Texas Executory Contract / Contract for Deed Compliance Checklist

To sell a promissory note in Texas, you typically need the original promissory note, the deed of trust, the payment history, a copy of the property insurance, and a current payoff statement. Having these documents organized and ready before requesting a quote can speed up the closing process significantly. Longhorn Note Buyers, a San Antonio–based direct buyer with over 40 years of experience and more than $47 million in Texas notes purchased, provides cash offers within 24 hours at longhornnotebuyers.com or (210) 828-3573.

This guide provides a complete checklist of every document you need to sell your Texas promissory note, with explanations of why each one matters and what to do if any are missing.

Pre-Contract Disclosure Checklist

Before the contract for deed was signed, Chapter 5 required you to provide the buyer with specific written disclosures. These pre-contract disclosures are among the most important Chapter 5 requirements because failure to provide them can give the buyer the right to cancel the contract.

Property Survey or Plat

Did you provide the buyer with a copy of a survey or plat of the property before signing the contract? If no survey existed, did you provide a written statement disclosing that fact? The survey requirement helps the buyer understand exactly what property they are purchasing, including boundaries, easements, and any encroachments. If you did not provide a survey or a statement about the lack of one, this is a compliance gap that should be documented and disclosed to any potential buyer of your contract. If a boundary dispute later arises, this gap becomes particularly problematic — see our article on selling a note when there is a boundary dispute for more on that scenario.

Lien and Encumbrance Disclosure

Did you provide the buyer with a legible copy of any liens, encumbrances, or other obligations affecting the property? This includes any existing mortgages, tax liens, judgment liens, easements, restrictive covenants, or other interests that could affect the buyer's title. The disclosure must be provided before the contract is signed — not at closing, not after the buyer discovers the lien on their own.

Tax Certificate

Did you provide the buyer with a tax certificate from the applicable taxing authorities showing the status of property taxes on the property? The tax certificate confirms whether taxes are current, delinquent, or subject to a pending assessment. This is especially important because delinquent property taxes can result in tax liens that take priority over the contract for deed. Our article on selling a note when property taxes are delinquent explains how tax issues affect your note's value.

Insurance Policy Copy

Did you provide the buyer with a legible copy of any existing insurance policy on the property? If no insurance policy existed at the time of the contract, did you disclose that fact? Insurance disclosure helps the buyer understand what coverage exists and what additional coverage they may need to obtain.

Property Condition Disclosure

Did you provide the buyer with a disclosure of the property's condition, including any known defects? For residential property, this disclosure should cover structural issues, water damage, pest infestations, environmental hazards, and other material conditions that could affect the property's value or habitability.

Statutory Disclosure Statement

Did you provide the buyer with the specific written disclosure statement required by Section 5.069 of the Property Code? This statement includes prescribed language informing the buyer of their rights under the contract, the risks of the transaction, and the consequences of default. The statutory language is specific and must be substantially similar to the language set forth in the statute.

Contract Execution and Recording Checklist

Written Contract

Is the contract for deed in writing and signed by both parties? An oral contract for deed is not enforceable in Texas under the Statute of Frauds. The written contract should include all material terms: the property description, purchase price, down payment, payment schedule, interest rate, maturity date, and the parties' respective obligations.

Contract Recording

Was the contract for deed recorded with the county clerk in the county where the property is located? Section 5.076 requires recording. If the contract was never recorded, record it now. The recording fee is typically under $50 — a small price to pay for compliance and for protecting the buyer's interest in the public records. Our article on recording requirements in Texas explains why recording matters.

Memorandum of Contract

If you recorded a memorandum of the contract rather than the full contract, does the memorandum contain all the information required by the statute? Some sellers prefer to record a memorandum (a summary) rather than the full contract to keep the detailed terms private. If a memorandum was recorded, verify that it meets the statutory requirements.

Ongoing Obligations Checklist

Chapter 5 does not just impose requirements at the time the contract is created — it also imposes ongoing obligations throughout the life of the contract.

Annual Accounting Statements

Have you provided the buyer with an annual accounting statement every year, on or before January 31, covering the preceding calendar year? The statement must include the amount paid during the year, the remaining balance, the number of remaining payments, and any amounts owed for taxes, insurance, or other charges. If you have not been providing annual statements, start now and consider providing catch-up statements for prior years.

Property Tax Payments

Have property taxes been paid current throughout the term of the contract? The seller is generally responsible for ensuring taxes are paid (or for applying the buyer's tax escrow payments to taxes). Delinquent taxes create a tax lien that takes priority over the contract for deed, threatening both the seller's and buyer's interests. Verify the tax status with the county tax assessor-collector.

Insurance Maintenance

Has hazard insurance been maintained on the property throughout the term of the contract? If the buyer is required to maintain insurance under the contract, have you verified compliance? If the property is currently uninsured, this is a serious issue that needs to be addressed before selling the contract. Our article on selling a note when the property has no insurance covers how insurance gaps affect value.

