A Texas contract for deed template has to do more than record a purchase price and a payment schedule. To be enforceable, it must satisfy Property Code Sections 5.061 through 5.085, which govern executory contracts for residential property and impose disclosure, notice, and recording rules that are stricter than in most states. A workable template identifies the parties and property precisely, sets financial terms inside the state’s interest rate ceiling and the IRS floor, embeds the statutory disclosures and the 14-day cancellation notice, and prepares both sides for the signing, recording, and annual accounting duties that follow.
When the Executory Contract Rules Apply
Subchapter D covers transactions where the property will be the buyer’s residence or the residence of a close relative.1State of Texas. Texas Code Property Code 5.062 – Applicability Any lot of one acre or less is presumed residential. Lease-option agreements that pair a residential lease with a purchase option are treated the same way and pull in the same rules.
A few situations sit outside the statute. Sales of state land, transactions through the Veterans’ Land Board, and deals involving political subdivisions or their instrumentalities are exempt. There is also a threshold most drafters should know about: if the contract calls for the seller to deliver the deed within 180 days of signing, the executory contract rules do not apply. Anything past that 180-day mark is the long-term installment deal the statute targets, and the template needs to be built accordingly.
Parties, Property, and Financial Terms
The template must identify both parties by full legal name and current mailing address. For the property, a street address alone is not enough. Use the formal legal description from the county property records — lot and block numbers in a subdivision plat, or metes and bounds for unplatted land. Copying that description directly from the most recent deed or from county appraisal records avoids the discrepancies that create title problems later.
Financial terms need to be stated with precision:
- Total purchase price
- Down payment amount
- Interest rate on the remaining balance
- Dollar amount of each monthly installment
- Date payments are due
- Total number of payments
An amortization schedule showing how each payment splits between principal and interest belongs in the package as well. It reduces disputes about the remaining balance as the contract runs, and it feeds directly into the annual accounting statement the seller will owe every January.
Reliable starting points for a Texas-compliant template include the Texas State Law Library, the State Bar of Texas, and legal form providers that structure their documents around Subchapter D. Whichever source you use, every field has to be completed. Blank sections and vague payment language undermine the whole agreement.
Interest Rate Limits and the Federal Floor
Texas caps the interest rate at 10 percent per year for most transactions unless a statutory exception applies.2State of Texas. Texas Code Finance Code 302.001 – Contracting For, Charging, or Receiving Interest or Time Price Differential Anything above that is usurious and exposes the seller to Finance Code penalties.
Federal tax law sets a floor. If the contract rate falls below the IRS applicable federal rate, the IRS can recharacterize part of each principal payment as imputed interest, generating unexpected tax liability on both sides.3Internal Revenue Service. Publication 537, Installment Sales As of mid-2026, the long-term applicable federal rate is roughly 4.87 percent annually, the mid-term rate is 4.13 percent, and the short-term rate is 3.85 percent.4Internal Revenue Service. Rev. Rul. 2026-11 Most contracts for deed run long enough that the long-term rate is the applicable benchmark. Setting the contract rate at or above that number, and below the 10 percent state cap, keeps the template out of trouble on both fronts.
Required Disclosures and Attachments
Several items have to be delivered before the buyer signs. Missing any of them can give the buyer a right to rescind and recover every payment made.
Property Condition
The seller must provide a current survey completed within the past year, copies of any document describing an encumbrance or claim against title (easements, restrictive covenants, and similar items), and a written notice about the property’s condition.5State of Texas. Texas Code Property Code 5.069 – Sellers Disclosure of Property Condition The condition notice is a statutory checklist rather than a narrative. It covers access to potable water, sewer or septic service, and electricity; whether the property sits inside a platted subdivision; whether it lies in a floodplain; and whether any liens are attached. Both parties sign the checklist and it is attached to the contract.
If those items are not delivered, the buyer can cancel and receive a full refund of every payment. That remedy stays available for the life of the contract when the disclosure was never made, so leaving it out is not a minor oversight.
Tax Certificate and Insurance
The seller must also hand over a tax certificate from each taxing authority that collects on the property, together with a copy of any insurance policy or binder covering it.6State of Texas. Texas Code Property Code 5.070 – Seller Items to Provide Before Signing The insurance documentation has to identify the insurer, describe the property, and state the coverage amount. If the seller carries an existing mortgage on the property, the buyer needs to know, because a default on that underlying loan can trigger foreclosure regardless of whether contract payments are current.
The 14-Day Cancellation Notice
Every buyer has an unconditional right to cancel within 14 days of signing.7State of Texas. Texas Code Property Code 5.074 – Purchasers Right to Cancel Contract Without Cause The buyer exercises the right by sending a signed written cancellation notice by certified or registered mail, or by delivering it in person. Once the seller has the notice, they have 10 days to return the executed contract, refund all payments, and release any security interest.
Two things must appear in the template itself. First, a cancellation notice in 14-point bold type sitting directly next to the buyer’s signature line, stating the cancellation deadline and explaining how to exercise the right. Second, a separate cancellation form the seller provides at signing. Omitting either is one of the most common failures in do-it-yourself contracts, and it hands the buyer an open-ended way out.
Signing, Notarization, and Recording
Both parties sign the completed contract in front of a notary. Notarization confirms each signer’s identity and is required for filing in county property records. After the signatures are notarized, the seller has 30 days from the signing date to record the contract at the County Clerk’s office in the county where the property sits.8Texas Law Help. Executory Contracts and Lease-to-Own Real Estate
Recording does two things. It puts the public on notice that the buyer holds an equitable interest, which protects the buyer if the seller later tries to sell or encumber the property behind their back. It also shuts off the seller’s quick forfeiture remedy after a default, because that remedy is available only when the contract was never recorded. County filing fees vary. In Travis and Bexar counties, for example, the first page costs $25 and each additional page $4.9Travis County Clerk. Recording Fee Information Keep a file-stamped copy in a safe location; it is the buyer’s primary proof of interest.
