The Ultimate Guide to Seller Financing in Bryan/College Station, Texas

Real estate investors love creative financing, and in my opinion, the absolute best form of creative financing is seller financing (also known as owner financing). It’s a complete win-win for both buyers and sellers.

Online influencers make it sound like you just sit down with an 80-year-old investor retiring from being a landlord, buy him a cup of coffee, shake his hand, and 20 days later you’re the happy owner of your first investment property. Look, I’ve been there—I’ve bought using creative financing, and I’ve helped investors do the exact same thing. It isn’t hard, but I can tell you it takes a lot more than a handshake and an IOU written on the back of a Denny’s napkin.

My name is Greg Schwartz. I’m a BCS agent and investor with nearly 25 units in my portfolio and almost a decade of experience helping folks buy and sell right here in Bryan and College Station, Texas, right next to Texas A&M University.

This topic is top of mind for me right now because I'm simultaneously refinancing out of my very first seller financing deal while helping a client close on their first seller financing deal. Both of these deals are absolute grand slams.

Whether you’re looking to acquire rental properties around Aggieland or offload a property for steady cash flow, here is the exact 5-step play-by-play for structuring a seller financing deal in Texas from negotiation to closing and beyond.

Step 1: Negotiate the Core Loan Numbers

When negotiating seller financing, forget about the purchase price for a second. Your main focus should be on four key numbers:

• Down Payment: What amount is necessary for the seller to feel safe working with the buyer? Is it 20%, 10%, or maybe 5%? I always recommend starting here.
• Monthly Payments: Figure out what monthly number works for the seller. Sometimes it’s as simple as matching previous rent (e.g., the property rented for $1,000, so the seller wants $1,000 a month).
• Interest Rate: The agreed-upon rate calculated into the payment structure.
• Loan Term & Amortization: How long the loan lasts and how long it is amortized for.

Balloon Payments vs. Prepayment Penalties

Once you have the core terms, you need to address how the loan behaves over time. These two options act in completely opposite directions:

• Balloon Payments: A balloon payment requires the loan to be paid in full within a set timeframe—usually 3, 5, or 7 years. At that point, the seller is paid in full the remaining balance of the loan. This is fantastic for a seller wanting liquidity soon, or a buyer executing a BRRRR strategy who plans to improve the property and refinance. However, it isn't ideal for a seller who wants consistent income for 10+ years.
• Prepayment Penalties: If a seller wants long-term monthly income, they might skip the balloon payment entirely and institute a prepayment penalty. This penalizes the buyer if they refinance or sell earlier than a specific timeframe (such as 5, 7, or 10 years).

If you're evaluating prospective investment properties in the area to see how these numbers stack up, try running scenarios through our Rental Property Calculator.

Step 2: Craft the Official Texas Offer

We live in Texas, but a cowboy handshake won't cut it. Everything must be put in writing.

To craft the offer, we use the standard TREC (Texas Real Estate Commission) One to Four Family Residential Contract and attach the Seller Financing Addendum.

The Seller Financing Addendum (LINK) explicitly outlines:

1. Buyer Vetting Procedures: Details on how the buyer will be evaluated before extending credit.
2. Loan Terms: All agreed-upon rates, terms, and payment amounts.
3. Resale Restrictions: Any restrictions on reselling the property during the loan term.
4. Taxes & Insurance (Escrow): Whether an escrow account will be set up for the buyer to pay into for annual property taxes and insurance premiums.

While these TREC forms establish the agreement, the specific financial details will ultimately be drafted into a formal promissory note by a qualified attorney.

Step 3: Vet the Buyer (Underwriting)

I wouldn't lend someone $120,000, $150,000, or $400,000 without knowing who they are, and a seller shouldn't either. Once the offer is accepted, the seller must underwrite the buyer.

• Basic Vetting: At a bare minimum, vet the buyer like a tenant. Collect proof of income, a credit report, and a background check.
• Advanced Vetting: You can go full "bank mode" by utilizing Dodd-Frank compliant underwriting through a professional third-party company (which typically costs $1,000+).

The goal is to find a middle ground where the seller feels completely comfortable and the buyer is transparent. If the background check reveals the buyer isn't a good fit, the seller has the contractual right under the addendum to cancel the deal.

Step 4: Title, Document Signing, and Closing

Closing a seller-financed deal is nearly identical to closing with a traditional bank. You go to the same title company, sit at the same table, sign with the same notary, perform title searches, and bring your down payment.

During closing, two crucial documents are executed:

• Promissory Note: This acts as the official legal IOU between buyer and seller.
• Deed of Trust: This is recorded directly with the county to secure the loan against the property.

Pro Tip: Buyer closing costs are usually much lower because you avoid traditional bank lending fees. However, do not cheap out on drafting documents with online templates. Hire a local real estate attorney to draft the promissory note. It establishes a great legal relationship locally in case issues like evictions or foreclosures ever arise down the road.

Step 5: Loan Servicing and How the Deal Ends

Once closed, how do monthly payments work, and how does the deal eventually end?

Making Monthly Payments

• Direct Payments: The buyer can mail checks directly to the seller every month.
• Third-Party Servicing: For $20 to $40 a month, you can hire a loan servicing company. They provide online portals for buyers, automatically process payments, manage escrows, and issue end-of-year tax forms.

How the Loan Concludes

Eventually, the seller gets paid off in full through one of three ways:

1. Refinance, Sale, or Buyout: The buyer chooses to refinance into a traditional mortgage, sell the property and use the proceeds, or pay off the remaining balance with cash.
2. Balloon Maturity: The agreed balloon term ends, forcing the buyer to refinance, sell, or pay cash.
3. Foreclosure: If the buyer defaults, the seller can exercise their deed of trust recorded with the county to foreclose. While nobody wants to go through it, non-judicial foreclosure in Texas is straightforward compared to many other states.

Ready to Explore Seller Financing in Bryan/College Station?

Seller financing is an incredible, win-win strategy when structured correctly with local professionals. Whether you are an investor looking to grow your local footprint or a seller wanting consistent monthly income, my team and I are here to help you navigate every step.

If you want to run the numbers on an upcoming real estate investment, check out our online Rental Property Calculator.

Have questions or want to negotiate your next deal in Aggieland? Reach out to us directly at info@schwartzrealtygroup.com—we look forward to working with you!

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