Selling options
How to structure an owner-financed land sale in Texas
A good owner-finance deal is mostly paperwork done right. These are the documents, terms and protections that keep you paid and keep the land safe.
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In this guide (20 sections)
- What documents make up an owner-financed sale?
- What terms must the note include?
- What protections belong in the deed of trust?
- How do you handle property taxes and insurance?
- Why does title matter so much?
- Do you need a servicer?
- Which legal rules might apply?
- What is a simple checklist before you sign?
- Who signs what, and when?
- What does the money look like on closing day?
- How should you screen the buyer?
- What does the note look like in a small example?
- What are your options for servicing the note?
- What should you do about insurance and improvements?
- How does the structure change by type of land?
- What documents should you gather before you list or accept an offer?
- What mistakes should you avoid?
- What does the calendar look like after closing?
- What do you ask a Texas attorney, a title company and a CPA?
- What if you decide a note is more than you want to carry?
An owner-financed sale is a loan wrapped in a land sale. Banks protect themselves with a stack of documents and checks, and you should too. This guide walks through each piece.
What documents make up an owner-financed sale?
Purchase contract
States price, down payment, closing date, contingencies and what the buyer gets.
Promissory note
The buyer's written promise to pay. It sets the amount, rate, payment dates, term, late fees and any balloon payment.
Deed of trust
The lien document. It lets a trustee sell the land if the buyer defaults, and it is recorded in the county records.
Warranty or special warranty deed
Transfers title to the buyer at closing.
Title commitment and policy
Shows ownership and liens, and insures the buyer and, with a lender policy, you.
Closing statement
Shows the money flow.
What terms must the note include?
A clear note covers the following.
- The principal amount and the interest rate.
- The payment amount, due date and how it is applied between interest and principal.
- The maturity date and any balloon payment.
- Late fees and a grace period.
- What counts as default.
- Whether the buyer can prepay.
- Whether the note can be assumed or must be paid when the buyer sells.
Ambiguity is the enemy. Every blank space is a place for a dispute.
What protections belong in the deed of trust?
Include covenants that the buyer will pay property taxes, keep the land free of other liens, carry insurance if there are improvements and not sell or transfer the land without paying you off. Add a due-on-sale clause. Add a right for you to inspect the land. Add a clause that allows you to pay taxes and add the cost to the balance if the buyer does not.
How do you handle property taxes and insurance?
Texas taxes are a first lien on the land, ahead of your lien. If the buyer does not pay them, the taxing units can foreclose and you could lose your security. Ask for proof of payment each year. Some sellers collect a monthly tax escrow. If there are buildings, require insurance that lists you as a mortgagee.
Why does title matter so much?
Order a title commitment before closing. It reveals other liens, easements and unpaid taxes. Close through a title company so the deed and deed of trust are recorded in the right order on the same day. An unrecorded lien can lose priority to a later lien.
Do you need a servicer?
If you want hands-off income, a loan servicing company collects payments, tracks taxes, sends year-end tax forms and handles late notices for a fee. If you service the note yourself, keep a payment ledger and send statements. Records are your best evidence if the buyer ever disputes the balance.
Which legal rules might apply?
Texas has special rules for some seller-financed transactions, especially those that involve a residence and contracts for deed under Chapter 5 of the Property Code. Federal rules can apply to residential seller financing too. Rules for raw land used for business or recreation are usually lighter, but the line depends on facts. Ask an attorney. We summarize the contract for deed rules in contract for deed vs deed of trust.
What is a simple checklist before you sign?
- Confirm you own the land free of unexpected liens.
- Get a written offer with price, down payment, rate and term.
- Screen the buyer for income, credit and a record of paying.
- Have an attorney prepare the note and deed of trust.
- Close at a title company and record the lien.
- Set up payment collection and tax tracking.
- Calendar your annual tax check and the balloon date.
See the owner financing pillar guide for the full comparison with a cash sale.
Who signs what, and when?
New sellers often lose track of which paper belongs to whom. This table shows the usual flow.
| Document | Who signs | What it does | Recorded? |
|---|---|---|---|
| Purchase contract | Seller and buyer | Sets price, terms and conditions to close | Usually not |
| Deed | Seller | Moves title to the buyer | Yes |
| Promissory note | Buyer | Creates the debt | Usually not |
| Deed of trust | Buyer | Gives you a lien on the land | Yes |
| Closing statement | Both | Shows every dollar in and out | No |
| Tax and insurance proof | Buyer provides | Shows taxes and coverage are current | No |
Notice that the note itself is typically not recorded. Keep the original in a safe place, and make sure your attorney or the title company tells you who holds it. If you ever sell the note, the buyer of the note will want the original.
