Real estate and landlord-tenant
Texas Contract for Deed: How an Executory Contract Works, Buyer Protections, and What Happens on Default
How a Texas contract for deed works: seller disclosures, 30-day recording, the 40 percent or 48-payment rule, 30 and 60-day cure periods, and converting to a deed.
Counselado · August 2, 2026 · Texas · Updated October 1, 2026
A Texas contract for deed is an executory contract: the buyer makes payments directly to the seller, usually lives in the home, and the seller keeps legal title until the contract is paid off or converted. For residential property, Texas Property Code chapter 5 (opens in a new tab) requires written disclosures, recording, annual accounting statements and specific default notices. Your protections after a missed payment depend on whether the contract was recorded and whether you have paid 40 percent of the amount due or the equivalent of 48 monthly payments. Once either is true, the seller generally must use a foreclosure-sale procedure instead of simple forfeiture. Federal Truth in Lending rules (opens in a new tab) may also apply.
Key takeaways
- The seller keeps legal title during a Texas contract for deed, but a recorded contract is treated as a deed with a vendor's lien.
- The seller must record the contract in the county real property records within 30 days after it is signed.
- After a default, the buyer gets at least 30 days to cure, or at least 60 days if the contract is recorded or the 40 percent or 48-payment threshold is met.
- You can convert the contract into a deed and deed of trust at any time without penalties or charges.
- You can cancel without cause by the 14th day after the contract date.
- The seller must send an annual accounting statement every January.
What a Texas contract for deed is
The Property Code calls this arrangement an "executory contract for conveyance." "Contract for deed" is the everyday name, and people also call it seller financing, a land contract, an installment land contract or rent-to-own. In each case, you pay the seller over time and receive recorded legal title after payoff or conversion, as TexasLawHelp explains (opens in a new tab).
The buyer protections in Subchapter D apply to a contract for real property used, or intended to be used, as the buyer's home or the home of a relative within the second degree (§ 5.062 (opens in a new tab)). A lot of one acre or less is presumed residential. A residential lease combined with an option to buy is treated as an executory contract, with special rules for some lease-options of three years or less.
Exempt sales include state land, Veterans' Land Board and other public-entity sales, and contracts requiring the deed within 180 days after final signing.
Who holds title, and what the buyer receives
During the contract, the seller generally keeps legal title and the buyer has possession. Recording changes that in an important way. Under § 5.079 (opens in a new tab), a recorded executory contract is treated as a deed with a vendor's lien. The lien secures the unpaid price, and the seller enforces it through a foreclosure sale or judicial foreclosure. A general warranty of title is implied unless the recorded contract limits it.
If the contract was never recorded or converted, the seller must transfer recorded legal title within 30 days after receiving your final payment. Whether a particular buyer has built equity depends on the contract, the county records and the payment history; a Texas real estate attorney can review them.
What the seller must give you before you sign
Under §§ 5.068 through 5.072 (opens in a new tab), the seller must provide:
- A survey completed within the past year, or a current survey plat.
- Legible copies of documents showing liens, claims, restrictive covenants and easements that affect title.
- A signed property-condition notice attached to the contract, stating whether the property is in a recorded subdivision, has drinkable water, sewer service, approved septic service and electric service, and whether it is outside a floodplain (§ 5.069 (opens in a new tab)).
- A tax certificate from each taxing unit that collects taxes on the property, and a copy of the insurance information showing the insurer, the insured, the property and the coverage amount (§ 5.070 (opens in a new tab)).
- A financing statement listing the purchase price, interest rate, total or estimated interest, total principal and interest, the late charge, and a statement that there is no prepayment penalty (§ 5.071 (opens in a new tab)).
- A written, signed contract stating that it is the final agreement; earlier oral promises do not change it (§ 5.072 (opens in a new tab)).
If the negotiations were mainly in a language other than English, such as Spanish, the seller must give you the contract, the disclosure notices, the annual statements and any default notice in that language (§ 5.068 (opens in a new tab)). TexasLawHelp publishes the same topic in Spanish as Contrato por escritura (opens in a new tab).
