9 Important Items to Look For in a Texas Land Contract

A Texas land sales contract is a legally binding document that outlines the terms and conditions of the sale, protecting both the buyer and the seller in a transaction. As a seller, it's essential to understand some key elements of the land sales contract. This article will guide you through what to look out for as a seller to ensure a smooth and successful transaction.

1.Clear Property Description

The first and most critical element of a Texas land sales contract is the property description. It should provide a precise and accurate description of the land being sold. The property description typically includes the address, if any, and the full legal description which can be obtained from the county website, the survey, or the deed.

2.Purchase Price and Financing

The contract should clearly state the purchase price and type of financing the buyer intends to use, if any. If the buyer is using financing, you should be especially aware of the finance contingency period. If the buyer has a finance contingency listed in the contract, he or she can receive a full earnest money refund if financing is denied within the stated financing contingency period.

For example, if you have $100,000 tied up in vacant land that appreciates at a rate of 2% annually, your opportunity cost is the potential return you could have earned if you invested that money in stocks, bonds, or a business venture that could yield higher returns. It is important to consider what your money could be doing for you in other ways.

3.Earnest Money and Default Clauses

An earnest money is a deposit made by the buyer as a sign of good faith and commitment to the purchase. The contract should specify the amount of earnest money, its deadline, and the conditions under which it may be forfeited or returned. Be sure you understand the remedies available to you as the seller if the buyer defaults.

4.Title and Title Insurance

Title issues can significantly impact a land sale, so it's crucial to pay attention to the contract's provisions regarding title matters. The title policy provides critical protection for both you as the seller and the buyer in case undisclosed title issues should arise. Pay attention to who is responsible for paying for the title policy. Sellers typically pay for the title policy in Texas, but this is not always the case.

When you sell your land to Land People, we pay for the title policy.

5.Easements and Encumbrances

The contract should address any existing easements or encumbrances that affect the property. Easements grant third parties specific rights to use or access the land, and this information must be conveyed to the buyer. Make sure the contract provides a complete list of any existing easements and how they might impact the property's use. Transparency is essential when it comes to easements to avoid disputes and potential legal issues down the road.

6.Closing Date and Possession

The contract should specify the agreed upon closing date, which is when the property officially changes hands. Additionally, it should address possession, detailing when the buyer is allowed to officially occupy the land, and when you, as the seller, are expected to vacate. Pay close attention to these dates and make sure they align with your plans and obligations.

7.Contingencies and Due Diligence Period

Contingencies in a land purchase contract are conditions that must be met for the sale to proceed. Some common contingencies may include the buyer’s financing, ensuring clear title, and the satisfactory review of any HOA documents. The contract should also clearly state the option period, if any, during which the buyer can perform necessary inspections and investigations as well as discuss with local city and county representatives about their plans for the land.

8.Default and Remedies

The contract should outline the consequences of default by either party and the remedies available to the non-defaulting party. As the seller, you need to be aware of the legal options you have in case the buyer fails to meet his or her obligations. Understanding these consequences can help you make informed decisions and protect your interests.

9.Closing Costs and Prorations

Review the contract's provisions regarding closing costs. The contract should specify how these costs are allocated between the buyer and the seller. Ensure you fully understand the financial implications of these allocations and how they affect your net proceeds from the sale.

When you sell your land to Land People, we pay all closing costs.

Conclusion

A good understanding of these key elements of a Texas land sales contract is crucial for a smooth and successful transaction. Be sure to review these items on any offer you receive from a potential buyer, and ensure the contract aligns with your interests and that you fully understand your rights and obligations.