What does the money look like on closing day?
The closing statement is the best way to see whether the deal works for you. Here is a hypothetical for a $100,000 sale with $20,000 down. Suppose you still owe $6,000 on an old loan against the land, there are $2,500 in back taxes and title and recording costs come to $1,300.
| Line | Amount |
|---|---|
| Down payment from buyer | $20,000 |
| Payoff of your old loan | minus $6,000 |
| Back taxes | minus $2,500 |
| Title, escrow and recording | minus $1,300 |
| Cash to you at closing | $10,200 |
| Note balance you hold | $80,000 |
The lesson is that the down payment must be big enough to clear everything ahead of you. If the old loan and taxes had been $17,000 instead, you would walk away with about $1,700 at closing and carry the entire note. If the liens exceed the down payment, either the buyer pays more up front or you bring cash to the table.
For more on paying off a loan at sale, see selling Texas land with a mortgage or lien.
How should you screen the buyer?
You are making a loan, so act like a lender. Ask for a written application and the following.
- Government identification that matches the name on the contract.
- Recent proof of income, such as pay stubs, tax returns or bank statements.
- A credit report, with the buyer’s written permission.
- The source of the down payment.
- A description of what the buyer plans to do with the land.
- References, including a prior landlord or lender if there is one.
Then look for patterns. A buyer who will not share documents, wants to move in before signing, pushes you to skip the title company or offers an unusually high price in exchange for no questions is giving you a reason to slow down. See Texas land scams and red flags for more.
What does the note look like in a small example?
Suppose the note is $80,000 at 9 percent for a ten-year schedule. The payment is about $1,013.41 a month. Here is how the first month splits.
- Interest for month one is $80,000 times 9 percent divided by 12, which is $600.
- Principal is $1,013.41 minus $600, which is $413.41.
- The balance after the first payment is about $79,586.59.
Early payments are mostly interest, and that is normal. Your ledger should show these splits for every payment so that the balance can be proved at any time. A buyer who asks for a payoff figure in year four should get an answer from your ledger within a day.
If you add a tax escrow of $150 a month (suppose annual taxes are $1,800), the buyer sends $1,163.41 each month. The $150 goes into a separate account to be paid to the tax office in the fall. If you do not use an escrow, you should ask for a copy of the paid tax receipt each year.
What are your options for servicing the note?
| Option | Who does the work | Good for | Watch for |
|---|---|---|---|
| Self-service | You | Sellers who like records and have one note | Late calls feel personal, and errors are yours |
| Loan servicing company | A third party for a fee | Sellers who want hands-off income | Fees, and ask who holds the escrow money |
| Title company or bank collection account | The institution | Sellers who want a neutral middleman | Not all offer this, so ask |
Whichever you choose, keep a ledger, send a yearly statement and keep copies of everything. If a dispute arises, the ledger is your proof.
What should you do about insurance and improvements?
On bare land, insurance is often less of an issue. If there is a house, barn, cabin or mobile home, the buyer should carry coverage that names you as a lienholder. That way, if there is a fire, the insurance money cannot be spent without paying you first.
Ask for proof of coverage at closing and a fresh certificate each year. A lapse is a default under the deed of trust, and your documents should say so.
If the buyer plans to build, ask for a plan. Construction can lead to contractors’ liens that compete with yours. Your deed of trust should forbid new liens without your consent, and you should check the county records once a year.
How does the structure change by type of land?
Raw acreage
The most common case for seller financing. Ask for a large down payment and require tax proof each year. Check access and any easements before you set a price.
Land with a residence
Special Texas and federal rules can apply, including disclosure rules and limits on contracts for deed. Hire an attorney before you offer terms. See contract for deed vs deed of trust.
Ag land
Settle who pays any rollback taxes if the use changes, and whether grazing or farm leases continue. See ag exemption and rollback taxes.
Inherited land
Your first job is to prove you have the right to sell. Heirs must usually all sign, and probate or an heirship process may come first. See selling land in probate and selling inherited land.
Land with minerals
Decide in writing whether minerals pass to the buyer. See selling or keeping mineral rights.
What documents should you gather before you list or accept an offer?
A prepared seller closes faster and makes fewer mistakes.
- Your deed and a copy of any earlier deeds in the chain.
- Tax statements for every tax account on the land.
- Payoff letters for any loan or lien.
- A survey, plat or a clear legal description.
- Any leases, easements, road agreements or HOA papers.
- For inherited land, a death certificate and any will, probate order or heirship affidavit.
