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Understanding Property Seller Financing in Texas

Seller financing is an option to consider if you want to attract more potential buyers and sell a commercial property quickly. This is a valuable tool in slow-moving real estate markets where it is difficult for young companies to qualify for conventional loans. There are benefits, but there are also tradeoffs because the process is not without risks. If you decide to offer or accept seller financing, you must understand every Sugar Land real estate law for seller financing and be certain the agreement protects you fully.

What Is Seller Financing?

If businesses or property owners offer seller financing, it means that they have assumed the role of the lender. The seller determines the interest rate and possibly the length of the loan. Once both parties agree on the particulars, the buyer and seller execute formal mortgage documents, including the promissory note and terms. According to Katy real estate law, a deed of trust, which is a record of the mortgage, must be filed with the county clerk or recorder in your area. As long as you follow all state and federal laws, you can choose from a number of different owner financing options. Here are the most common arrangements.

Seller Financing Options

  • Balloon loans with a term of five to 10 years are frequently recommended for seller financing. The idea is that after several years, the buyer should have enough equity and credit to refinance with a bank before the balloon payment is due.
  • With an all-inclusive mortgage, the seller finances the full balance minus the down payment and retains control over the promissory note.
  • If the buyer qualifies for partial bank financing, the seller can finance a junior mortgage on the balance. You will receive cash from the lender after closing. Be aware that you are accepting a lower repayment priority than the bank.
  • Usually, sellers that offer financing have already paid off their loans. If the property is mortgaged, a buyer could assume responsibility and make all future payments.
  • Since the housing bubble burst, Texas has frowned upon executory contracts, such as leases with a purchase option and land contracts. These options are risky, and they are governed by strict consumer-protection laws.

Before you agree to financing, consult an attorney to protect yourself and your interests in the property. Call The Law Office of Henry Jakob at 713.640.5700 to learn more about seller financing. Our attorneys focus on real estate law, Katy estate planning and commercial litigation.