Seller Financing for Texas Real Estate
Real Estate Law For Current or Prospective Property Owners
Seller Financing for Texas Real Estate
Real Estate Law For Current or Prospective Property Owners
Seller or Owner Financing in Texas
In Texas, if a Seller or Owner of a house wants to sell their Texas real estate property and receive monthly, quarterly or annual payments instead of a lump sum payment, Seller Financing is an option for the parties. This type of financing is also known as Owner Financing.
While Seller Financing for Texas real estate is not recommended for everyone, if the parties know and trust each other, this form of private financing or private lending may be a safe option.
Furthermore, this form of private lending may be an option when a parent wants to help his or her son or daughter buy property. The parent, or other family member, loans money to purchase the property and becomes the Lender. Or the parent can buy the property in the parent’s name and then sell the property to an adult child on terms the child can afford.
How to Owner Finance a House in Texas
If the Seller and Buyer agree on private financing as an option, the transaction should be properly documented. It is recommended that the documents be prepared by an attorney experienced with real estate law in Texas.
The three documents needed to Owner Finance the sale of a house in Texas are a Promissory Note, a Deed of Trust, and a General Warranty Deed with Vendor’s Lien.
- A Promissory Note is a legal document that contains the promise to pay back the loan, and sets forth the terms for the loan, including the interest rate and the number and amount of each payment.
- The Deed of Trust is a legal document that the buyer signs granting the seller or lender a lien on the property that is being purchased. It is often referred to as a Mortgage. This document needs to be filed in the county property records.
- A Warranty Deed with Vendor’s Lien transfers the property to the Buyer and creates what is known as a Vendor’s Lien or Seller’s Lien on the property to secure the Promissory Note. This document needs to be filed in the county property records.
If the three documents have been properly prepared, signed and recorded, the Seller or Lender should have the legal right to foreclose the Lien securing the loan if necessary.
To do so, the Seller or Lender will need to hire an attorney to conduct a foreclosure of the property. The property will be auctioned off to the highest bidder at a public sale at the courthouse and the proceeds from the sale are applied to the loan.
A simpler procedure is for the Buyer to give the property back to the seller by signing a Deed in Lieu of Foreclosure. In exchange for the transfer, the value of the property is applied to the loan.
Once the loan has been paid in full, the Seller or Lender needs to provide the Buyer with a signed and notarized Release of Lien, clearing the lien from the title. The Release of Lien should be promptly filed at the county clerk’s office.
Note: If the parties do not know each other, a common-sense rule of thumb for the Seller to consider: If a Bank or Mortgage company would not make the loan, you should not make the loan.
Our fee for to prepare the three documents needed for an Owner or Seller Financing sale is $600. This fee does not include title search, title insurance, recording fees or any other service.
Loan Modification Agreement
An existing Seller Finance Agreement can be modified at any time with a Loan Modification Agreement.
The parties can agree to extend the loan, change the interest rate or the payment amount.
The Modification Agreement needs to be signed by all parties and recorded in the property records.
Our fee for to prepare the document needed for a Loan Modification Agreement is $300. This fee does not include title search, title insurance, recording fees or any other service.
CONTRACT FOR DEED in Texas
A less common form of Seller Finance is called a Contract for Deed.
A Contract for Deed in Texas is a written agreement that states the Seller will transfer title to the property using a Warranty Deed after the Buyer pays the sales price in full.
This form of financing is not recommended in Texas for property in which the Buyer will be living.
With a Contract for Deed, the Seller still owns the property until the sales price has been paid in full. When the Buyer pays the sale price in full, the Seller gives the Buyer the Warranty Deed transferring the title to the Buyer.
Note: With a Contract for Deed, many problems can arise for the Buyer including the death of the Seller, liens against the property, judgments against the Seller, or even the bankruptcy of the Seller.
Any of these problems could cause the Buyer to lose the property and all money that has been paid for the property.
Buyers should avoid this form of financing. A traditional Seller Financing sale with a Promissory Note, Deed of Trust and Warranty Deed with Vendor’s Lien is better option.
If the property is NOT intended to be the residence of the Buyer or is Commercial Property, our fee for the preparation of a Contract for Deed is $900. This fee does not include title search, title insurance, recording fees or any other service.
Experienced Texas Real Estate Lawyer
Our fee for the preparation of a Warranty Deed with Vendor’s Lien, a Promissory Note, and a Deed of Trust is $600. This fee does not include a title search, title insurance, survey, recording fees or any other service.
Do you have questions about Seller Financing in Texas? Email your questions to Scott at scott@steinbachlaw.com. Or speak directly with attorney Scott Steinbach at 972-960-1850. There is no fee for your call.
At The Steinbach Law Firm, all legal documents are prepared by a Texas licensed attorney Board Certified by the Texas Board of Legal Specialization in Residential Real Estate Law.
Scott Steinbach is AV Preeminent rated by Martindale-Hubbell. Peer rated for Highest Level of Professional Excellence.