A tax bill showed up in a seller’s mailbox almost three years after he thought he was done with the house. He’d sold it on a land contract and kept legal title in his own name. He never once sat down with his buyer to settle who’d pay the county’s annual bill. Tax penalties and interest got added every year after that. Meanwhile, the buyer had assumed the monthly payments covered everything.
That one gap in a handwritten agreement cost both of them real money. Owner financing can be a good tool in Texas, and it’s also one of the most heavily regulated ways to sell a house in this state. Property taxes on a land contract sit right in the middle of it.
How Does a Land Contract Work in Texas?
A widow out in Lufkin called me about her late husband’s rental, a 1970s brick ranch she had no interest in managing. Her neighbor’s nephew wanted it. He couldn’t get a bank loan, so she started asking about owner financing.
That’s the usual path into a land contract, which you’ll also hear called a contract for deed. The buyer moves in and starts making payments. Legal title stays with the seller until the balance is paid off. Texas law calls this an executory contract, and Subchapter D of Chapter 5 of the Property Code controls almost every move the seller makes.
Those rules kick in when the arrangement runs long and the buyer lives there. According to TexasLawHelp, the land contract has to stretch past 180 days, and the buyer must use the place mainly as a residence. Close relatives get a narrow carve out. A parent, child, grandparent, grandchild, or sibling can waive many of the protections, but only in writing. A seller who hands over the deed within that 180-day window stays outside the subchapter entirely.
Before the buyer signs, you owe a stack of disclosures. The list starts with a survey completed within the past year (or a current plat), copies of anything encumbering title, and a written statement of the purchase price and interest rate. It also covers the total interest and principal to be paid, plus any late charge. The land contract then has to go into the county real property records within 30 days of signing. Once recorded, a contract for deed is treated the same as a deed with a vendor’s lien, and in my experience buying from these sellers, that changes how a default plays out later.
Softer resale conditions keep pushing sellers toward this setup. Texas homes sold for a median of $333,611 in August 2026, down 1.3 percent from a year earlier, per Redfin’s state data. They sat a median of 68 days before selling. When a listing lingers, seller financing starts to look like a way to reach buyers the banks won’t touch.
Is the Buyer Considered a Tenant Under a Texas Land Contract?
Picture a seller who treats his contract buyer like a renter. He serves a three-day notice to vacate after two late payments. The justice of the peace tosses the case, and he could end up paying the buyer’s attorney.
Your buyer isn’t a tenant. Once the agreement is signed, the buyer holds an equitable interest in the property, which a renter never has. Each payment builds toward ownership instead of buying another month of rent. Texas courts take that difference seriously.
A while back I bought a house in Mesquite from the adult children of an elderly homeowner. He’d been collecting payments on it for a long time. They were done chasing money and done with Saturday calls about the water heater. None of them wanted to be landlords. Their dad’s fishing rods still hung from the rafters when we walked the garage. If your family’s holding vacant land there too, here’s how to sell your land fast in Mesquite, TX.
That family fit a pattern I keep seeing. People set these arrangements up expecting the ease of a rental, and they get a lender’s paperwork instead. On a land contract, the seller is the lender. That means annual accounting, property tax tracking, default notices, and a servicing duty that lasts until the final payment clears.
Each side carries risk, just in a different direction. A buyer can pay for years and then learn the seller never recorded anything, or quietly let an underlying mortgage go delinquent. For the seller, it’s a technical slip that lets the buyer rescind the whole contract and demand every dollar back.
Who Pays Property Taxes on a Land Contract in Texas?
Start with the size of the bill. The median listing price in the Austin-Round Rock market was $450,000 in August 2026, according to FRED’s listing data. Property taxes on a house at that price add up to a serious yearly bill, and nobody wants it landing on them by surprise.
Your land contract decides who pays, because the Property Code doesn’t assign property taxes to either side. In my experience, most well-drafted contracts for deed put them on the buyer. The buyer lives there and gets the use of the place, so the cost follows. Either the buyer pays the county tax office directly, or the buyer sends a monthly escrow payment to the seller, who pays the bill. Whoever the contract names, the bill has to get paid on time.
If I were the seller, I’d push for escrow. Direct pay sounds cleaner until the buyer runs short and the tax bill doesn’t get paid. From there, the county adds penalties and interest to a tax lien that sits ahead of your interest in the property.
Texas law backs the tax question with paperwork on both ends. Under Section 5.070, the seller must hand the buyer a tax certificate from the collector for every taxing unit on the property before signing. The seller also owes a legible copy of any insurance policy or binder. It has to show the insurer, the insured, the property, and the coverage amount. Skipping either one counts as a deceptive trade practice, and the buyer can cancel the agreement and get a full refund of every payment.
