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Should I Agree to a Contract for Deed Arrangement to Buy or Sell in Texas?

Posted by Chris Peterson | Nov 04, 2014 | 0 Comments

Should I Agree to a Contract for Deed Arrangement to Buy or Sell in Texas?

Contract for deedA contract for deed is one way to sell property to a buyer who doesn't have the money to pay cash and who can't or chooses not to obtain traditional financing. It is a bit riskier for the seller, especially if you are relying on the buyer to make payments so you can, in turn, make payments on the property. This is one reason why most mortgage companies won't let you sell mortgaged property under a contract for deed.

What exactly is a contract for deed?

A contract for deed arrangement is also sometimes called a lease to own. A buyer signs a contract agreeing to make monthly payments to the seller. When the payment terms are satisfied and completed, the seller is supposed to transfer title of the property to the buyer. Unlike a traditional mortgage, the property does not legally change hands until the buyer finishes paying off the home.

When can a seller use a contract for deed?

A seller can enter into a contract for deed arrangement at any time, as long as the seller has not previously contracted away the right to do so. An example of such a situation, as mentioned above, is when the property is already mortgaged. Most lenders have clauses in their loan agreements that prevent would-be sellers from entering into lease to own or contract for deed deals.

What are the potential pitfalls in lease to own deals?

Texas has strict rules for sellers in these agreements, which can be complicated to follow without good legal advice. For buyers, a contract for deed may contain terms which say possession of the property reverts to the seller if you miss a payment or two. In that case, all of a buyer's previous payments could be considered rent and the buyer may be evicted without any recourse to redeem the property. Depending on your situation, there may be other potential problems.

Seek legal advice before entering into a lease to own deal

Both sides of a contract for deed arrangement should seek legal advice from a skilled real estate litigation attorney before agreeing to the deal. Or, if you've already signed on the dotted line, an experienced lawyer can help mitigate your losses and fight for your property rights. When your home or other property is at stake, it's worth an hour or two of your lawyer's time to find out how Texas law applies to your circumstances.

Call today for an appointment

Protect your property rights by consulting with an experienced real estate litigation attorney before you sign up for a non-traditional buy-sell agreement. Our Bryan-College Station, Texas real estate attorneys review your situation and provide advice you can rely on. Call us at Peterson Law Group to make an appointment at 979-703-7014 today, or visit us online to request a meeting using our online contact form.

About the Author

Chris Peterson

Chris Peterson is the owner of Peterson Law Group. He practices primarily in the areas of wills, trusts and estate planning; probate and trust administration; elder law; and business law. Chris is also the owner of Brazos 1031 Exchange Company.

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