Owner Financing Land in Texas: Contract for Deed, Deed of Trust or Cash
You can owner finance land in Texas, but the structure you pick decides your risk. Here is how a deed of trust compares with a contract for deed, when the Texas contract-for-deed rules apply to land, what a seller must do, how foreclosure works, and how it compares with a cash sale.
Updated Nov 4, 2026 · By the Twin Sun Land Company team
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The short version
- Two structures: deed + note + deed of trust, or a contract for deed.
- Contract-for-deed rules apply if the land is or will be a residence; 1 acre or less is presumed residential (§ 5.062).
- Seller records within 30 days and sends a January statement every year (§§ 5.076, 5.077).
- After 40% or 48 payments, or once recorded, no forfeiture: a 60-day cure, then a trustee sale (§ 5.066).
- The buyer can cancel for any reason within 14 days and convert to a deed at any time (§§ 5.074, 5.081).
- Land with a mortgage or other lien generally can’t go on a residential contract for deed (§ 5.085).
- Deed-of-trust sale: first Tuesday, 21 days’ notice (§ 51.002).
- Texas license exemption stops at three residential loans in 12 months (Finance Code §§ 156.202, 180.003).
Can I owner finance land in Texas?
Yes. Texas allows seller financing on land, and there are two ways to do it. You can deed the land to the buyer and keep a lien through a promissory note and a deed of trust, or sign a contract for deed and keep the title until the last payment. Texas regulates the second one far more heavily.
| Deed + note + deed of trust | Contract for deed | Cash sale | |
|---|---|---|---|
| Who holds title while paying | Buyer, with your lien recorded | You, until paid off | Buyer, at closing |
| If the buyer stops paying | Trustee sale under § 51.002 | If residential: a 30-day cure, then forfeiture, only on an unrecorded contract under 40% or 48 payments. Otherwise a 60-day cure, then a trustee sale (§§ 5.064 to 5.066) | Not your problem |
| Extra Texas duties | Few, but the licensing limit can apply | If residential: disclosures before signing, record in 30 days, January statements and more | None beyond the usual notices |
| When you get your money | Over years | Over years | At closing |
All three still carry the usual Texas sale notices, such as the additional tax notice in a vacant land contract (§ 5.010).
When do the Texas contract-for-deed rules apply to land?
When the land is used, or will be used, as the buyer’s home or a relative’s home (Property Code § 5.062). A lot of one acre or less is presumed residential. A contract that requires the deed within 180 days is outside the rules. A 40-acre hunting tract with no home planned is usually outside; a one-acre home lot usually isn’t.
The test is the buyer’s use, not the size alone. If the buyer plans to put a house or a manufactured home on the land, assume the rules apply and have a Texas real estate attorney draft the contract.
- Close relatives. A buyer related to you within the second degree can waive § 5.066 and §§ 5.068 to 5.080 in writing. The other sections still apply (§ 5.062(d)).
- Lease with an option to buy. Signed together, they count as a contract for deed, with their own carve-outs (§ 5.062(a)(2), (e), (f)).
- A few counties add more. A small group of counties can adopt an order under § 5.0622, and that order can require conversion to a deed within three years (§ 5.087). Ask the county or your attorney.
What must a Texas seller give the buyer before signing a contract for deed?
A survey or plat, copies of anything that affects title, a signed property condition notice, a tax certificate, any insurance evidence and a written statement of the financing terms (§§ 5.069 to 5.071). Skip the property or tax disclosures and the buyer can cancel and get a full refund of all payments.
| Item | What the law asks for | Section |
|---|---|---|
| Survey | A survey completed within the past year, or a plat of a current survey | § 5.069(a)(1) |
| Title papers | A legible copy of any document describing an encumbrance or claim, including covenants and easements | § 5.069(a)(2) |
| Condition notice | Signed by both of you and attached to the contract. It covers water, sewer, septic approval, electric, floodplain, paved roads, ownership, liens and limits on building a house, under a warning that the buyer may not be able to live on the land | § 5.069(a)(3) |
| Utility form | If the land isn’t in a recorded subdivision: a separate form saying utilities may not be available until it is recorded | § 5.069(b) |
| Tax certificate | From the collector for each taxing unit on the land | § 5.070(a)(1) |
| Insurance | A legible copy of any policy, binder or other evidence for the land | § 5.070(a)(2) |
| Financing terms | Price, interest rate, total interest, total principal and interest, any late charge, and a statement that there is no prepayment penalty | § 5.071 |
| At signing | The final agreement statement, the two-week cancellation statement near the buyer’s signature, and a cancellation form, all in 14-point type | §§ 5.072(d), 5.074(c), (d) |
| Another language | If you negotiate mainly in Spanish or another language, a copy of every document in that language, including notices and annual statements | § 5.068 |
Advertising the land on these terms? The ad itself must disclose water, sewer and electric availability (§ 5.069(c)). Failing to provide what §§ 5.069 and 5.070 require, or the § 5.072(d) notice, is also a deceptive act that can be sued on under the Texas consumer protection law.