No Unauthorized Liens

Have you ensured that no unauthorized liens or encumbrances have been placed on the property since the contract was signed? As the seller who retains legal title, you are in a position to encumber the property — but doing so violates the buyer's rights under the contract. Placing a mortgage or other lien on the property while a contract for deed is outstanding is a Chapter 5 violation and can give the buyer the right to cancel.

Deed Delivery and Conversion Checklist

The deed delivery requirements are among the most critical — and most commonly violated — Chapter 5 provisions.

40% / 48 Payment Threshold

Has the buyer paid 40% or more of the purchase price, or the equivalent of 48 monthly payments (whichever is less)? If so, you are required to deliver a deed to the buyer and convert the transaction from a contract for deed to a deed of trust structure. Calculate the threshold carefully — it is based on the total amount paid toward the purchase price, which may or may not include interest payments depending on how the contract is structured.

Deed Delivery Upon Threshold

If the 40%/48-payment threshold has been met, have you delivered a deed to the buyer? The deed must be a general warranty deed (or a special warranty deed if the contract specifies). Along with the deed, you should record a deed of trust to secure the remaining balance. This conversion is mandatory, not optional — failing to convert is one of the most serious Chapter 5 violations.

Deed Delivery Upon Final Payment

If the buyer has made all payments under the contract, have you delivered the deed within 30 days of receiving the final payment? Failure to deliver the deed after final payment exposes you to damages. This should be a straightforward step, but sellers sometimes delay — particularly if there are disputes about the final payment amount or the property condition.

Payment Collection and Documentation Checklist

Consistent Payment Records

Do you have thorough records of all payments received from the buyer? Bank statements, canceled checks, money order receipts, payment platform records, or a formal payment ledger are all acceptable forms of documentation. Complete payment records support the accuracy of your annual accounting statements and demonstrate the contract's performance to potential note buyers. If payments have been collected in cash without receipts, this creates a documentation problem addressed in our article on selling a note with unverified payments.

Escrow Account Management

If the buyer's payments include amounts for property taxes and insurance, are you properly managing those escrow funds? Are the tax and insurance payments being made from the escrow funds as intended? Mismanaging escrow funds is a serious breach that can result in penalties and give the buyer grounds to cancel the contract.

Late Payment Documentation

If the buyer has made late payments, do you have documentation of the late payments and any late fees assessed? Late payment documentation is important for the annual accounting statement and for demonstrating the contract's payment history to note buyers.

How to Use This Checklist When Selling Your Contract for Deed

Before approaching a note buyer, go through this checklist and honestly assess your compliance status. For each item where you are non-compliant, determine whether the issue can be corrected and take corrective action where possible.

Prioritize the Most Critical Items

The most critical compliance items — the ones that have the biggest impact on your contract's value and salability — are pre-contract disclosures (particularly the statutory disclosure statement), deed delivery compliance (the 40% threshold conversion), contract recording, and property tax status. If you can address these four items, you will have resolved the most significant compliance gaps.

Document Your Compliance Efforts

Even if you cannot fully cure a past violation, documenting your efforts to comply going forward demonstrates good faith. Note buyers appreciate sellers who are transparent about compliance issues and proactive about addressing them. Gather all disclosures, statements, correspondence, and payment records into a single file that you can provide to the buyer during due diligence.

Be Transparent With the Buyer

Do not try to hide compliance gaps from a note buyer. Experienced buyers like Longhorn Note Buyers will discover issues during due diligence, and discovering undisclosed problems erodes trust and can torpedo the transaction. Being upfront about compliance issues — and about what you have done to address them — actually strengthens your negotiating position because it demonstrates honesty and saves time in the due diligence process.

Chapter 5 Compliance and Contract Value

A fully Chapter 5-compliant contract for deed will command the strongest offer from a note buyer. The buyer can step into the contract with confidence, knowing that the buyer's (property buyer's) cancellation rights are minimal and the risk of legal challenge is low.

A contract with minor compliance gaps — such as missing annual accounting statements or late recording — will still be saleable but may receive a slightly lower offer to account for the additional risk and the cost of remediation.

A contract with major compliance gaps — such as missing pre-contract disclosures, failure to convert after the 40% threshold, or delinquent property taxes — faces a significantly lower offer because the buyer is assuming substantial risk, including the possibility that the property buyer could cancel the contract entirely.

The takeaway is clear: every compliance item you can check off this list directly supports a stronger offer for your contract. Our article on how note buyers calculate their offer explains the full range of factors that affect pricing.

Special Considerations for Different Property Types

Residential Property Contracts for Deed

Chapter 5's protections are strongest for residential property contracts for deed — property that the buyer uses or intends to use as their primary residence. All of the disclosure requirements, annual accounting obligations, and deed delivery thresholds apply. If your contract for deed involves a house, duplex, manufactured home, or any property used as a residence, full Chapter 5 compliance is essential. This includes properties where the buyer placed a mobile home on land purchased under a contract for deed — the presence of the dwelling triggers the residential protections.

Vacant Land Contracts for Deed

For vacant land with no dwelling (and no intent by the buyer to use it as a residence), some of Chapter 5's residential protections may not apply. However, the line is not always clear. If the buyer intends to build or place a home on the land, the residential provisions could be triggered. Many cautious sellers and buyers assume Chapter 5 applies to all contracts for deed and comply fully regardless of property type — this is the safest approach and eliminates any ambiguity for future note buyers.

