Texas Wraps: Contract for Deeds and Subject - to's

General Real Estate Investing
1

Anyone in Texas doing any wraps lately?

I’ve been interviewing some title companies that are saying that “contract for deeds are illegal in TX b/c of legislation passed a few years ago”.

I am believing that they are just misinformed, but just wanted to see if yall had experience with these type of transactions.

So, anyone done any contract for deeds or subject - to wraps in the past 1-2 years?

2

It is not illegal just not practical. The contract for deed is an Executory contract (contract for something in the future). These contracts in Texas must follow several complicated actions such as, current survey the permission of the lender restrictive covenants financial disclosure and other information. If the buyer determines that all the requirements have not been met they can take the seller to court. If they win they will be awarded all the payments they have made including down payment and treble legal fees. In other words if you get an unscrupulous buyer he can live I our house for 2 years and then sue you and get all their money back.

3

Wow…

Not a good deal.

Should I just stick with subject to’s in TX?

Also, I’m assuming lease options fall under the same executory contract too?

So would the only way around that be to sign a lease and then sign a separate option purchase contract?

Thanks for the response by the way!

4

What I have done is to deed the house into a trust. Then we do the option for the tenant to buy the trust (and all the things that the trust owns) after the elements were completed. Since a trust is personnel property not real property it doesn’t fall under the requirements of an executor contract. I don’t really have high hopes that this is a perfect solution but I have done it 6 or 7 times and since the tenant never converts anyway I just get the house back.

5

Ah I see!

So I’m a new wholesaler. I was wanting to flip owner financed properties (since starting out I am not doing any landlording or portfolio building, just wholesaling). Would that same strategy work with wholesaling owner financed houses?

I’m assuming there’s a way to do it (I always see the experienced investors say that if you want it bad enough, you’ll find a way to make it work), just not sure exactly how…

6

If you owner finance and don’t deliver title within 180 days, then Title 2 Chapter 5 applies to you, since you are actually doing a contract for deed.
If you want to do lease options, then there are SOME items in Title 2 Chapter 5 that apply to you, such as disclosing the lienholder’s info etc.

7

So can you wholesale lease options?

8

Assign them? Yes.

9

As the prior post highlights the simple answer is yes.

More important is the general principal. To wholesale RE means to take a legal contract that you own and to sell it on. That might be done by assigning your rights so the buyer of the assignment steps into your shoes. You are not earning a commission or anything like a fee. You are hunting down a deal, getting it under contract and then selling the contract you created with the seller. You are selling your real property (the right to buy).

10

That’s a fantastic solution for about anywhere as far as I can tell…!

Great post!

11

Thanks for the advice! I appreciate it!