If the Grantor defaults on the loan, the Trustee is authorized to foreclose on the property with no lawsuit and no judicial oversight. This is called non-judicial foreclosure. The property is sold at public auction and the proceeds will be used to pay back the principal of the loan, any attorney's fees, and foreclosure fees. The Trustee must give any excess proceeds from the sale to the Grantor. If there are no excess proceeds and instead a deficiency, a lawsuit could be filed to recoup the deficiency from the Grantor.
Often at the time of drafting the Deed of Trust, a Real Estate Lien Note is also drafted, which is an agreement for one party (Grantor) to pay the other party (Grantee) a specific amount of money at a specific time. The note, also called a Promissory Note, must identify the parties and include the agreed upon terms of payment, such as the payment schedule and the interest rate.
When the Grantor completes payment on the note, the Grantee is obligated to file as Release of Lien in the real property records of the county clerk's office. Without a Release of Lien, the title to the property is clouded. If the Grantee refuses to release the lien or otherwise cannot be found, a Quiet Title Action will need to be filed to release the lien and remove the cloud from the title.
Drafting financing documents and getting the legal terminology correct can be complex. I've seen clients use premade forms from online in an attempt to save a buck and the results were costly. You need to employ a Texas real estate attorney to assist you in drafting the Deed of Trust, Promissory Note, and Deed with Vendor's Lien.
While Deed of Trusts are very common and widely used in Texas, there are other creative financing options available. Our attorneys can help you determine the best ways to plan your financial future.