You also have a short window to change your mind. Under § 5.074 (opens in a new tab), you may cancel without cause by giving notice by the 14th day after the contract date, and the seller must refund your money within 10 days after receiving the notice.
Recording and the annual statement
The seller must record the contract, with the § 5.069 (opens in a new tab) disclosure attached, on or before the 30th day after it is signed (§ 5.076 (opens in a new tab)). Recording happens in the real property records of the county where the property sits. If the contract ends, the seller must also record the document that ends it. The county clerk charges a filing fee that varies by county and document, so confirm the current amount with that clerk's office.
Failing to record does not automatically void the contract, but it makes the seller liable to the buyer, up to $500 for each calendar year of noncompliance. Recording also has a practical effect for you: it triggers the stronger default protections in § 5.066 (opens in a new tab) no matter how much you have paid. You can check whether your contract was recorded by searching the county clerk's real property records.
Every January, the seller must send an annual accounting statement, postmarked by January 31 if it is mailed (§ 5.077 (opens in a new tab)). It must show the amount paid, the remaining balance, the number of payments left, taxes and insurance the seller paid or collected, insurance money applied to property damage, and current insurance documents if coverage changed.
Who pays taxes, insurance, repairs and utilities
The contract should say who pays for repairs and ordinary costs. The Property Code adds these rules:
- If the property is damaged, insurance proceeds are issued jointly to the buyer and seller, and both must use them to repair, remedy or improve the property (§ 5.078 (opens in a new tab)).
- Once the contract is recorded, the seller is not required to keep insuring the property (§ 5.070(d) (opens in a new tab)).
- A lien for the reasonable value of improvements made to bring utility service to the property is not a default under the contract (§ 5.067 (opens in a new tab)).
- The seller must own the property in fee simple, free of liens and encumbrances, before signing and generally throughout the contract (§ 5.085 (opens in a new tab)). Exceptions include liens the buyer caused, improvement loans the buyer agreed to, and certain seller purchase loans disclosed at least three days before signing.
An inspection, a title search and an insurance review go further than the disclosures. The county clerk, the appraisal district, the utility provider and a title professional can confirm floodplain status, platting, utilities and liens for a specific property.
What happens after a missed payment
A default under § 5.061 (opens in a new tab) means a late payment or a failure to follow a term of the contract. Before the seller can act on it, § 5.063 (opens in a new tab) requires a written notice sent by registered or certified mail, return receipt requested, printed conspicuously in 14-point boldface or uppercase type. The notice must include the statutory warning language, the remedy the seller intends to use, the delinquent principal and interest, any other charges claimed, the period the delinquency covers, and any contract term you violated along with what you must do to fix it.
How long you have to cure depends on where your contract stands:
- Unrecorded contract, under the threshold: 30 days after notice (§ 5.065 (opens in a new tab)). If the default is not cured, the seller may rescind the contract or enforce forfeiture and acceleration, but only after complying with §§ 5.063 and 5.064 (opens in a new tab).
- Recorded contract, or 40 percent or 48 monthly payments paid: at least 60 days after notice (§ 5.066 (opens in a new tab)). The notice carries a public-auction warning instead.
Under § 5.066 (opens in a new tab), if the default is not cured, a trustee posts, files and serves a notice of sale and conducts the sale under Property Code § 51.002 (opens in a new tab), the same procedure used for deed-of-trust foreclosures. The seller must convey fee-simple title, free of encumbrances, to the buyer at the sale. Whether the occupant can then be removed is a separate court question; our guide to the Texas eviction process explains how that case works.
