’Owner Finance! No Banks Needed!’ Consumer Protection Analysis of Seller-Financed Home Sales: a Texas Case Study

This Article argues that the changes in Texas law in 1995, 2001 , and 2005 created significant new protections for purchasers but created new problems and left several areas still in need of attention. Leveling the playing field, in short, was not enough. Part II of this Article explores the current lending landscape, the history of contract for deed, and why it is still used for home financing. Part III dissects the changes to Texas contract for deed legislation in 1995, 2001, and 2005. Part IV critiques those changes from a consumer protection viewpoint, suggesting that the typical consumer protection formula failed to resolve many of the abusive practices. In the contract for deed system, leveling the playing field is about more than the negotiation between the buyer and the seller. It focuses on the buyer's right to enjoy her property-to place a lien, make home improvements, or prevent foreclosure- regardless of the type of home financing she obtained. More meaningful disclosures and penalties for deceptive practices are important corrective steps, as are automatic conversions of contract for deed into mortgages and automatic conversion of lease-to-own agreements into purchase agreements. While this Article focuses primarily on hits and glaring misses in Texas contract for deed legislation, it also suggests a framework for looking at seller financing and residential property protection more generally. Despite significant legal protections, buyers are still losing their homes at an alarming rate and often do not recapture any of the money they have invested. If the goal of consumer protection is to balance the rights of purchasers and sellers and to maximize a homeowner's homestead rights and equity, the legislation should focus on removing barriers and artificial opt-in provisions that place less-sophisticated homeowners at a significant disadvantage