Contract for Deed in Texas: How to Get Your Deed or Sell the House

If you live in a house you are buying on a contract for deed in Texas, you may not hold the deed yet, even after years of payments. That matters the day you want to sell, refinance, move or leave the house to your family. Texas regulates these deals closely in Subchapter D of Chapter 5 of the Texas Property Code, which calls them "executory contracts for conveyance." This post walks through what that law says about owning the house, falling behind and selling, with section numbers so you can read the statute yourself.

I work with House Buyers Texas, a company that buys houses in Texas. This post is general information, not legal advice. A Texas real estate attorney can tell you how the law applies to your own contract.

What counts as a contract for deed in Texas?

A contract for deed in Texas is an agreement where you pay the seller over time and the seller hands over the deed later. Subchapter D covers these contracts when the property is used, or will be used, as the buyer's home or the home of a close relative (Section 5.062(a)). A lot of one acre or less is presumed to be residential, and a lease combined with an option to buy is treated as an executory contract too.

The subchapter does not apply to a contract that calls for the deed to be delivered within 180 days of signing (Section 5.062(c)), or to land sold by the state, the Veterans' Land Board or a local government (Section 5.062(b)). When buyer and seller are close relatives, some of its protections can be waived in a written agreement (Section 5.062(d)).

Do you own the house before the last payment?

Not in the usual sense, unless the contract was recorded. Section 5.079(a) says "A recorded executory contract shall be the same as a deed with a vendor's lien," and the vendor's lien is for the unpaid contract price. The seller is required to record the contract within 30 days after it is signed (Section 5.076(a)), but not every seller does. A good first step is to search the real property records at the county clerk's office where the house sits and see whether your contract is there.

If the contract was never recorded and never converted, the seller must transfer recorded, legal title within 30 days after receiving your final payment (Section 5.079(a)). A seller who misses that deadline owes liquidated damages of $250 a day from day 31 through day 90, $500 a day after that, and reasonable attorney's fees (Section 5.079(b)).

How do you get the deed before the contract is paid off?

You can convert the contract into a deed at any time, "without paying penalties or charges of any kind," whether or not the seller recorded it (Section 5.081(a)). The contract also cannot charge a prepayment penalty if you pay the whole balance early (Section 5.073(a)(3)).

The statute gives two routes. The first is to pay the seller the full balance you owe, after which the seller must transfer recorded, legal title (Section 5.081(b)). The second is to give the seller a promissory note for the balance carrying the same interest rate, due dates and late fees as the contract. The seller then signs a deed to you, and at the same time you sign a deed of trust back to the seller, so the seller keeps a power of sale if you default (Section 5.081(c)). Within 10 days of receiving that note, the seller must either explain in writing the legal reason for refusing or schedule a time to sign (Section 5.081(d)).

To know the number, send the seller a written request for your balance. The seller has 10 days to answer in writing (Section 5.082(b)). If the seller does not respond, you may determine the amount owed yourself, and the seller then has 20 days to object in writing, based on records kept for the whole life of the contract (Section 5.082(c) and (e)). The seller also owes you an accounting statement every January showing what you have paid and what remains (Section 5.077).

What happens if you fall behind on a contract for deed?

You are entitled to a written notice and a chance to catch up before you can lose the house. The notice must go by registered or certified mail and must spell out what is owed and which remedy the seller intends to use (Section 5.063). On an unrecorded contract where you have paid less than 40 percent of the amount due or the equivalent of 48 monthly payments, the seller can cancel the contract or demand the whole balance only if you fail to cure within 30 days after notice (Sections 5.064, 5.065 and 5.066(g)).

Once you have paid 40 percent or 48 monthly payments, or once the contract is recorded no matter how much you have paid, the seller cannot simply cancel. Instead the seller may sell your interest through a trustee at a public sale under the same procedure used for foreclosures, and only after giving you at least 60 days to cure (Section 5.066(a) through (d)). If that sale brings more than the remaining balance, the seller must pay the excess to you (Section 5.066(e)).

Because that 40 percent or 48-payment line changes your protections so much, add up what you have actually paid before you assume the worst. Your January statements are the place to start.

Can you sell a house you are buying on a contract for deed?

Yes, but a clean sale runs through the deed question first. If your contract is unrecorded, recorded legal title is still in the seller's name until you convert or finish paying. If it is recorded, it works like a deed, and the seller's unpaid balance is a vendor's lien on the house (Section 5.079(a)). Either way, the balance under Section 5.081 is the number that has to be handled. Get it in writing under Section 5.082 before you sign with a buyer, and ask the title company handling your sale how it will pay that balance and get the seller's deed or release recorded at closing.

Two more protections matter when you sell. The seller had to own the property free of liens when the contract was signed and must keep it that way for the whole contract, with narrow exceptions such as a disclosed purchase loan (Section 5.085(a) and (b)). A violation lets you cancel and recover your payments, plus reimbursement for property taxes you paid and the value of improvements you made (Section 5.085(c)). And if the seller has died, the duty to deliver title passes to the seller's heirs, executor or administrator (Section 5.079(d)), though a court may waive the daily damages while heirs work diligently to clear title (Section 5.079(c)).

What should you gather before you make a move?

Conversion or a sale goes faster when the paperwork is in one place. Pull together the signed contract, any recorded copy from the county clerk, your payment records and January statements, and any default notices. Add the disclosure notice and survey the seller had to give you before you signed (Section 5.069), and the tax certificate and insurance information (Section 5.070). If the negotiations were conducted mainly in Spanish or another language, the seller was required to give you the contract and notices in that language as well (Section 5.068).

If your house is in the Houston area and you would rather sell it as it is once the title question is settled, our sell my house for cash in Houston page explains that route. Whatever you decide, answer the deed question first. It decides every other option you have.