What does a Texas seller have to do under a contract for deed?
Record the contract with the county clerk within 30 days of signing (§ 5.076), send the buyer a statement of payments, balance and taxes every January (§ 5.077), and deliver the deed on time at payoff (§ 5.079). Missing a duty costs money: up to $500 a year for not recording, and $100 or more per late statement.
- Recording (§ 5.076). On or before the 30th day after signing, with the required disclosure attached. If the contract ends, record that too.
- Annual statement (§ 5.077). Each January (postmarked by January 31 if mailed): amount paid, balance, payments left, and any taxes and insurance you paid for the buyer. Late statements cost $100 each, or $250 a day up to the land’s fair market value if you did two or more of these deals in 12 months, plus the buyer’s attorney’s fees.
- Fees (§ 5.073). A late fee can’t exceed the lesser of 8% of the monthly payment or your actual cost to process it, and you can’t charge a prepayment penalty.
- Balance requests (§ 5.082). A written statement within 10 days of the buyer’s written request.
- Deed at payoff (§ 5.079). If the contract wasn’t recorded or converted, transfer title within 30 days of the final payment. After that it costs $250 a day through day 90 and $500 a day after, plus attorney’s fees.
This list is not every duty in Subchapter D (§ 5.061 and following). The point: a residential contract for deed in Texas is a regulated loan, not a handshake.
What happens if the buyer stops paying on a Texas contract for deed?
It depends on recording and on how much the buyer has paid. Forfeiture survives only on an unrecorded contract with under 40% of the amount due and under 48 monthly payments paid, after a 30-day cure period. Otherwise you give at least 60 days to cure, then use a trustee sale (§§ 5.064 to 5.066).
| The contract | Cure period after notice | Your remedy |
|---|---|---|
| Not recorded, under 40% and under 48 monthly payments paid | 30 days (§ 5.065) | Rescission, or forfeiture and acceleration (§ 5.064) |
| Recorded at any payment level, or 40% or 48 monthly payments paid | At least 60 days (§ 5.066(b)) | A trustee sale under § 51.002. On a recorded contract, judicial foreclosure is the other route (§ 5.079(a)) |
Here is the catch. The law requires you to record within 30 days, and once the contract is recorded you can no longer use forfeiture, however little the buyer has paid (§§ 5.064(4), 5.066(a)). So a seller who follows the rules should plan on a foreclosure, not a quick cancellation. Notice of sale can’t go out until the cure period ends, so a 60-day cure plus the 21-day sale notice is at least 81 days, and the sale still has to land on a sale date (§ 5.066(c)).
Default notices go by registered or certified mail, in 14-point bold type, with the statute’s wording on a separate page (§ 5.063). At a trustee sale you must convey fee simple title and warrant that the land is free of encumbrances. If the sale brings more than the debt, the extra goes to the buyer, and any claim for a shortfall is subject to §§ 51.003 to 51.005 (§ 5.066(d), (e)).
What rights does the buyer keep under a Texas contract for deed?
The buyer can cancel for any reason within 14 days, convert to a deed at any time, cancel if the land wasn’t properly platted, and deduct what you owe from payments. A contract term that tries to waive a right under these rules is void (§ 5.073(b)).
- 14-day cancellation (§ 5.074). By the 14th day after the contract date. Within 10 days of the notice you return the contract and all payments and cancel any security interest.
- Conversion (§ 5.081). At any time, with no penalty. If the buyer pays the balance, you transfer title. If the buyer delivers a note for the balance with the same rate, due dates and late fees, you sign a deed and the buyer signs a deed of trust. You have 10 days to schedule that or explain in writing why you refuse.
- Platting (§ 5.083). If the land wasn’t properly subdivided or platted, the buyer can cancel at any time. Within 10 days you either give notice that you will fix it, then finish within 90 days, or return all payments, plus taxes the buyer paid and the value of improvements. This matters if you are selling part of a larger tract.
- Deduction (§ 5.084). If you owe the buyer under these rules, the buyer can subtract it from payments without going to court.
Can I use a contract for deed if my Texas land has a mortgage?
Generally no. You may not sign a residential contract for deed unless you own the land in fee simple, free of liens and other encumbrances, and you must keep it that way for the life of the contract (§ 5.085). One narrow exception covers a loan used only to buy the land.
