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I found this information in regard to Texas ‘Contract For Deeds’, as supplied by the Texas Attorney General’s Office ( https://www.texasattorneygeneral.gov/cpd/home-buying )
“Contracts for Deed” – Contracts for deed, sometimes referred to as “rent to own” financing arrangements, are legal in Texas. The important difference between a contract for deed and a conventional purchase contract is that under the contract for deed the buyer generally does not gain immediate equity in the property as he or she makes payments. Equity is the difference between the value of the home and the amount still owed. Under a contract for deed, the buyer only has an equity interest after they have paid 40% of the loan or more, or have made 48 monthly payments.”
I’m particularly confused about the last sentence. It seems to indicate that if there was a property worth $100,000 and I was able to negotiate a $60,000 contract for deed/seller financing price (which would give me an immediate $40,000 equity position), that I wouldn’t have an equitable interest until the loan was paid down to $36,000 (60% of $60,000) or made 48 payments? That makes absolutely no sense!
A contract for deed could be done when you are buying but why in the world would you want to do that – you have basically no rights until you have owned the home 4 years. It would be very difficult to sell a property that you bought with a contract for deed – title companies don’t want to touch them.
It would be much better to buy with seller financing. A contract for deed purchase could never be used with a wrap
A contract for deed was reclassified as an executory contract in Texas about 20 years ago. You would never want to SELL a property with a contract for deed because the rules are so strict. Some examples, you can never make the down payment or option non-refundable. Under certain circumstances, you could be forced to give back ALL payments made to you, including the down payment, under a Contract for Deed. You have to give the buyer the deed within 6 months. You have to provide annual accounting – failure to do so results in a $250 per DAY fine, etc etc etc.
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