Texas Foreclosure Law

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In many states, you must go through the judicial system (the courts) to conduct a real estate foreclosure. Texas foreclosure law, however, does not typically require court involvement. As such, Texas is considered a non-judicial foreclosure state.

If you have loaned money to an individual to purchase real estate or owner-financed the sale of your real estate, you should have obtained a promissory note from the buyer as well as a deed of trust (sometimes referred to as a mortgage). The promissory note outlines the terms of payment and the deed of trust gives the lender a lien (i.e. the property becomes collateral for the loan). If your loan was documented properly and you are not getting paid in accordance with the promissory note, you can force the sale of the property to repay the note.

The Texas Foreclosure Process (Non-Judicial)

1. Notice of Default - Prior to proceeding with a foreclosure, Texas law states that the lender must mail the borrower a notice of default (aka demand letter) informing the borrower that he/she has twenty days to pay the delinquent payments (the cure period) or the debt will be declared due and foreclosure proceedings will begin.

2. Acceleration of Maturity Date - At some point after the twenty day cure period has expired, a Notice of Acceleration will be mailed to the borrower via certified mail. This letter is typically accompanied by a notice of foreclosure.

3. Notice of Foreclosure - At least twenty one days before the foreclosure sale, a foreclosure notice must be: (a) filed with the county clerk; (b) mailed to the borrower at their last known address; and (c) posted at the county courthouse.

4. The Foreclosure Sale - The foreclosure sale must take place on the first Tuesday of any month, even if said Tuesday falls on a legal holiday, but only after the proper preliminary notices have been given. The sale is typically conducted on the courthouse steps by auction to the highest bidder for cash. Anyone may bid, including the lender, who bids by canceling out the balance due on the note, or some part of it.

5. Conveyance to Purchaser - The trustee will transfer the property to highest bidder via a trustee’s deed. The highest bidder/new owner will own property free and clear of any junior liens, but subject to any superior liens (superior liens typically include ad valorem real property taxes and liens recorded before your deed of trust is recorded).

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