Attorney Nick Stevens shares commonly asked questions and his guidance for purchasing money contracts in Texas, from how to close loans in the name of a trust or business entity to handling special requests.  

Nick, how do I identify which parties are to take title on a Texas purchase transaction? 

Although it is not a legal requirement under Texas law, it is customary in Texas for the parties shown as the Buyer on the purchase money contract to take title of the subject property and appear as Grantees on the warranty deed’s vesting. In addition to Texas custom, lender and investor guidelines often require the parties taking title to be shown as the Buyer on the purchase money contract. 

What about when the loan is closing in the name of a trust or a business entity like an LLC? Is an amendment to the purchase contract needed? 

If the borrower and lender want the loan to close in the name of a trust or LLC and the individual borrower is shown on the purchase contract as the Buyer, then an amendment to the contract will generally be required to show the trust or LLC as the Buyer. This will ensure that the trust or LLC appears as the Grantee on the warranty deed and will be the sole owner of the property.  

How do I handle special requests regarding the warranty deed? In instances where a seller is reserving a mineral interest, is selling the property “as is,” or is requesting a special warranty deed? 

Special requests for the warranty deed are generally governed by the terms of the purchase money contract which have been agreed to by both the buyer and seller. In Texas, when the buyer and seller are individuals the Texas Real Estate Commission (TREC) One to Four Family Residential Contract form is routinely used. In situations where the seller is a corporate or business entity like a real estate developer or homebuilding company, a contract form specific to the seller may be utilized instead.  

Whether the warranty deed can contain a reservation of oil, gas, or other minerals in favor of the seller is determined by whether the contract specifies that the seller is retaining a mineral interest in the property or not. On the TREC form this can be verified by looking at Section 22 “Agreement of Parties” to see if the Addendum for Reservation of Oil, Gas and Other Minerals box is checked and whether that addendum has been included as a part of the contract. This addendum will contain the specifics of the seller’s mineral reservation. Similarly, if the seller is stating the property is being sold “as is” and is requesting specific language to be appear on the warranty deed, Section 7(D) of the TREC contract contains two boxes indicating whether it the property is being sold “as is” and whether any additional conditions exist regarding the condition of the property.  

On the TREC form Section 9(B)(1) states a general warranty deed must be delivered to the buyer, however this standard provision may be amended by Section 11. Both sections of the TREC form should be reviewed when determining if a special or general warranty deed is needed on a purchase transaction. Real estate developers and homebuilders using their own purchase contract form often require the warranty deed to be a special warranty deed rather than a general warranty deed which is a standard provision in the TREC contract. A review of the complete contract form from the seller will be needed when the TREC form is not being utilized to determine whether a special or general warranty deed must be used since the forms are unique to each seller.