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Real Estate
Wills, Trusts
& Probate
General Civil

Real Estate Security Instruments

Lenders, whether banks or individual sellers, typically require the persons who are borrowing money in order to finance the purchase of real estate to sign a "note" and a "security instrument." A note is a written, unconditional promise to pay a certain sum of money at a certain time or within a certain period of time. Because the borrower might be cash poor or have other debts, lenders will secure the note with a security instrument, such as a mortgage or a deed of trust.

The type of instrument chosen can have substantial legal implications for both the lender and the borrower. The following overview is intended to alert you to the need to consider your choices carefully before entering into such agreements.


A mortgage is a written instrument giving the lender the right to sell the borrower's designated property and use the money collected to pay off the debt if the borrower defaults on the loan. Some mortgages give the lender the "power of sale," which means that the lender may simply take possession of the property and sell it to satisfy the debt if the borrower defaults on the loan. Other mortgages require the lender to file suit, prove the debt, and get a judicial order allowing it to sell the property to satisfy the debt.

Deed of Trust

A deed of trust is similar to a mortgage with a power of sale except that it absolutely conveys the property title to a third person, the trustee, for the benefit of the lender. A deed of trust includes a power of sale so that if the lender notifies the trustee that the borrower has defaulted on the loan the trustee may advertise the property and sell it to satisfy the outstanding debt.

A trustee or a mortgagee with a power of sale is not required to file a civil suit to sell the property. It must simply give the borrower notice and advertise the sale according to the terms of the trust deed or mortgage. Such trusts and mortgages are advantageous for the lender because both the time and the expense of a judicial foreclosure proceeding are saved. However, there is a risk that the lender or the trustee might wrongfully sell the property under the power of sale, in which case the lender or the trustee would be liable for damages.

Installment Land Contract

In a typical installment land contract, the seller of the property retains title until the purchase price is fully paid. The purchaser usually gets immediate possession of the property even though he or she does not have legal title.

Installment land contracts almost always have forfeiture clauses that allow the seller to terminate the contract, to recover possession of the property, and to keep all installments paid if the purchaser defaults. This remedy can be especially harsh for the purchaser if most of the purchase price has already been paid at the time of default. Because Illinois courts do not favor forfeiture provisions, the seller's ability to rely on such a provision is far from certain, and the seller may be forced to pursue other more costly and time-consuming remedies.


Procedures for enforcing security interests are usually controlled by statute, and sometimes by contract, depending on the instrument used. One such enforcement tool is a deficiency judgment. A deficiency judgment is a personal judgment for damages against the borrower, requiring the borrower to pay (in cash) the difference between the amount of the sale price applied to the debt and the debt itself. In some cases, a borrower may not only lose the property but may also be liable for money damages for the balance of the loan.

This website is not intended to constitute legal advice or the provision of legal services. By posting and/or maintaining the website and its contents, Lucas Law does not intend to solicit business from clients located in states or jurisdictions outside of Illinois wherein Lucas Law or its individual attorney(s) are not licensed or authorized to practice law.

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