- Your ID and, if the seller is an entity, its formation papers and signing authority.
If any of these are missing, ask the title company what substitutes it accepts. It is better to learn this before an offer than after.
What mistakes should you avoid?
- Using a form that does not fit Texas. Generic forms can omit required disclosures and Texas-specific clauses.
- Leaving the deed of trust unrecorded. An unrecorded lien can lose to a later one.
- Letting the buyer move on before closing. Possession without signed documents is how disputes begin.
- Forgetting the tax lien. Taxes outrank yours. A yearly check is cheap protection.
- No written record of payments. Keep a ledger.
- Agreeing to vague default language. Spell out notice and cure steps.
- Ignoring your own exit. Decide whether you might sell the note, and write the documents so a note buyer will accept them.
- Skipping professional review. A few hundred dollars of review is small beside a failed lien.
What does the calendar look like after closing?
Put these dates in a calendar on closing day.
| When | What to do |
|---|---|
| Every month | Record the payment in your ledger and confirm the split between interest and principal |
| After any late payment | Send the notice your documents require |
| Each fall | Confirm that property taxes were paid, or that escrow paid them |
| Each January | Send the buyer a year-end statement and prepare your own tax reporting |
| Each year | Check county records for new liens, and confirm that insurance is active |
| 90 days before maturity | Remind the buyer of a balloon and ask about refinance plans |
A short routine like this prevents most of the problems that make owner financing feel risky.
What do you ask a Texas attorney, a title company and a CPA?
Attorney.
- Which structure fits this land and this buyer?
- What disclosures must I give?
- What do the notice and cure steps look like?
Title company.
- What liens or taxes will you pay at closing?
- Can you hold escrow and record documents in order?
- Will you issue a lender’s policy for me?
CPA.
- How will I report the sale and the interest? See installment sale tax on owner-financed land.
- How will the down payment affect my taxes this year?
What if you decide a note is more than you want to carry?
Many sellers start by exploring owner financing and then realize they prefer a clean exit. That is a fair conclusion. Compare the two paths in owner financing vs a cash offer and work through your terms in down payment and interest rate on owner-financed land. We are a direct buyer of Texas land. We buy for cash, and we can also buy on owner-financed or other creative terms when a deal calls for it. If a cash sale is closer to what you need, see how it works or contact us.
Cash is simple. Some land needs more than that.
We buy for cash when that works. When a deal needs it, we get creative: owner-financed purchases, notes, partnerships and development.
Cash offer
A written offer within 24 hours. Closing typically takes 7 to 30 days, or on the date you choose. No commissions or fees.
Owner financing and notes
Want a down payment and payments over time? We can buy your land on owner-financed terms, and we can talk about buying an owner-financed note you hold.
Partnerships and entitlement
Land with development potential? We partner with landowners, buy entitled land and take properties through entitlement.
There is no one-size-fits-all land deal. Each one can have its own lenders, financials and offers, so contact us for details.
Tell us how you want to be paid How owner financing works → Investor? Register for deals →
Common questions
Do I need a lawyer for an owner-financed land sale?
You should use one or a title company that prepares Texas documents. Mistakes are expensive to fix later.
What is a promissory note?
It is the buyer's written promise to repay a stated amount on stated terms.
What is a deed of trust?
It is a recorded lien that lets a trustee sell the land to pay the note if the buyer defaults.
Do I need title insurance?
The buyer will want an owner's policy. You can ask for a lender's policy too.
Who pays property taxes?
The buyer should, and the documents should say so. Check each year that they did.
Can the buyer sell the land before paying me off?
Only if the documents allow it. A due-on-sale clause usually requires payoff.
Can I sell the note later?
Often yes, at a discount, to a note buyer. Well-documented notes sell better.
What is a balloon payment?
It is a large payment due at the end of a shorter term, after smaller payments that did not fully repay the balance.
Who holds the original promissory note?
Usually you do, as the lender. Keep it in a safe place and ask your attorney or title company to confirm who has it.
Should I require a tax escrow?
Many sellers do, or they require proof of payment each year. Either way, the documents should say who pays the taxes and what happens if they are missed.
What if the buyer wants to build on the land?
Ask for a plan and a way to pay for it. Construction can bring contractors' liens, so your deed of trust should forbid new liens without your consent.
Can a title company handle the closing for an owner-financed sale?
Yes, many do. Ask that the deed and deed of trust be recorded in the right order on the same day.
What if I inherited the land?
You must usually prove who owns it before you can finance a sale. See our guide on selling inherited land and ask an attorney about probate or an heirship process.
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