HB 2207, passed into law in June and effective 01/01/2008. It requires a disclosure to be sent to both the lien holder and the buyer if a Texas residential property is sold (to someone other than an investor) and an existing lien is to remain on the property that will not be paid off in 30 days.
The good news is that if title insurance is purchased for (or by) the buyer, then the notice requirements do not apply. The statutory remedy appears to be that the buyer may get out of the contract. Other issues are not so clear.
What this really means is that in Texas the title insurance lobby and the institutional lender’s lobby is stronger than the residential real estate investor’s lobby.
So, what does this translate to?
Bottom line: In Texas, you can buy subject to the mortgage or with seller financing that wraps the underlying loan. But the only thing you can do with the property is keep it as a rental unless you want to notify the lender that you bought the house.
If you want to sell the house with owner financing, then you need to notify the lender that you have bought subject to the loan – and that notification could (1) get lost and never noticed, or (2) cause the lender to call the loan due…. UNLESS you buy title insurance, then you don’t have to give the disclosures. ( seems like the logical solution even though it increases your cost by about 2% of the purchase price)
Read the law for all the details!
There are other stipulations like… a 7 day waiting period for all purchases where the loan stays in place, etc