A family has held a few acres of land along a Brownsville industrial corridor for decades. A buyer, a young logistics company with a parent business in Matamoros, likes the site and offers close to the asking price, on one condition: the family carries part of the price as a note and gets paid over time. One sibling likes the monthly income. Another worries about what happens if the payments stop. A third asks whether the taxes are due all at once. All three questions are fair, and the answers depend on documents that have not been written yet.
This article is an owner brief on selling with seller financing, sometimes called owner financing or "carrying the note," for owners and investors selling industrial land, warehouses, flex buildings, yards, or small commercial buildings in Brownsville and Cameron County. It is not legal, tax, or lending advice. How to prepare a property for sale, 1031 exchanges, and FIRPTA withholding live in our selling guide. What a buyer checks on a leased building lives in buying a leased industrial building. Bank and SBA options for owner-users live in SBA 504 and 7(a) financing. This page owns the seller's side of a carried note: what the note and deed of trust do, the terms owners negotiate, the protections that belong at closing, servicing after closing, what happens if the buyer defaults, and how an installment sale is reported for tax purposes.
Alfredo Cristo Realty Group operates from Brownsville with more than 45 years of advisory and stewardship experience, Texas real-estate licensing, and a background in Mexico corporate and real-estate law. The goal matches our promise: Experience that protects your investment. Education first. Specialist handoff when the question leaves the real-estate lane.
Can a Texas seller who carried the note foreclose without going to court if the buyer stops paying? If the deed of trust gives the trustee a power of sale, Section 51.002 of the Texas Property Code allows a nonjudicial sale at public auction on the first Tuesday of a month between 10 a.m. and 4 p.m., in the area of the county courthouse designated by the commissioners court. Notice must be given at least 21 days before the sale by posting at the courthouse door, filing with the county clerk, and serving each debtor obligated on the debt by certified mail. The deed of trust itself can add steps, so the documents are read first.
How long does a Texas seller have to enforce a seller-financed lien on real property? Section 16.035 of the Texas Civil Practice and Remedies Code generally requires a suit to foreclose, or a sale under a power of sale, within four years after the cause of action accrues. For a note payable in installments, the four years do not begin until the maturity date of the last installment. When the period expires, the statute says the lien and the power of sale become void.
This page is educational only. It is not legal, tax, lending, or investment advice. Retain a Texas real-estate attorney (and a Mexican attorney when the buyer, a guarantor, or assets are in Mexico), a CPA, a title company, and your insurance broker for those decisions. Nothing below sets an interest rate, a down payment, a term, a price, a tax result, or the outcome of any default or foreclosure. Legal references are attributed to the Texas and federal provisions they come from, listed in Sources.
Why this matters for Brownsville owners now
Three reasons make this a good time to understand a carried note before agreeing to one:
- Not every buyer fits a bank's box. Small suppliers, newly formed entities, and buyers whose business history sits partly in Mexico sometimes struggle to document a bank loan on a U.S. property. Seller financing can close that gap. It also moves the lender's risk onto the seller.
- Long-held and inherited land is changing hands. Families selling land held for decades, sometimes after the title work described in our inherited family land guide, often hear a buyer ask for terms. A note can spread the price over time, but it ties the family to the buyer for years.
- Many protective Texas rules are written for homes. Several statutes that govern seller-financed sales in Texas apply only to residential property. On industrial and commercial property, much of the seller's protection comes from the documents the parties sign, which makes careful drafting the main safeguard.
What seller financing is, stated plainly
In a seller-financed sale, the seller deeds the property to the buyer at closing, the buyer pays part of the price in cash, and the buyer signs a promissory note for the rest. The seller becomes the lender. The note is secured by a lien on the property sold, so if the buyer does not pay, the seller can look to the property.
The note, the deed of trust, and the vendor's lien
- Promissory note. The buyer's promise to pay: amount, interest, payment schedule, maturity, late charges, default, and acceleration. Whoever signs it, and in what capacity, determines who is personally liable.
- Deed of trust. The security instrument. The buyer grants a lien to a trustee for the seller's benefit, usually with a power of sale and covenants about taxes, insurance, use, and transfer. Chapter 51 of the Texas Property Code governs sales under a power of sale.
