Non-judicial foreclosures in Texas\nare governed by Chapter 51 of the Texas Property Code, which outlines the\nforeclosure process for residential property, or the property used by borrowers\nas their principal residence [1]. Foreclosures of non-residential property\nfollow different procedures. <\/p>\n\n\n\n\n\n\n\n
The majority of Texas foreclosures\nare non-judicial. They require a trustee\u2019s deed (alternately called a\nforeclosure deed or substitute trustee\u2019s deed, if applicable) to convey\nforeclosed property at a trustee\u2019s sale.<\/p>\n\n\n\n
Trustee\u2019s deeds identify three\nprimary parties: the grantor, who is the trustee in the deed of trust; the\nbeneficiary, who is the lender and grantor in the deed of trust; and the buyer,\nwho is the grantee and purchaser of the property at the foreclosure sale.<\/p>\n\n\n\n
In a deed of trust, a trustee (the\ngrantee under the original deed of trust instrument), appointed by the lender,\nholds the deed to the property as collateral for a loan to be repaid by the borrower\n(the trustor under the deed of trust). If the borrower fails to fulfill the\nterms of the deed of trust, the lender can direct the trustee to enforce the\nterms of the deed or begin the foreclosure process. This starts with a notice\nmailed to the borrower, now debtor, of the intent to accelerate. Notice of sale\nis also recorded and posted in the county where the subject property is\nlocated, as directed by Tex. Prop. Code \u00a7 51.002 et seq.<\/p>\n\n\n\n
A trustee\u2019s deed may sometimes be\ncalled a substitute trustee\u2019s deed, but it is functionally the same thing. The\nlender may appoint a substitute trustee if the original trustee is unable to administer\nthe sale of property at public auction. A substitute trustee is a person named by\nthe lender under the terms of the security instrument (deed of trust) to\nexercise the power of sale (Tex. Prop. Code \u00a7 51.0001(7)). The power to appoint\na substitute trustee must be expressly designated by the lender in the deed of trust,\notherwise the appointment is invalid. A substitute trustee can be appointed at\nany time during the foreclosure process, so long as notice of the appointment\nis recorded. The foreclosing trustee, regardless, is generally an attorney for\nthe lender [1]. The trustee should identify in the deed whether they are\nserving as a trustee or substitute.<\/p>\n\n\n\n
The trustee delivers the deed to\nthe highest bidder at the foreclosure sale. In addition to meeting the format\nand content requirements for a standard deed (warranty, quitclaim, etc.), the\ntrustee\u2019s deed \u201crecites that all prerequisites to the sale were satisfied,\nidentifies [the] foreclosing entity, purchaser, sale price, sale date and time\u201d\nand must be signed by the trustee and notarized before it is recorded and filed\nin the county where the property is located [2]. Tex.\nProp. Code \u00a7 51.009 stipulates that the buyer at a foreclosure sale \u201cacquires\nthe foreclosed property \u2018as is\u2019 without any expressed or implied warranties,\nexcept as to warranties of title, and at the purchaser\u2019s own risk\u201d [2].<\/p>\n\n\n\n
Property under a deed of trust differs from real property in a living trust, which is used in estate planning. Rather, the deed of trust functions as a mortgage equivalent. In living trusts, a quitclaim deed or special warranty deed is used to convey property into and out of the trust.<\/p>\n\n\n\n