That exception has conditions: a separate written disclosure at least three days before signing, a lien on this land only and never larger than the buyer’s balance, a lender that agrees to verify the loan and accept the buyer’s payments, and covenants in the contract (§ 5.085(b)(3)). Break the rule and the buyer can cancel and recover every payment, plus taxes paid and the value of improvements (§ 5.085(c)). Land with a lien can still sell for cash, because the title company pays the lien at closing: selling Texas land with a lien.
What happens if the buyer stops paying on a Texas deed of trust?
The trustee can sell the land at a public auction at the county courthouse on the first Tuesday of a month, between 10 a.m. and 4 p.m. (Property Code § 51.002). Notice must be posted, filed with the county clerk and sent by certified mail at least 21 days before the sale.
If the buyer lives on the land, the debtor must first get a written notice of default and at least 20 days to cure before the sale can be noticed (§ 51.002(d)). On bare land the timeline is shorter, but it is still weeks of process and a resale at the end, which is the real cost of being the bank.
Two details: if the first Tuesday falls on January 1 or July 4, the sale moves to the first Wednesday, and a county can designate a sale area near the courthouse (§ 51.002(a-1), (h)). Notices to the debtor must also carry the statute’s military service statement (§ 51.002(i)).
How is owner financing taxed?
Usually as an installment sale: IRS Publication 537 lets you report the gain as you receive payments instead of all in the year of sale. The interest is ordinary income every year. Texas has no state income tax, so this is a federal question.
Each payment has three parts: interest, a tax-free return of your basis, and gain. The note must charge enough interest, or the IRS can treat part of the principal as interest. For the math with a worked example, see our owner financing vs. cash guide; the federal rules are the same in Texas.
Tax note. General information from IRS Publication 537, not tax advice. Ask a CPA about your own sale.
Do federal mortgage rules apply to owner financed land?
Mostly when a dwelling is involved. Regulation Z’s loan originator and ability-to-repay rules cover credit secured by a dwelling, a home of one to four units, including a mobile home used as a residence. Bare land is treated differently, but a buyer’s plan to build can matter, and Texas has its own licensing limit.
A seller who finances only one property in 12 months, or three or fewer with a good-faith check that the buyer can repay, can fall outside the loan originator rules (12 CFR 1026.36(a)(4) and (5)), with conditions. If you plan to finance more than once, or to a buyer who will build a home, have a Texas attorney review the deal first.
Do I need a mortgage license to owner finance land in Texas?
Usually not for a few sales, but the limit is three. Texas exempts an owner who makes no more than three residential mortgage loans in any 12 months to buyers of the owner’s own property (Finance Code §§ 156.202, 180.003). Past that, or if you aren’t sure, ask a Texas attorney before you sign.
Vacant land isn’t automatically outside this. “Residential real estate” means Texas land on which a dwelling is constructed or intended to be constructed. A residential mortgage loan is one mainly for personal, family or household use, secured by a mortgage, deed of trust or equivalent interest on a dwelling or on that land (§ 180.002). So a buyer’s plan to build a home can bring the rule into play.
Two or more owners count as one for the limit if any of them is an entity, such as an LLC, or an affiliate of one (§§ 156.202(b), 180.003(d)). The federal limits above have their own conditions, so check both. How these rules apply to one deal, including a contract for deed, is a question for your attorney.
Owner financing or cash: which is better for Texas land?
Owner financing can bring a higher price and monthly income, but you carry the default risk, the paperwork and years of waiting. Cash pays you once, at closing, with no note to collect. If you need the money now or don’t want to be a lender, cash usually wins.
If you sell to us: We pay all closing costs (title, closing fee, notary and recording), and there is no commission. Texas has no transfer tax or deed stamps. Only a mortgage, liens or back taxes owed on the land come out of the sale proceeds, paid off by the title company at closing. We pay cash, so there is no note, no January statements and no foreclosure risk. Compare our written offer with your owner-finance numbers before you choose. How selling land in Texas works · Selling land by owner in Texas · Texas land closing costs.
Please note. General information, not legal advice. Laws change and every title is different, so confirm your situation with a Texas attorney or your county tax office before you act.
Who wrote this. Twin Sun Land Co. is a direct cash buyer of vacant and rural land in Oklahoma and Texas. We are one of the options on this page, so we have a stake in the answer. Our mission: Twin Sun Land Company exists to serve landowners: we make selling land simple, transparent, and fair, so every owner walks away with the most value their property can bring. The Texas rules here come from the Texas statutes linked in the sources.
Frequently asked questions
Is owner financing land legal in Texas?
Yes. You can deed the land and keep a lien through a note and deed of trust, or use a contract for deed, which has extra rules when the land is a residence.
Do the Texas contract-for-deed rules apply to vacant land?