- Vendor's lien. The deed to the buyer often reserves a vendor's lien securing the unpaid price. Section 16.035 of the Civil Practice and Remedies Code lists a vendor's lien, a superior title retained by a vendor, and a deed of trust among the "real property liens" its limitations rule covers.
- Guaranty. When the buyer is an entity, the seller may ask the owners or a parent company to guarantee the note. Our tenant default guide explains why a guaranty must be in writing and signed under Texas law.
The seller as lender: what changes in your risk
A cash sale ends the seller's exposure at closing. A carried note keeps it open. The seller now depends on the buyer's payments, on the buyer keeping taxes paid and the building insured, and on the property holding its value as collateral. If the buyer defaults, the seller's remedy is usually to foreclose and take the property back, sometimes in worse condition than when it was sold. Counsel and a CPA can help compare a carried note with a cash sale at a lower price, a bank-financed buyer, or a shorter note that the buyer refinances.
Terms owners negotiate before signing
The terms below are business points first and legal points second. None of them has a standard answer. Counsel drafts them to fit the property and the buyer.
Down payment, payment schedule, and maturity
- Down payment. Cash at closing gives the buyer something to lose and gives the seller a cushion if the property must be taken back. How much is a negotiation, not a rule.
- Payment schedule. Monthly, quarterly, or another schedule, with principal and interest fully amortized or with a larger payment due at maturity.
- Maturity and balloon. A shorter note with a balloon payment assumes the buyer will refinance or sell before maturity. The seller should ask what happens if that refinancing does not come through.
- Prepayment. Whether the buyer can pay early, and on what terms. Prepayment can affect the seller's tax reporting, so a CPA should see the draft.
Interest and the commercial-loan rules
- Interest ceilings. Section 306.002 of the Texas Finance Code says a creditor on a commercial loan may contract for interest that does not exceed the ceilings computed under Chapter 303, and that the remedies and penalties of the usury subtitle apply unless Chapter 306 provides otherwise. Counsel should set the rate, late charges, and default interest with that framework in mind.
- Federal disclosure rules. Under 12 CFR 1026.3, Regulation Z (Truth in Lending) does not apply to credit extended primarily for a business, commercial, or agricultural purpose, or to credit extended to someone other than a natural person. A sale of an industrial building to a company usually sits outside it, but the facts decide, so counsel confirms.
- Little or no stated interest. IRS Publication 537 explains that when an installment sale carries little or no interest, part of the price may be treated as interest for tax purposes under the unstated-interest and original-issue-discount rules. A rate that looks generous to the buyer may not hold up for tax reporting.
Covenants that protect the collateral
- Taxes and insurance. The deed of trust should require the buyer to pay property taxes and keep the building insured, with proof to the seller. Many sellers require monthly escrow deposits for both.
- Use and environmental conditions. Limits on hazardous uses, compliance with law, and access for inspection. Our environmental baseline guide covers why documenting condition matters.
- Transfer and further liens. A clause letting the seller accelerate the note if the buyer sells or further encumbers the property without consent, and limits on later liens.
- Improvements and construction. If the buyer plans to build, the seller's lien position against construction lenders and contractors needs attention. Our mechanic's lien guide explains how contractor liens attach.
- Partial releases on land. A buyer developing land in phases may ask for release of parcels as payments are made. Release prices, access, and the shape of what stays as collateral should be set in writing. Our ground-up development guide covers platting, which can affect how parcels are described.
- Agricultural valuation. If the land carries an agricultural appraisal, a change of use can trigger rollback taxes. Who pays belongs in the contract; see our ag valuation and rollback guide.
Closing protections
Recording and title
Section 13.001 of the Texas Property Code says an unrecorded conveyance of real property, including a deed of trust, is void as to a creditor or a subsequent purchaser for value without notice. The seller's deed of trust should be recorded in the Cameron County Clerk's real property records at closing, along with the deed. The Texas Department of Insurance promulgates a Loan Policy of Title Insurance (Form T-2), which a seller-lender can ask the title company to issue to insure the lien, alongside the buyer's Owner's Policy (Form T-1). A title company closing with escrow gives both sides a neutral place to sign, fund, and record.
Property taxes come first
Section 32.05 of the Texas Tax Code gives a property tax lien priority over the claims of creditors and holders of liens, regardless of whether the other lien existed first. Unpaid taxes can therefore sit ahead of the seller's note. Section 32.06 also lets an owner authorize a licensed property tax lender to pay the taxes and take a transfer of the tax lien. Sellers often require tax escrows, proof of payment each year, and notice to the seller of any tax-lien transfer. For how commercial property taxes are set and protested, see our appraisal protest guide and ownership costs guide.