Annual Accounting Statement
For every year the contract is active, the seller must give the buyer an annual accounting statement no later than January 31.10State of Texas. Texas Code Property Code 5.077 – Annual Accounting Statement The template should build in the categories the statement has to cover:
- Total payments received during the year
- Remaining balance on the contract
- Number of installments left
- Amounts paid to taxing authorities or insurers on the buyer’s behalf
- Accounting of any insurance proceeds received after property damage
- A copy of the current insurance policy or binder if coverage changed
A seller who handles fewer than two executory contract transactions in a 12-month period owes liquidated damages of $100 for each missed statement. A seller who handles two or more owes $250 per day for every day past the January 31 deadline, capped at the fair market value of the property. Attorney’s fees are recoverable in both cases.
Default Notice and Cure Period
The template should reflect the mandatory default process, because a seller cannot simply terminate the contract and retake the property after a missed payment. Before pursuing any remedy, the seller sends a written default notice by certified or registered mail. The notice identifies the default, describes exactly what the buyer must do to cure it, sets a deadline at least 30 days out, and warns that failure to cure may lead to acceleration and eviction.11State of Texas. Texas Code Property Code 5.063 – Notice of Default and Acceleration It must be printed in at least 14-point bold type, and it must be in Spanish if the original deal was negotiated primarily in Spanish.
The right to a cure period does not apply if the seller already sent a default notice within the previous 12 months. A buyer who repeatedly falls behind can lose that safety net on the second occurrence in the same year.
The seller’s remedies are limited even after the cure window closes. Rescission or forfeiture is available only when several conditions all hold, including that the contract was never recorded and the buyer has not crossed the equity threshold below.12State of Texas. Texas Code Property Code 5.064 – Sellers Remedies on Default Because Subchapter D requires recording within 30 days, a compliant contract essentially takes fast forfeiture off the table.
The 40 Percent or 48-Payment Threshold
Once a buyer has paid 40 percent or more of the total amount due, or has made the equivalent of 48 monthly payments, additional equity protections apply.13State of Texas. Texas Code Property Code 5.066 – Equity Protection At that point, whether or not the contract was recorded, the seller cannot use simple forfeiture and has to pursue formal foreclosure proceedings similar to those used for traditional mortgages.
Conversion and Final Title Transfer
The buyer under an executory contract has the right, at any time and without penalty, to convert the interest into recorded legal title with a purchase-money deed of trust securing the remaining balance.14State of Texas. Texas Code Property Code 5.081 – Right to Conversion Conversion transforms the arrangement into a traditional mortgage structure: the buyer holds the deed, the seller holds a lien for what is still owed. The seller must cooperate. A well-drafted template acknowledges this right so neither side is surprised when it is exercised.
When the buyer makes the final payment, the seller must deliver a recorded deed transferring legal title within 30 days. This is a statutory obligation, not a courtesy. A seller who misses the deadline owes $250 per day for every day between the 31st and 90th day after receiving the final payment, and $500 per day for every day after the 90th, plus reasonable attorney’s fees.15State of Texas. Texas Code Property Code 5.079 – Title Transfer Six months past the deadline puts the seller over $60,000 in liquidated damages. Buyers should keep detailed records of every payment and send the final one in a way that creates proof of receipt.
Federal Seller Financing Exemptions
Dodd-Frank and its implementing regulation reach anyone providing seller financing on residential property. Most individual sellers fit inside one of two exemptions, and the template needs to stay within whichever one applies.
Under the one-property exemption, a natural person, estate, or trust that finances only one property sale in any 12-month period avoids loan originator requirements if the loan does not produce negative amortization and the interest rate is either fixed or adjustable only after at least five years with reasonable annual and lifetime rate caps.16eCFR. 12 CFR 1026.36 – Prohibited Acts or Practices and Certain Requirements for Credit Secured by a Dwelling There is no obligation to verify the buyer’s ability to repay.
The three-property exemption covers a seller financing up to three sales in a 12-month period, but it adds a good-faith ability-to-repay determination. The financing must be fully amortizing, and the rate must be fixed or adjustable only after at least five years, tied to a widely available index such as U.S. Treasury securities or SOFR. A seller who finances more than three sales per year falls outside both exemptions and has to comply with the full qualified mortgage regime, including documented income verification and limits on points and fees.
Tax Reporting the Template Should Anticipate
A contract for deed is an installment sale for federal tax purposes. The seller separates each payment into interest income, return of cost basis, and gain. Interest is ordinary income in the year received; gain is reported based on the gross profit percentage of each payment. If the contract rate falls short of the applicable federal rate, the IRS treats part of the stated principal as unstated interest or original issue discount, which the seller must report regardless of contract language.3Internal Revenue Service. Publication 537, Installment Sales
The buyer can deduct the interest portion of payments as mortgage interest if the property is a primary or secondary residence and they itemize, reporting the interest on Schedule A of Form 1040. If the property is used as a rental, interest goes on Schedule E. Because the amortization schedule and the annual accounting statement both break out interest from principal, the buyer will have the documentation to support the deduction. Private sellers are generally not required to issue Form 1098, but the buyer still needs the seller’s name, address, and tax identification number to claim the deduction. A line in the template committing the seller to provide that information avoids a scramble at tax time.