Only if the buyer uses or will use it as a residence (or a relative’s). A lot of one acre or less is presumed residential (Property Code 5.062).
How long does a Texas seller have to record a contract for deed?
30 days after signing (Property Code 5.076). Missing it can cost up to $500 for each year of noncompliance.
Can a Texas seller cancel a contract for deed if the buyer stops paying?
Only on an unrecorded contract with under 40% of the amount due and under 48 monthly payments paid, after notice and a 30-day cure period. If it’s recorded or past either mark, the seller gives at least 60 days to cure and then uses a trustee sale (Property Code 5.064 to 5.066).
Can the buyer back out of a Texas contract for deed?
Yes. The buyer can cancel for any reason by the 14th day after the contract date, and the seller returns all payments within 10 days of getting the notice (Property Code 5.074).
Can I put land with a mortgage on a contract for deed in Texas?
Generally no, when the contract-for-deed rules apply. The land must stay free of liens and other encumbrances for the life of the contract, with one narrow exception for a loan used only to buy the land (Property Code 5.085).
Do I need a license to owner finance land in Texas?
An owner who makes no more than three residential mortgage loans in any 12 months to buyers of the owner’s own property is exempt (Finance Code 156.202, 180.003). Land where a home is planned counts as residential real estate.
How fast can a Texas seller foreclose on owner financed land?
A trustee sale needs at least 21 days’ notice and happens on the first Tuesday of a month at the courthouse; a residence also gets a 20-day cure notice first (Property Code 51.002). A contract for deed under the 60-day cure rule takes at least 81 days.
How is owner financed land taxed in Texas?
Federally, usually as an installment sale (IRS Publication 537); interest is ordinary income. Texas has no state income tax.
Sources
Texas rules come from the official text of the Texas Property Code and Finance Code, read November 4, 2026; federal rules from IRS Publication 537 and Regulation Z on the eCFR, checked October 2026. This is a text check, not legal advice. How to cite: Twin Sun Land Company team, “Owner Financing Land in Texas,” Twin Sun Land Co., November 2026.
- Contract-for-deed (executory contract) rules apply when the land is or will be the buyer’s or a relative’s residence; a lot of one acre or less is presumed residential; not if the deed is due within 180 days; written waiver for close relatives; lease with an option to buy: Property Code § 5.062
- County orders in certain counties, including a three-year conversion deadline: Property Code § 5.0622, Property Code § 5.087
- Default notice form; forfeiture only on an unrecorded contract where § 5.066 doesn’t apply; 30-day cure a contract can’t waive: Property Code § 5.063, Property Code § 5.064, Property Code § 5.065
- After 40% or 48 monthly payments, or once the contract is recorded: 60-day cure, then a trustee sale, not forfeiture; title warranty at the sale and excess proceeds to the buyer: Property Code § 5.066
- Documents in the language of the negotiations: Property Code § 5.068
- Survey, title documents, property condition notice, utility form, advertising rule, cancel and refund remedy: Property Code § 5.069
- Tax certificate, insurance evidence and financing terms before signing: Property Code § 5.070, Property Code § 5.071
- Written contract and final agreement statement; late fee cap, no prepayment penalty, waivers void: Property Code § 5.072, Property Code § 5.073
- Buyer’s 14-day right to cancel for any reason: Property Code § 5.074
- Seller must record the contract within 30 days: Property Code § 5.076
- Seller’s annual statement every January and the liquidated damages for missing it: Property Code § 5.077
- Recorded contract treated as a deed with a vendor’s lien; deed within 30 days of the final payment and damages for delay: Property Code § 5.079
- Buyer’s right to convert to a deed, and the balance statement due in 10 days: Property Code § 5.081, Property Code § 5.082
- Cancellation for improper platting and the buyer’s right to deduct: Property Code § 5.083, Property Code § 5.084
- Land must stay free of liens and other encumbrances, with one narrow exception: Property Code § 5.085
- Deed-of-trust foreclosure: first-Tuesday sale, 21-day notice, 20-day cure notice for a residence: Property Code § 51.002
- Mortgage licensing: license requirements, the three-loan owner exemption, and the definitions of residential real estate and residential mortgage loan: Finance Code § 156.201, Finance Code § 156.202, Finance Code § 180.002, Finance Code § 180.003, Finance Code § 180.051
- Installment sale reporting of the gain (federal, applies in every state): IRS Publication 537
- Regulation Z: dwelling definition, seller-financer exclusions, ability-to-repay scope: 12 CFR 1026.2 (eCFR), 12 CFR 1026.36 (eCFR), 12 CFR 1026.43 (eCFR)
More for Texas landowners
Last updated Nov 4, 2026. General information, not legal, tax or financial advice.
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