We buy houses Memphis TN — and one of the most common questions we hear from sellers is: “What happens if I still have a deed of trust on my home?”
A deed of trust is the legal document that secures your mortgage loan in Tennessee. When you sell your home, that deed of trust must be released before the buyer can take clear title. This is handled at closing by the title company, but many homeowners aren’t sure what that process looks like.
In this guide, we’ll explain how title companies handle trust deeds, what payoff statements include, and give you a simple flow of how everything works at closing.
What Is a Deed of Trust in Tennessee?
In Tennessee, mortgages are secured by deeds of trust instead of traditional mortgage documents. A deed of trust involves three parties:
- Borrower (you, the homeowner) – the person who took out the loan.
- Lender (bank or mortgage company) – the one who provided the funds.
- Trustee (neutral third party) – often an attorney or title company, who holds the right to foreclose if payments aren’t made.
When you make your monthly mortgage payments, you’re paying down the debt secured by that deed of trust. When you sell, the balance must be paid off in full for the deed to be released.
How Title Companies Handle Trust Deeds
When you go under contract to sell your Memphis home, the title company steps in to manage the financial side of closing. Here’s what they do:
- Order a payoff statement. They contact your lender to get the exact payoff amount due as of closing day.
- Check for additional liens. This ensures there are no unpaid taxes, judgments, or second loans tied to the property.
- Collect funds from buyer. The buyer (or their lender) wires money to the title company.
- Pay off your deed of trust. The title company wires your lender the exact payoff.
- Record release of deed. Once paid, the deed of trust is released, clearing title for the new buyer.
- Send you remaining equity. Whatever is left after paying your loan and closing costs is wired to you.
Flow of Payoff Process
Here’s a simple flowchart showing how it works:
Buyer Wires Funds → Title Company Receives Funds → Loan Payoff Sent to Lender → Deed of Trust Released → Seller Gets Remaining Equity
Example: Payoff at Closing
Let’s say you’re selling your Memphis home for $250,000.
- Sale price: $250,000
- Loan payoff (per deed of trust): $160,000
- Closing costs/fees: $6,000
- Remaining equity: $84,000
At closing:
- Buyer wires $250,000.
- Title company pays $160,000 to your lender.
- Title company pays $6,000 to cover taxes and fees.
- You receive $84,000 by wire transfer or check.
Why the Payoff Amount May Differ From Your Loan Balance
Sellers are often surprised that the payoff amount is slightly different from the balance shown on their mortgage statement. That’s because payoff statements include:
- Daily interest up to the date of payoff.
- Any late fees or unpaid charges.
- Escrow adjustments.
That’s why only the payoff letter from your lender is accurate for closing.
FAQs About Selling With a Deed of Trust
Q: Can I sell if I still have a deed of trust?
A: Yes. The deed is released at closing once your loan is paid off.
Q: What if my sale price is less than what I owe?
A: That’s called being “underwater.” You’d need to bring money to closing or request a short sale approval from your lender.
Q: How long does it take for the deed of trust to be released?
A: Typically within 30 days after payoff, but title companies record proof immediately so the buyer’s title is protected.
Q: Do I get the money before or after the deed of trust is paid?
A: After. The lender must be paid first, and then you receive your remaining equity.
Q: Can there be more than one deed of trust?
A: Yes. Some homeowners have a second mortgage or HELOC. Both must be paid off at closing.
Final Thoughts
Selling a Memphis home with a deed of trust is straightforward once you understand the process. The title company ensures your loan is paid off, the deed is released, and your equity is delivered to you safely.
Think of it this way: the lender always gets paid first, and you get the rest. By knowing how trust deeds work at closing, you can feel confident when it’s time to sell your home.