Contract for Deed Foreclosure

[aconnally]

What is the name of your state? Texas

I am the owner of 20 acres and a home in Brewster County, Texas. We sold the property with owner financing through a contract for deed. The buyer has now missed a payment, and in the contract it states that we give him 30 days until we send the first notice of delinquency, then 15 days to pay up or we foreclose. The contract is not even 2 months old, and the buyer hasn't gotten insurance, either, which is also in the contract and can be a reason for foreclosure.

What process should I take to foreclose on the property? Should I go to court, or should I just stick to the contract, send him the notice after 30 days, then if he doesn't pay up within 15 days, what happens then? Do I just make up an affidavit stating that the contract is now null and void due to buyer's default? Does anything have to be registered with the county courthouse?

I am wondering if I actually have to do a public sale with the 21 day notice, etc.

The deed is still in my name and the buyer has not taken possession of the property, yet. That is, he is not living there.

Any suggestions will be greatly appreciated.

Thanks

[seniorjudge]

Ask for a quit claim deed from the bad people to you, stating that they give up all rights to you under the contract for deed.

Obviously, you needed a lawyer BEFORE you did this...so be sure and get one now to help you clean up this mess.

[LindaP777]

ABOSLUTELY, you need a lawyer, now! Don't even attempt a foreclosure by yourself!

Aconnally, look away, this might be painful!
PEOPLE, when selling real estate on a "lease with option", "land contract", or "note purchase", it is wise to keep the property deeded in your name (not your buyers), until the transaction has been completed! It they default for whatever reason, it becomes a matter of eviction, rather than foreclosure (a little money and a little time vrs a lot of money and a lot of time!)
If you are unsure how to write up a lease with option type of purchase, SEE A LAWYER!
If you are unsure what the laws of your state allow, SEE A LAWYER!

There are tens, and possibly hundreds of thousands of dollars at stake if it is done wrong! Pay a few hundred buck and get it done right! (I am always amazed at the people who want to save a few hundred dollars and have thousands of dollars at risk - but I am not much of a gambler, either!)

[aconnally]

We never gave the buyer a deed with this transaction, only the Contract for Deed. Maybe foreclosure isn't the appropriate word here, I guess "default" might be better.

As far as I have seen, I need to send them a demand letter, giving them so many days to pay up and get things back in order. If they don't, then I file an affidavit with the county stating that the buyer has defaulted.

The buyer has not taken possession of the property, nor does he have a deed, nor has he paid insurance, and now has missed a payment.

It seems like it would be simple enough to go ahead, send the notice and plan on him defaulting, but am I missing something here? Do I really need a lawyer to send a demand letter?

Thanks for your suggestions.

[moburkes]

Why did you "close" the deal without proof of insurance?

[aconnally]

Well, to be honest, we were a little rushed getting into the new place, and overlooked it. We have been bugging him ever since to get it taken care of, but no success, yet. Our confidence with the buyer has definitely been shaken, and given all of the circumstances, it looks like we made the biggest mistake by accepting his offer and going with him in the first place.

At this point, however, we have to look at where we go from here, and since he is defaulting on the payments, we want to make sure we have everything in order to cancel the contract, if we have to.

[seniorjudge]

Originally Posted by aconnally

...
Do I really need a lawyer to send a demand letter?
....

No.

BUT (a big word) if the guy refuses to pay then you will need a lawyer to prepare a quit claim deed in lieu of foreclosure OR a judicial foreclosure.

If the legal system works really fast, you should have him out by New Year's Eve.

[LindaP777]

Is there a house and does he live there?
Sounds more like eviction (if they reside there), or terminating a contract for default than a "foreclosure".
Better contact a lawyer. Have him send a demand letter. If the buyer fails to comply, then terminate the deal.

[seniorjudge]

Originally Posted by LindaP777

Is there a house and does he live there?
Sounds more like eviction (if they reside there), or terminating a contract for default than a "foreclosure".
Better contact a lawyer. Have him send a demand letter. If the buyer fails to comply, then terminate the deal.

And the way to terminate the deal is by a judicial foreclosure (at least that is one way).

[aconnally]

There is a house, but the buyer is not living there. They have no deed at all, so I don't think a quit claim is necessary, as our contract states that they only gain title when the entire amount is paid up.

I do think this is really more of a default, and not even an eviction, because they aren't living there yet. The contract states that he can only move in when a certain amount has been paid toward the principle, and he hasn't made it to that point, yet.

A judicial foreclosure should not be necessary, as this is Texas and it is not required to end a contract. I guess I will contact a lawyer and see what the best route is. It seems simple enough to send a demand letter and then register an affidavit with the county.

If he does fight it, then we can go to lawyers, but at this point, I don't think he has the money to do anything like that.

Thanks for the advice.

[seniorjudge]

Originally Posted by aconnally

There is a house, but the buyer is not living there. They have no deed at all, so I don't think a quit claim is necessary, as our contract states that they only gain title when the entire amount is paid up.

I do think this is really more of a default, and not even an eviction, because they aren't living there yet. The contract states that he can only move in when a certain amount has been paid toward the principle, and he hasn't made it to that point, yet.

A judicial foreclosure should not be necessary, as this is Texas and it is not required to end a contract. I guess I will contact a lawyer and see what the best route is. It seems simple enough to send a demand letter and then register an affidavit with the county.

If he does fight it, then we can go to lawyers, but at this point, I don't think he has the money to do anything like that.

Thanks for the advice.

I am not sure that you have one single thing right in this post.

You have screwed up the title to the land massively.

Yes, it will need a lawyer to clear it up.

[Ozark_Sophist]

Was the land-contract recorded?

[aconnally]

Yes, the contract was recorded with the County.

How have I screwed up the title to the land? A Contract for Deed should not mess with the title at all, and the contract states that the buyer does not gain title until he completes the contract.

This contract was not written by me, but a Real Estate lawyer, and I have seen several like it in this area. It is a standard practice here in Texas.

[Ozark_Sophist]

Originally Posted by aconnally

Yes, the contract was recorded with the County.

How have I screwed up the title to the land? A Contract for Deed should not mess with the title at all, and the contract states that the buyer does not gain title until he completes the contract.

This contract was not written by me, but a Real Estate lawyer, and I have seen several like it in this area. It is a standard practice here in Texas.

Contract will show up in the title search. You can't sell the property when you have a contract to sell to someone else, which is why you need to follow SeniorJudge's advice.

Recording is supposed to be standard practice here, but often it is ignored , so I had to ask.

[aconnally]

Surely recording an affidavit stating that the contract is canceled should show up in the title search as well.
Am I wrong with that? How would a judicial ruling change that? They would record an extra document to show that the contract is canceled, so I am not sure why I couldn't do that myself.