A real estate transaction is a complicated process. In addition, every buyer and seller comes from a certain background. People from all walks of life buy and sell property. There are many options out there to cater to different financial situations. This can sometimes be beneficial, and sometimes troublesome, if done incorrectly.
To avoid legal issues down the road, it’s important to read up on the basics of different types of transactions, such as:
1. Seller financing
Seller financing takes out the middleman in a real estate transaction. The person selling the property can lend the buyer money for the purchase. This is helpful in situations where the buyer is struggling to get an adequate mortgage.
Sometimes sellers and buyers can benefit from this financing tool. Closing costs are lower, payments are flexible and the process goes faster.
Seller financing arrangements are intended to be short-term. However, buyers can get burned if they are unable to refinance before the quoted deadline. Overall, this route can be risky.
2. Contract for deed
A contract for deed is essentially a financing tool. Texas homeowners can use this to help sell their property. This process, however, is not always a simple transaction. Significant risk is involved for both parties.
In Texas, the seller and the buyer need to document and record the transaction. The contract of deed specifies the obligations and responsibilities of each party. The seller needs to bring the signed contract to the county clerk’s office and record the contract.
While you can purchase a standard form, it’s wise to work with a lawyer to create your own contract. Real estate laws in Texas are complex, and this type of document needs to be prepared and recorded properly.
3. Lease with purchase option
In summary, a lease option is one agreement - or a few – that involves leasing property without the obligation to buy it. The party who is renting still has a right to purchase the property, but is not confined by a set price or timeframe.
Lease with purchase options also fall into the category of financing tools. For consumers, however, vigorous regulations and statutory penalties make these options extremely hard to do alone. Texas Property Code governs all lease options. It’s important you comply with the laws. Seller financing, contract for deeds and lease options can be profitable if done legally, which is why it’s important to have a real estate lawyer by your side.