A deed of trust is a legal document that transfers ownership of real property (real estate) to a trustee until the person or entity buying the real property repays a loan for the purchase of the real property. A deed of trust is similar to a mortgage—some states use a mortgage and other states use a deed of trust.

In a deed of trust transaction a lender (the bank) gives a borrower (who is purchasing the real property) money to pay the seller, and the borrower gives the lender one or more promissory notes for repayment of the loan. As security for the promissory notes, the borrower transfers the ownership interest (title) in the real property to a trustee—often a title company—to hold until the borrower repays the lender.

If the borrower fails to timely make payments and defaults on the loan, the property generally may be sold without the lender using or going through the court system. This is known as nonjudicial foreclosure and is usually less time-consuming and less expensive for the lender.

A deed of trust is also known as a trust deed, a trust indenture, an indemnity mortgage, or a common-law mortgage.

In Michigan, the primary instrument used to secure a loan for the purchase of real estate is a mortgage, not a deed of trust. Michigan law recognizes mortgages as the legal means by which a property owner (borrower) pledges their property to a lender (mortgagee) as security for a loan. When a borrower takes out a mortgage, they retain ownership of the property but grant the lender a lien on the property as security for repayment of the mortgage debt. If the borrower defaults on the loan, the lender may initiate foreclosure proceedings to recover the debt. In Michigan, foreclosure can be either judicial, which involves going through the court system, or nonjudicial under certain circumstances, which is faster and less costly. Nonjudicial foreclosure is allowed in Michigan if the mortgage contains a power of sale clause, which permits the lender to sell the property without court intervention in the event of default. It's important to note that while the term 'deed of trust' is commonly used in other states, in Michigan, the equivalent security instrument is the mortgage.