Oct
25

Buying Land in Texas- the different types of land deeds and Texas land financing contracts explained

If you think the time is ripe to buy yourself some ripe piece of Texas land or Texas lakefront property then you should know that buying land in Texas is no different to buying land anywhere else. You need to be careful, make the right choices and make sure that the Texas land that is for sale meets your requirements not just in terms of what’s important to you but also in terms of the legalities concerned.

There are a number of Land Deeds associated with buying land in Texas and it would be useful to examine them here as part of the research that you should be doing:

.

If you think the time is ripe to buy yourself some ripe piece of Texas land or Texas lakefront property then you should know that buying land in Texas is no different to buying land anywhere else. You need to be careful, make the right choices and make sure that the Texas land that is for sale meets your requirements not just in terms of what’s important to you but also in terms of the legalities concerned.

There are a number of Land Deeds associated with buying land in Texas and it would be useful to examine them here as part of the research that you should be doing:

What is a Land Deed?

The definition of a Land Deed in Texas is the same as everywhere else. It is a legal document designed to transfer real estate property in the land of Texas. There are two types of Deed which are primarily used for the transfer of land in Texas. The first one is the Quit Claim Deed and the other one is the Warranty Deed.

The Warranty Deed lives up to its name. It is used when the seller of Texas land uses the Deed to make certain guarantees to the buyer of Texas land. There are three basic parts or covenants associated with the Warranty Deed – The Covenant of Seishen, in which the seller of Texas land guarantees that they own the piece of Texas land they are selling to the buyer and that they, indeed, have the right to sell it. The Covenant Against Encumbrances, in which the seller of Texas land guarantees to the buyer of Texas land that the Texas property they are selling (or the piece of Texas land) is free of encumbrances or claims against it such as mortgage liens, tax liens or any other form of liens. The Covenant of Quiet Enjoyment in which the seller of Texas land guarantees to the buyer that, after the sale, should anyone show up and try to lay claim to the piece of Texas land that has been purchased by the buyer, the seller will defend the buyer’s rights to the Texas land they have bought from the seller.

Generally speaking a seller and buyer are free to negotiate and agree to alter any of the terms and conditions of a Warranty Deed until they are both satisfied with it, but, in principal, these are the three parts to it.

Compared to the Warranty Deed a Quit Claim Deed contains none of these guarantees. The basic situation here is that the seller of the Texas piece of land or Texas property tells the buyer: “If I own this piece of Texas land or Texas property, I am selling it to you and you take it as is.” This is the classic caveat emptor situation – Buyer Beware!

Types of Land Financing Contacts available to buyers of Texas Land or Texas Property

Buyers of Texas Properties and Texas Land, as well as sellers, may finance the purchase and sale of such properties through the use of a Texas land sale contract.

In Texas there are many types of Land Contract available but the most common are Mortgages, Deed of Trust and Contract for Deed where some type of installment agreement is in place. Mortgages are the most common form of Texas Land buyer financing while Deed of Trust and Contract for Deed are used for Texas Land seller financing.

A Contract for Deed is usually used for the purchase of a Texas recreational property rather than Texas residential property and Texas Law, currently, has imposed some restrictions regarding the use of a Texas recreational property as a regular residence. A Contract of Deed allows the seller of the Texas recreational property to retain the legal title to the property while the buyer makes installment payments. During this time the buyer has access to the property, has use of it and the right to develop it. Once the installment contract completes and all the payments have been made by the buyer a Deed transfers the legal title to the recreational property from the seller to the buyer and it then becomes officially theirs. While the installment contract is in effect the buyer is responsible for all taxes to the property as well as any fees which need to be paid for it. If the buyer falls behind on the payments the seller of the property retains the option of calling the buyer into ‘default’ and foreclosing on the property upon which the buyer loses all rights of use, residency and development, the seller regains full title and retains all money paid via installment to date.

A Deed of Trust works a little differently. The legal title to the Texas property or Texas piece of land is transferred to a third party trustee when the sale of the Texas property or the sale of the Texas land is made and then the seller of the property or land retains a lien as security against the property until all payments agreed in the contract have been made by the buyer. During this time the buyer of the Texas property or Texas land has access, use and development rights to the property or land he has bought. The Deed of Trust is recorded in the public records and it is noted that the property or Texas land is not free of encumbrances and claims against it. Once all the payments agreed in the sale contract or sale agreement have been made by the buyer the Deed is cancelled and the full title is then transferred by the trustee to the buyer who then becomes the sole legal owner of the Texas property or Texas land he has purchased. Much like in a Contract for Deed, should the buyer miss payments the seller can instruct the trustee to foreclose on the property and the buyer loses all claims to any money already paid by him.

Mortgage sales work a little differently. Upon closing the deal the seller of the Texas property or Texas land conveys the full title to the buyer who has obtained a mortgage. The party providing the mortgage then places a lien which is recorded in the public record against the Texas property or Texas land that has been bought. This lien remains on the Texas land or Texas property until the mortgage has been paid off in full upon which time a release of lien is filed and it is recorded that the property is free of encumbrances.

Severance of Estate in Texas Land

Because the land of Texas is so rich in minerals many people buying Texas land need to be aware of the concept of severed estates. In most parts of the world ownership of a piece of land allows the use and development of that land from the surface to the center of the Earth. In Texas however, most Texas land and Texas real estate has been severed so that the surface estate is owned separately from the mineral estate that lies beneath it. This means that while you may own the surface of your Texas land someone else owns what lies beneath it. In Texas any minerals which may be found on the surface (and this includes gold, diamonds and silv
er) legally belong to the owner of the surface Texas land.

In Texas, the right to develop the mineral estate that lies beneath the surface of the Texas land supersedes the right of the surface Texas land owner to stop the development from taking place. What this means in practice is that the holder of the Texas land mineral rights has to pay the owner of the surface Texas land a reasonable fee for any portion of the surface of the Texas land that is used in the development of the mineral estate beneath it. There are, of course, safeguards in the use and development of the mineral estate so that it does not interfere with the surface use of the Texas land, so that no one, for instance, could run a series of underground tunnels that would result in the collapse of the surface.

The existence of a Severance of Estate in Texas should not stop anyone from buying some prime Texas land. Awareness of it however allows for careful planning and the ‘what if’ scenario, like how would your planned use of your Texas land be affected if your Texas property was used for developing the mineral rights that are underneath?

Having got all this information should be a good starting point for beginning your approach to owning your own piece of Texas land or Texas real estate. In our Directory and website you will find Texas Realtors and Texas lawyers who can help you with your purchase and, now, you will be better equipped to ask relevant questions.

Leave a Reply