Which of the following is TRUE about seller financing in Texas?
Question & Answer
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Sellers cannot finance property sales
Sellers in Texas are legally permitted to finance property sales, and seller financing is a well-established and frequently used transaction structure in the Texas real estate market, particularly in rural areas and for buyers who cannot qualify for conventional loans.
Seller financing requires TREC approval
TREC (Texas Real Estate Commission) regulates real estate licensees and brokerage practices but does not approve or oversee individual seller financing arrangements — there is no TREC approval process required for a seller to offer financing on their own property.
Seller financing with a wrap-around mortgage is allowed
Seller financing is limited to commercial property
Seller financing in Texas is absolutely available for residential property transactions and is not restricted to commercial property — in fact, residential seller financing is extremely common in Texas, particularly for single-family homes and land sales.
Why is this correct?
Texas law explicitly permits seller financing, including wrap-around mortgage arrangements, as a legitimate method for sellers to facilitate property sales when buyers cannot obtain or prefer not to use conventional financing. In a wrap-around, the seller's existing loan balance is incorporated into a new seller-financed note at a higher balance and often a blended interest rate, allowing the seller to potentially profit from the interest rate spread. The Texas Property Code provides the legal framework for these transactions, and they are commonly used in Texas residential and commercial real estate when buyers have credit challenges or when sellers want to generate installment income.
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