclosure, pay off the debt due, and get back title to your house the lender will have a difficult time selling the property.

Any prospective buyer will not get free title. The amount of time to exercise the right retention varies by state. It ranges from none to two years.