Is it a "SAFE" act? Not anymore! Flippers Beware!

Real Estate Broker/Owner with Brooks Prime Properties Wichita Falls Texas

First, I must proclaim that I am NOT an Attorney and in no way am I attempting to give legal advice.

 My question is, "how SAFE is it to owner finance in Texas?"  Deb Brooks on Texas House Bill 10 Lake Conroe Real Estate

I received a call from a friend yesterday and she was asking me about the potential of OWNER FINANCING her Texas home. She explained that a couple had viewed it and said their credit was not up to par and would the Seller consider holding the note. This answer was a no-brainer. It was a big fat "NO".  Their home is still mortgaged which caused the obvious problem.  ARMS LENGTH MORTGAGES ARE ILLEGAL IN TEXAS. In fact, if you go into a contract stating you will finance the home for them and you consider it a sale, it is my understanding that your note holder will call your note due and payable immediately!!!  If you've sold the house they want their money!


As Realtors, and Mortgage Pros and all of us that are involved with this business it seems we have to pay attention to LAWS OUTSIDE OF OUR PROFESSION to stay on top of things. Yes, yes, we all know this but with the changes being made every day it's tough to keep up.

 Are you familiar with the 2010 "SAFE ACT" IN TEXAS HOUSE BILL 10?
“Secure and Fair Enforcement for Mortgage Licensing Act”)

I was not familiar and came across it quite by accident. What an eye opener it is.

The bill states that, Under the current code, owner-financiers must have a Residential Mortgage Loan Originator license from the Texas Savings and Mortgage Lending Department.Texas House Bill 10

Once upon a time we were allowed up to 5 transactions a year...kind of like flipping cars. This restriction is just unimaginable!  It seems to me that if the sales took place at a legal Title Company with legal paperwork, the government shouldn't be able to tell us what we can or cannot sell!!!!!! Come on now! They are now saying not even ONE owner finance per year with a few exceptions.


If you own the home free and clear and it is your homestead.

If you sell to a family member.

Or, use a Third Party Mortgage Originator...there goes the profit!


Oh my, YES. If you are caught doing it anyway you are subject to a $25,000 fine, you may owe damages to the Buyer and well, isn't this all bad enough?


Comments (8)

Dan Hopper
Dan Hopper - Gold Way RE - Westminster, CO
Colorado Broker / Referral Services

Yikes, Deb ... that kind of screws the OWC transactions!!  Sellers should have the right to sell with owner carry... too bad this is in place! 

Mar 01, 2012 06:30 AM
Gary Woltal
Keller Williams Realty - Flower Mound, TX
Assoc. Broker Realtor SFR Dallas Ft. Worth

Deb, I think owner financing is a lending solution in times of high interest rates which is not today. PLUS the house can come back to you in a default. Renting it out could be a good idea, but in today's world I don't think it is a good idea at all with 3.5% money out there.

Mar 01, 2012 07:12 AM
Marco Giancola
Beachfront Realty - Miami Beach, FL
Realtor (305)608-1922, Miami Beach Florida

Hi Deb-interesting, there were a few items in your post that I was not aware of.

Mar 01, 2012 07:30 AM
Peter Pfann @ eXp Realty Pfanntastic Properties in Victoria, Since 1986.
eXp Realty, Victoria BC - Victoria, BC
Talk To or Text Peter 250-213-9490

HI Deb,

Who ever the law makers are in your area, must be paid by some mortgage lender(s), as this can not be otherwise be logically explained.... It just does not make any sense at all. Great information in your post, and much appreciated to learn a new twist and must admit that I am glad that we do not have this issue at all.

Mar 01, 2012 10:16 AM
Ellen Caruso
Daniel Gale Sotheby's International Realty - Glen Head, NY

Deb, I'm not sure how that works in Texas, but in NY my husband has done it as the builder and owner, it can work here.

Mar 01, 2012 11:08 AM
Carla Muss-Jacobs, RETIRED
RETIRED / State License is Inactive - Portland, OR

A few topics of discourse here: the owner financing being a no brainer for someone with lousy credit, the interesting point about the mortgagee being able to call the note due if "sold" and then the big HUH?!?  The State of Texas isn't saying that a home owner can't sell with owner financing . . . they still can, ONLY IF the have the required license.  Which is bull crap, IMHO.  I'm surprised no one batted an eye when that was up for approval.  Seems to be taking quite a bite out of property rights in Texas.

Mar 02, 2012 03:23 AM
Mimi Foster
Falcon Property Company - Colorado Springs, CO
Voted Colorado Springs Best Realtor

What an interesting concept.  There are a lot of these loop holes that people are trying to use to work out their issues, and we are doing some really interesting investigations into loan fraud around here.  good investigative work, Ma'am


Mar 04, 2012 11:04 AM
Jacqueline Tolstyka
Coldwell Banker Schmidt Realtors - Cheboygan, MI
Realtor - Selling Beautiful Northern Michigan

Hi Deb, It has been forever since I have been on Active Rain, finally tried a post today, and hopefully keep going. I just wanted to tell you what a great photo of you and did you move to another real estate office.

Mar 30, 2012 06:27 AM