Financing

Question 1

TX Contract for Deed

Answer 1

TX Contract for Deed (governed by Property Code)

• Applies to property “used or to be used as the purchaser’s residence”
• Presumption of residence if 1 acre or less
• Does not apply if closing is within 180 days
• Does not apply to certain family transactions if waiver is signed

Question 2

Seller Finance

Answer 2

• Seller acts just as a bank
• Extends credit for purchase price less some down payment
• Promissory note + deed of trust
• Have closing with delivery of the deed to the buyer

Question 3

Contract for Deed

Answer 3

• Very much like “rent to own”
• Enter into a contract for the sale with installment payments made to the seller
• No deed until final payment is made by buyer
• All payments made –> legal title transfers
• Default –> seller keeps the property and the money; no title ever transfers

Question 4

TX Protections for Contract Deed

Answer 4

TX Protections (Property Code) for Contract for Deed – cooling off + notice

• 14 day “cooling off” period –> seller must prove notice of buyer’s right to cancel
• Notice must be 14 point boldface type or 14 point UPPERCASE letters stating: “You, the purchaser, may cancel this contract at any time during the next two weeks. The deadline for cancelling the contract is _______. The attached notice of cancellation explains this right”
  
  • If the contract is cancelled, seller must refund all money exchanged to date within 10 days of seller receiving buyer’s notice of cancellation

Question 5

Rule for Equity Protection:

If the buyer has paid less than 40% of the amount due or

LESS than 48 monthly payments, seller may…

Answer 5

If the buyer has paid less than 40% of the amount due or less than 48 monthly payments, seller may…

1. Enforce the remedy of recission OR
2. Enforce the remedy of acceleration and forfeiture

Only if

1. Seller provides notice of intent to enforce the remedy AND
2. Gives the buyer a 30 day period to cure the default

In other words, the seller can cancel the contract and keep all of the money. The buyer has to leave or be evicted.

Question 6

Rule for Equity Protection:

If the buyer has paid 40% or MORE of the amount due or the equivalent of 48 monthly payments…

Answer 6

If the buyer has paid 40% or more of the amount due or the equivalent of 48 monthly payments…

There must a foreclosure sale

• Seller will bid their debt, which is the amount remaining on the contract for deed
• If no one else bids, the seller retains title and contract for deed is extinguished
• If some third party bids more, they get title to the property and buyer will receive any amounts received in excess of the debt owed to the seller

However, the seller must allow 60 days to cure the default and provide a proper notice