Hover or tap a row to highlight it.
| Rule | Figure | Source |
|---|---|---|
| Seller records the contract | On or before the 30th day after signing | § 5.076 (opens in a new tab) |
| Annual statement | Every January; postmarked by January 31 if mailed | § 5.077 (opens in a new tab) |
| Cure period, unrecorded contract under the threshold | 30 days after notice | § 5.065 (opens in a new tab) |
| Cure period, recorded contract or threshold met | At least 60 days after notice | § 5.066 (opens in a new tab) |
| Cancellation without cause | Notice by the 14th day after the contract date; refund within 10 days | § 5.074 (opens in a new tab) |
| Extra late charge | Lesser of 8 percent of the monthly payment or the actual administrative cost | § 5.073 (opens in a new tab) |
Converting the contract into a deed and deed of trust
You do not have to wait until the last payment to hold title. Under § 5.081 (opens in a new tab), a buyer may convert their interest into recorded legal title at any time, without penalties or charges, in one of two ways: pay the remaining balance, or deliver a promissory note for the balance with the same interest rate, due dates and late fees as the contract. The seller then signs a deed, and you sign a deed of trust securing the note. The seller must respond within 10 days after receiving a substantially compliant note, either with a written legal explanation for refusing or by arranging to sign the documents.
Before converting, you can ask the seller in writing for the current balance and, if applicable, the name and address of the trustee the seller prefers. The seller must answer within 10 days (§ 5.082 (opens in a new tab)), and the statute provides further steps if the seller does not.
How converting a Texas contract for deed works
- Ask for the balanceSend the seller a written request for the current balance and, if applicable, the preferred trustee; the seller must answer within 10 days.
- Choose how to convertPay the remaining balance, or prepare a promissory note with the contract's interest rate, due dates and late fees.
- Deliver the noteThe seller must respond within 10 days after receiving a substantially compliant note, with a written legal explanation or by arranging the signing.
- Sign the documentsThe seller signs a deed, and you sign a deed of trust securing the note.
- Hold recorded titleYou hold recorded legal title, without penalties or charges for converting.
The Texas Department of Housing and Community Affairs (TDHCA) (opens in a new tab) runs a Contract for Deed Program that funds organizations helping eligible lower-income colonia residents convert contracts into traditional mortgages. Its conversion forms library (opens in a new tab) includes Spanish versions of several program forms.
How a contract for deed differs from a mortgage
The biggest difference is when title moves. In a traditional seller-financed sale, the buyer receives title at closing and signs a promissory note secured by a deed of trust or vendor's lien. In a contract for deed, the seller generally keeps title until payoff or conversion. TexasLawHelp describes the contract for deed as carrying more risk for the buyer than a warranty deed with a vendor's lien, because title and equity are treated differently before conversion or payoff.
Other deeds work differently too. A quitclaim deed transfers whatever interest the signer has without warranties, and a Texas transfer-on-death deed is an estate-planning tool, not a way to finance a purchase.
Hover or tap a row to highlight it.
| Question | Contract for deed | Traditional seller-financed sale |
|---|---|---|
| When does the buyer get title? | Generally at payoff or conversion | At closing |
| What secures the debt? | A recorded contract is treated as a deed with a vendor's lien | A promissory note secured by a deed of trust or vendor's lien |
| What happens after a default? | Notice and a 30-day cure, or a 60-day cure and a foreclosure sale once recorded or past the threshold | Foreclosure under Property Code section 51.002 and the deed of trust |
Federal lending rules and seller licensing
The Consumer Financial Protection Bureau's advisory opinion (opens in a new tab) states that a consumer contract-for-deed sale will generally qualify as credit under the Truth in Lending Act and Regulation Z, and that transactions secured by the buyer's home generally receive residential mortgage protections.
Texas licensing rules may apply as well. The Texas Department of Savings and Mortgage Lending (opens in a new tab) says a residential mortgage loan originator generally must be licensed to take a residential mortgage application or offer or negotiate loan terms, subject to exemptions. You can look up an originator or company through NMLS Consumer Access, and a Texas attorney can tell you whether an exemption applies to a particular seller.
