Contract for Deed in Texas
In a contract for deed, also called an executory contract, the buyer pays the seller over time and the seller keeps title until the price is paid. Texas regulates residential contracts for deed heavily under Property Code Chapter 5. Sellers must provide disclosures, record the contract, give annual statements and notice of default with a chance to cure, and once the buyer has paid a set share, the seller generally cannot forfeit and must foreclose.
How it works
The buyer takes possession and pays installments. The seller holds legal title until the buyer pays in full or meets the terms for conveyance. If the buyer defaults, the seller historically could cancel the contract and keep payments. Texas has limited that practice for residential property to protect buyers, who are often low-income and do not get the same protections as mortgage borrowers.
Texas seller requirements
- Disclosures to the buyer before signing, including information about the property, the seller's title and the buyer's rights.
- Recording the executory contract in the county records within a statutory period after signing.
- Annual accounting statements showing payments, interest and balance.
- Notice and cure rights before the seller can terminate for default.
- Restrictions on forfeiture once the buyer has paid a specified portion of the price or number of payments, after which the seller generally must use foreclosure.
- Conveyance of title when the buyer has met statutory conditions.
Exact thresholds and deadlines are in Property Code Chapter 5. Confirm them before drafting.
Compare with other structures
| Contract for deed | Seller-financed sale with deed of trust | |
|---|---|---|
| Who holds title | Seller until payoff | Buyer from closing |
| Seller's remedy | Limited forfeiture or foreclosure | Foreclosure under the deed of trust |
| Buyer protection | Statutory protections apply | Treated like a mortgage borrower |
| Title risk for buyer | Seller's creditors or liens can attach | Buyer's title is recorded |
Risks
- Sellers who ignore the statutory steps can face penalties and may lose the right to enforce the contract.
- Buyers risk losing payments and any improvements if a seller's creditors, mortgage lender or heirs interfere, so recording and title checks matter.
- Property tax and insurance responsibilities need clear terms.
- Mixing a contract for deed with investor strategies that rely on tenants as buyers draws regulatory scrutiny.
What to do
For a residential property, many attorneys recommend a seller-financed sale with a deed of trust instead, since it avoids many of the contract for deed requirements. If a contract for deed is used, follow the statute strictly. See seller financing in Texas and title commitments.
Free consultation with a partner attorney. No cost, no obligation.
Book Free ConsultationFrequently asked questions
Can a seller keep the payments if the buyer defaults?
Texas limits forfeiture for residential contracts, especially after the buyer has paid a substantial amount. The seller must follow notice and cure steps.
Does a contract for deed need to be recorded?
Yes for residential executory contracts, within the statutory period after signing.
Who owns the property during the contract?
The seller holds legal title. The buyer holds equitable rights.
Is it legal to use a contract for deed in Texas?
Yes, but heavily regulated. Failing to follow the statute can create serious liability.