Then there’s the January duty. Section 5.077 requires an annual statement each January showing the amount paid, the balance left, and the number of payments remaining. If the seller collected money for taxes or insurance, the statement lists what went to taxing authorities and insurers on the buyer’s behalf. A mailed statement must be postmarked by January 31. Miss it and you owe the buyer’s reasonable attorney’s fees plus liquidated damages. That’s $100 per missed statement for a seller with fewer than two of these transactions a year, and $250 a day for a seller doing more.
Ask your county appraisal district one more question: who gets to claim the homestead exemption. The district looks at occupancy and ownership interest, and it makes that call on the facts of your situation. In the November 2025 election, Texas voters raised the school district residence homestead exemption to $140,000. They also raised the extra exemption for owners 65 or older or disabled to $60,000, per the Texas Comptroller. The application is Form 50-114, filed with the appraisal district. Get the claim wrong and somebody leaves money on the table.
What Closing Costs Apply When Selling a House on a Texas Land Contract?
“There’s no bank, so there shouldn’t be any closing costs.” I hear that a lot, and it’s about half right. No lender means no origination fee, no required appraisal, and no underwriting. Your other costs don’t vanish. They just move around.
Survey first. That recent survey or plat isn’t optional under the disclosure rules. If the last one was done when the house was built, you’re paying a surveyor. Tax certificates come from each collector, and county tax offices charge a small fee to issue them.
Recording is the step I see sellers skip most, usually to dodge the foreclosure rules that come with a recorded instrument. Don’t skip it. The county clerk charges a filing fee, and the clerk’s office can tell you the current amount over the phone. A seller who skips this step can owe the buyer damages of up to $500 for each calendar year of noncompliance.
Legal drafting is where I’d spend real money. These contracts need mandatory notice language in 14-point type, disclosures handed over before signing, and no prepayment penalty. A Texas real estate attorney who drafts them regularly will charge a fee. In my own transactions, that fee looked big next to a form off the internet and small next to a rescission lawsuit.
Title work, insurance, and prorated taxes round out the list. Some sellers also pay a third-party loan servicer to collect payments, hold escrow, and produce the January statement. It costs a monthly fee, and it heads off a lot of arguments.
Compare all that to a conventional sale, where agent commissions are often the biggest single cost. Owner financing trades a commission check for a long stretch of paperwork. Some sellers want the monthly income and the interest. Others just want out. I’ve never seen a seller regret the clean exit when their real goal was to stop thinking about the property. If that sounds like you, here’s how We Buy Land Quick works with property owners.
What Happens If a Buyer Defaults on a Texas Land Contract?
Plenty of land contracts say the buyer forfeits all payments and the seller takes the place back. I see that clause in a lot of the contracts for deed I read. Once the contract is recorded, it can’t be enforced.
Section 5.064 allows rescission, or forfeiture and acceleration, only when four things line up. First, the seller sent notice of intent to enforce the remedy and of the buyer’s right to cure. The buyer didn’t cure within 30 days. The equity protection rule doesn’t apply. And nothing has been recorded.
Under Section 5.065, that cure window runs from the date of notice. The statute applies no matter what the contract says, so a clause waiving it is just ink.
The real problem sits in Section 5.066. Forfeiture is off the table once the buyer has paid 40 percent or more of the amount due, or the equal of 48 monthly payments. It’s also gone if the agreement was recorded, no matter how little was paid. The seller instead gets the power to sell the buyer’s interest through a trustee. That route requires at least 60 days to cure after notice. The trustee then posts, files, and serves a notice of sale under the foreclosure statute and runs the sale the same way.
Notice content matters as much as timing. Default notices must be in writing and sent by registered or certified mail, return receipt requested. They have to be printed in 14-point boldface or uppercase type, with the statute’s warning language on a separate page. A payment default also needs the delinquent amount itemized into principal and interest.
Sellers who improvise these notices tend to lose. A defective notice usually means starting the clock over.
How Do You Evict a Buyer From a House Sold on a Texas Land Contract?
Sitting at a kitchen table in Garland a few years ago, I told a seller the thing that hit him hardest. He couldn’t evict his way out of this one. The buyer’s payments had stopped eight months earlier, and he’d been sure a quick trip to the JP court would fix it. Owners there who’d rather skip court altogether can talk with our cash land buyers in Garland, TX.
Eviction only fits the narrow case where the equity protections don’t apply and the contract was never recorded. Even then, it comes second. The default notice goes out first, and the buyer gets the full cure period. Only after that window closes should a possession case come up.