Remedies if the seller does not follow the rules
The Property Code gives buyers several remedies (§§ 5.070 through 5.085 (opens in a new tab)):
- Cancellation and a full refund if the seller did not provide the required tax and insurance information (§ 5.070 (opens in a new tab)) or the written final-agreement statement (§ 5.072 (opens in a new tab)).
- Damages of up to $500 for each calendar year the contract went unrecorded (§ 5.076 (opens in a new tab)).
- For a missing annual statement, $100 per statement for a seller in fewer than two such transactions, or $250 per day after January 31 for a seller in two or more, capped by the property's fair market value (§ 5.077 (opens in a new tab)).
- For a late title transfer after final payment, $250 per day from day 31 through day 90, then $500 per day, plus reasonable attorney's fees (§ 5.079 (opens in a new tab)).
- Liability for failing to respond to a conversion request (§ 5.081 (opens in a new tab)).
- Cancellation if the property was not properly platted, subject to the seller's chance to plat or subdivide it (§ 5.083 (opens in a new tab)).
- The right to deduct amounts the seller owes you from amounts you owe under the contract (§ 5.084 (opens in a new tab)).
Some violations are also treated as false, misleading or deceptive acts under the Texas Deceptive Trade Practices Act. For general breach terms outside these special rules, our guide to what a breach of contract is covers the basics.
Where to get help
TexasLawHelp (opens in a new tab) offers foreclosure resources and legal-aid screening for qualifying low-income Texans. The county clerk can search the real property records and confirm recording fees. TDHCA can point you to a current conversion-program provider in your county. The Texas Department of Insurance's legal-help page (opens in a new tab) lists the State Bar of Texas lawyer referral service along with TexasLawHelp.
Keep the contract, disclosures, recorded copy, annual statements, payment receipts and any default notice with its proof of delivery together in one file.
Check what you know
Frequently asked questions
These questions often come up once a contract is signed.
Does recording alone give me foreclosure protection?
Yes. Section 5.066 (opens in a new tab) applies when the contract has been recorded, regardless of how much you have paid. The 40 percent or 48-payment threshold is a second, independent trigger.
Are the protections the same if I am buying from a relative?
Not always. When the buyer is related to the seller within the second degree, the default-sale protections in § 5.066 (opens in a new tab) and the disclosure, recording and statement rules in §§ 5.068 through 5.080 (opens in a new tab) may be waived in writing. Read the contract for any signed waiver before relying on those protections.
Who should I contact first if I receive a default notice?
Check the notice against the requirements in § 5.063 (opens in a new tab), note the cure deadline, and contact a Texas real estate attorney or a legal-aid provider before the deadline passes. Keep the envelope and return receipt with the notice.
Next step
If you want a lawyer to review a contract for deed, a default notice or a conversion request, you can find Texas real estate law firms in the Counselado directory. The statutes and figures cited are current as of October 1, 2026.
Terms in this guide
Tap a term to see what it means.
Executory contract for conveyance. The Texas Property Code's name for a contract for deed, in which the buyer pays the seller over time and receives title later.
Legal title. Recorded ownership of the property; in a Texas contract for deed the seller generally keeps it until payoff or conversion.
Vendor's lien. A lien that secures the unpaid purchase price; in Texas a recorded executory contract is treated as a deed with a vendor's lien.
Deed of trust. A document the buyer signs to secure a promissory note with the property; it is used when a Texas contract for deed is converted.
Forfeiture. Ending the contract and keeping what the buyer paid; in Texas it is limited to unrecorded contracts below the 40 percent or 48-payment threshold, after the required notices.
Cure period. The time after a default notice to fix the default; in Texas, 30 days or at least 60 days depending on the contract.
Conversion. Turning the contract into recorded legal title by paying the balance or delivering a promissory note and signing a deed of trust.
Annual accounting statement. The yearly statement a Texas seller must send each January showing payments, the balance and taxes and insurance.
This guide gives general legal information, not legal advice for your situation. Laws change and differ by state; a lawyer licensed in your state can tell you how they apply to you.