Mixed-Use and Commercial Property

Contracts for deed on purely commercial property are less heavily regulated under Chapter 5, but some provisions may still apply. Mixed-use properties — those with both commercial and residential components — present the most challenging compliance questions. If any portion of the property is used as a dwelling, the residential protections of Chapter 5 likely apply to the entire transaction. For complex property types, consulting a Texas real estate attorney is advisable.

The Checklist in Action: A Practical Example

To illustrate how this checklist works in practice, consider a common scenario. Maria sold a house in Bexar County to a buyer under a contract for deed five years ago. The buyer has been making monthly payments consistently. Maria now wants to sell her vendor's interest for a lump sum of cash. She goes through the checklist and finds the following.

Pre-contract disclosures: Maria provided a property condition disclosure but did not provide the statutory disclosure statement required by Section 5.069. She also did not provide a survey or a tax certificate. These are compliance gaps that will affect her offer price.

Contract recording: Maria recorded the contract with the Bexar County clerk shortly after signing. This item is compliant.

Annual accounting statements: Maria provided statements for the first two years but stopped after that. She needs to prepare and send catch-up statements for the missing years.

Deed delivery threshold: After five years of payments, the buyer has paid more than 40% of the purchase price. Maria has not delivered a deed. This is a significant violation that she should address immediately — either by delivering a deed and recording a deed of trust, or by disclosing this gap to the note buyer and letting them factor it into the offer.

Property taxes and insurance: Both are current. No issues here.

By going through the checklist, Maria has identified her specific compliance gaps and can take corrective action before approaching a buyer. She decides to deliver the deed and convert to a deed of trust structure, provide the missing annual statements, and prepare the statutory disclosure (even though it is late) to demonstrate good faith. These steps significantly improve her position and will result in a stronger offer from note buyers.

This is exactly the kind of practical, proactive approach that maximizes the value of a contract for deed on the secondary market. Every item on this checklist that you can address before selling puts money in your pocket.

Sell Your Texas Contract for Deed to a Knowledgeable Buyer

Contracts for deed require a buyer who understands Chapter 5 and can evaluate compliance issues fairly. Longhorn Note Buyers has purchased contracts for deed across Texas since 2007, building on founder Nick McFadin's 42-plus years in the note business. We have seen every compliance scenario and we know how to evaluate the real risk — not just the theoretical risk — of Chapter 5 issues. We have purchased more than $47 million in Texas notes and contracts with a 100% close rate on quoted offers.

Our A+ BBB rating reflects our commitment to honest, transparent dealings. We provide a firm offer within 24 hours and close what we quote. Call Sandy McFadin at (210) 828-3573 or email sandy@longhornnotebuyers.com to get your free, no-obligation evaluation.

Frequently Asked Questions

Can I fix Chapter 5 compliance issues retroactively?

Some issues can be partially addressed retroactively. You can record the contract now, start providing annual accounting statements, and deliver the deed if the 40% threshold has been met. Pre-contract disclosures that were never provided cannot truly be given retroactively (since they were required before the contract was signed), but providing them now is better than never providing them. Full retroactive compliance is not possible, but partial correction demonstrates good faith and limits future exposure.

What if I already converted to a deed of trust — does Chapter 5 still apply?

Once you deliver a deed to the buyer and record a deed of trust to secure the remaining payments, the transaction is no longer an executory contract and most of Chapter 5's ongoing requirements cease to apply. However, any violations that occurred while the transaction was structured as a contract for deed may still create liability. If you converted years ago and have been operating under a deed of trust structure since, the Chapter 5 risk is significantly reduced.

Does Chapter 5 apply to commercial property contracts for deed?

Chapter 5's executory contract provisions are primarily directed at residential property transactions. For commercial property, some provisions may not apply. However, the line between residential and commercial can be blurry — for example, a mixed-use property with a commercial component and a residential unit may trigger Chapter 5 requirements. When in doubt, consult a Texas real estate attorney.

How long does a buyer have to exercise their cancellation rights under Chapter 5?

The statute does not specify a fixed deadline for the buyer to exercise cancellation rights for all violations. Some cancellation rights may be exercised at any time while the violation persists. Others may be subject to equitable defenses like laches (unreasonable delay). The practical reality is that a buyer who has been making payments for years without complaining about missing disclosures is less likely to exercise cancellation rights than a buyer who recently discovered a violation. But the legal right may still exist, and a note buyer will factor this risk into their evaluation.

Should I consult an attorney about Chapter 5 compliance before selling?

If your compliance review reveals significant gaps — particularly around pre-contract disclosures, deed delivery, or property tax status — consulting a Texas real estate attorney is strongly advisable. An attorney can evaluate your specific exposure, advise on corrective steps, and help you negotiate with the property buyer to resolve any outstanding issues before you sell the contract. Our article on whether you need a lawyer to sell your note discusses when legal counsel makes sense.