Seller Financing
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Seller Financing in texas
Seller Financing in Texas might be an option for a Buyer of real estate property. If a Buyer is not able to attain traditional lending or cannot pay cash to purchase a property, seller financing may be an alternative.
Good to know: Seller Finance is a common way for parents to help their adult children to purchase property. The parents can buy the property in the parents’ names and then sell the property to their adult child on terms the child can afford.
Since the buyer avoids using a bank or conventional mortgage lender, seller financing may be more cost-effective for the buyer. Additionally, when providing seller financing, the sale is often able to close quickly.
Typically, there are three legal documents needed for seller financing:
- Promissory Note – This document is the Buyer’s promise to pay for the property.
- Deed of Trust – This document gives the Seller a lien on the property.
- Warranty Deed – This document transfers the property to the Buyer
Good to know: If the Buyer fails to make payments, the Seller has the right to foreclose the lien securing the property. However, to avoid foreclosure, the Buyer may agree to transfer the property back to the Seller using a Deed in Lieu of Foreclosure.
Owner Financing Real Estate
Owner financing for real estate is an alternative term used for seller financing. As the term may imply, the owner who is selling the property finances the sale.
A financing transaction can be complicated. When providing an owner financing contract, it is important to have an experienced attorney ensure the transaction is properly structured.
At Texas Property Deeds, all legal documents are prepared by a Texas licensed attorney Board Certified by the Texas Board of Legal Specialization in Residential Real Estate Law.
A real estate purchase agreement with seller financing should include:
Contract for Deed
A Contract for Deed is a not recommended in Texas. It is an agreement where the current owner of the property agrees to transfer title to the property after the buyer pays for it. Sounds simple. But, since the title stays in the name of the seller, many problems can arise. Most often it is the death of the seller. Furthermore, the seller can get sued, have tax liens, judgment liens, divorce liens, all of which create serious problems for the buyer of the property, even though the buyer pays all payments.
Rather than using a Contract for Deed, a simple owner finance is recommended in Texas. Using an Owner Finance, the Seller transfers the property to the Buyer, the Buyer signs a promise to pay for the property and gives the seller a lien to secure the promise.
Good to know: Because of years of ample abuse by sellers, Contracts for Deed are NOT favored under Texas law. It is recommended that Seller or Buyer NOT use this form of financing.
Note: In order to limit seller abuses, Texas legislature has passed numerous regulations governing Contracts for Deed. It is very difficult for sellers to enter into these contracts while remaining compliant under the law.
Package of three documents for seller financing prepared for $750
The package includes the recommended legal documents needed to provide Seller Financing: A Warranty Deed, a Promissory Note, and a Deed of Trust.
Do you have questions about seller financing? Call and speak directly with attorney Scott Steinbach at 972-960-1850. Or email him at scott@texaspropertydeeds.com.
R. Scott Steinbach is licensed in the state of Texas. Board Certified by the Texas Board of Legal Specialization in Residential Real Estate Law. AV Preeminent rated by Martindale-Hubble. Peer rated for Highest Level of Professional Excellence.
Texas Property Deeds is a service of The Steinbach Law Firm.
The Steinbach Law Firm is a Texas Real Estate Law Firm. We prepare all documents for any real estate transaction in Texas.