If the land contract was recorded, and the law says it should have been, you’re in foreclosure territory. That means a trustee sale, statutory notices, and careful timing. Any surplus from the sale goes to the buyer, and a shortfall raises deficiency questions. That’s attorney work, not a weekend project.
The math surprises people who thought owner financing was the easy option. You’re looking at months of notice periods, county filing fees, and legal bills with no payments coming in and property taxes still due. Meanwhile, the place may sit neglected, which I’ve watched happen more than once. Resideline tracked a median closing price of $329,999 in Fort Worth over the six months through September 2026. A long recovery fight on a house in that range can eat a real chunk of your equity.
Sellers in that spot have another option. Selling the property outright, or selling the note and the paper that go with it, hands the whole problem to someone equipped for it. We’ve taken over plenty of situations where the seller just wanted out from under a defaulted contract. Companies like We Buy Land Quick look at these as the tangle they are, and they don’t walk away from them.
What Happens to a Texas Land Contract If the Buyer Dies Before Paying It Off?
For years I assumed a buyer’s death simply ended the contract and handed the house back to the seller. I was wrong, and not by a little.
The buyer’s equitable interest is property. It passes into the buyer’s estate and then to heirs or devisees, and the payment obligation travels with it. Heirs who want the house can keep paying under the existing terms. A seller who refuses those payments and tries to take it back faces the same rules as with a living buyer in default. That means notice, a cure period, and either forfeiture or a trustee sale, depending on what’s been paid and whether the land contract is recorded.
Estates move slowly. Probate often takes months in many Texas counties. Meanwhile the county keeps sending tax bills, the insurance premium comes due, and the roof keeps aging. Whoever’s handling the estate should talk to a probate attorney early, since the process depends on whether there’s a will and what else the person owned. Your county clerk’s office can show what’s actually been filed on the property and in the probate records.
Insurance is where a lot of these arrangements quietly fall apart. Under Section 5.078, the named insured must tell the insurer about the executory contract within 10 days of getting coverage or signing, whichever is later. That notice covers the contract’s term and the other party’s name and address. Any payout for damage has to be issued jointly to buyer and seller and used to repair or improve the property. A policy in a deceased buyer’s name with nobody paying the premium is how a house ends up uninsured when a Panhandle hailstorm rolls through.
Death and successor terms belong in the agreement from day one. Naming a process up front beats discovering that the buyer’s nephew has moved in and considers himself the owner. A good clause names who gets notice, where it goes, and how long an estate has to pick a successor payer. It won’t override the statute, and it keeps everyone working from the same calendar.
The annual statement under Section 5.077 doesn’t pause because the buyer died, either. The seller still owes it by January 31 to whoever holds the buyer’s interest, and the penalties for skipping it still apply.
Frequently Asked Questions
Does a buyer’s death automatically cancel a Texas land contract?
No. The buyer’s equitable interest becomes estate property and passes to heirs or devisees, along with the duty to keep paying. A seller who treats the death as the end and changes the locks is inviting a wrongful eviction claim.
Can heirs take over payments without going through probate?
Sometimes, if the seller is willing to accept payments while the estate gets sorted out. Taking money from someone with no recorded interest doesn’t give them title, though. The seller also can’t deliver a deed at payoff to a person the probate record doesn’t recognize. A small estate affidavit or an affidavit of heirship handles some of these cheaply, and a probate attorney can tell you which fits.
What if the heirs stop paying and nobody responds to notices?
The seller follows the same default track as with a living buyer. Send the statutory notice, honor the cure period, and then move to forfeiture or a trustee sale based on how much has been paid and whether the contract was recorded. Mail notice to the estate representative and to known heirs at their last known addresses. Keep a record of every mailing.
Who is responsible for taxes and insurance while the estate is open?
Under the land contract, it’s still the buyer’s side, and that duty travels with the interest. In real life, bills go unpaid during probate all the time. Sellers often end up advancing property taxes and insurance to protect the house, then adding those amounts to the payoff if the contract allows it. Check the county appraisal district account and call the insurer directly instead of assuming.
Can a seller sell the property while a buyer’s estate still holds an interest?
Not free and clear. What a seller can sell is their own position, meaning the remaining payments and the retained legal title, to a buyer who understands what comes with it. That’s a different transaction from a clean deed sale, and it closes with different paperwork. If you’d like to talk through your own position, you can connect with our team any time.
If you’re holding paper on a Fort Worth or Panhandle property and things have gotten complicated, there’s no rush and nothing to decide today. Pull your land contract, check whether it was recorded and whether the taxes are current, and add up what’s actually been paid. When you’ve got that in front of you and want a second opinion on your options, we’re here whenever you’re ready.