Insurance and the seller as loss payee
The buyer's property policy should name the seller as mortgagee or loss payee, so insurance proceeds after a fire or windstorm protect the collateral. Your broker can explain the endorsements. Flood and windstorm exposure in the Lower Rio Grande Valley is covered in our resilience guide.
Guaranties and buyers tied to Mexico
When the buyer is a newly formed Texas entity owned by people or companies in Mexico, the seller's practical recovery may depend on a guaranty and on assets the seller can reach. Collecting a deficiency or a guaranty against assets in Mexico is a question for Mexican counsel, not something to assume. Our binational capital guide covers entity and banking structure from the investor's side.
Residential rules that usually do not govern commercial deals
Texas has detailed rules for seller-financed homes. Owners selling industrial or commercial property should know these exist and where their boundaries are:
- Executory contracts (contracts for deed). Subchapter D of Chapter 5 of the Texas Property Code applies to executory contracts for property used or to be used as the purchaser's residence or a close relative's residence. Section 5.062 adds that a lot of one acre or less is presumed to be residential property. A small vacant lot can trip that presumption, so counsel should review any installment structure on small parcels.
- Wrap mortgage loans. Chapter 159 of the Texas Finance Code regulates wrap mortgage loans, which it defines in terms of residential real estate.
- Truth in Lending. As noted above, Regulation Z excludes credit primarily for business, commercial, or agricultural purposes.
Outside those rules, a carried note on commercial property is mostly governed by the note, the deed of trust, Chapter 51 of the Property Code, and general contract law. The documents carry more of the load.
Servicing the note after closing
- Keep a payment ledger. Date, amount, principal, interest, late charges, and escrow, for every payment. It becomes evidence if there is ever a dispute.
- Check taxes every year. Confirm with the Cameron County Tax Assessor-Collector that the property taxes are paid, even when the buyer handles them.
- Check insurance every renewal. Ask for the declarations page showing the seller as mortgagee or loss payee.
- Keep addresses current. Section 51.0021 of the Property Code says a debtor must inform the mortgage servicer of a change of address. The seller should keep the buyer's notice address current in the file.
- Consider a third-party servicer. A servicer or the title company's escrow department can collect payments, track escrows, and issue year-end statements. It is a cost, but it adds records and distance.
When the buyer defaults
Notice, cure, and acceleration
The note and deed of trust set the default steps: written notice, a period to cure, and the right to accelerate the full balance. Follow them exactly. Section 51.002(d) of the Property Code requires a 20-day notice of default and opportunity to cure before a notice of sale only for property used as the debtor's residence; commercial documents often include their own notice and cure periods, and those control. Section 16.038 of the Civil Practice and Remedies Code allows the holder to rescind an acceleration by written notice, which can matter for the limitations clock.
Nonjudicial foreclosure in Cameron County
- Who conducts it. A trustee or substitute trustee named under the deed of trust. Section 51.0074 says a trustee may not be assigned duties other than exercising the power of sale under the security instrument, or be held to the obligations of a fiduciary of the mortgagor or mortgagee.
- When and where. Section 51.002 sets the first Tuesday of a month, between 10 a.m. and 4 p.m., in the courthouse area designated by the commissioners court. The Cameron County Clerk states that sales take place at the west side of the Cameron County Courthouse, or as designated by the Commissioners Court.
- Notice. At least 21 days before the sale: posting at the courthouse door, filing in the county clerk's office, and certified mail to each debtor obligated to pay. Section 51.002(e) treats certified mail service as complete when the notice is deposited in the mail addressed to the debtor's last known address. The Cameron County Clerk's Recordings Division files notices of trustee sales.
- Military service statement. Section 51.002(i) requires the notice to include a conspicuous statement about the rights of a debtor, or a debtor's spouse, serving on active military duty.
After the sale: deficiency and fair market value
If the sale brings less than the debt, Section 51.003 allows the holder to sue for the deficiency within two years after the foreclosure sale. A person against whom the deficiency is sought may ask the court to determine the property's fair market value as of the sale date, and if the court finds a value higher than the sale price, that person is entitled to an offset against the deficiency. Section 51.005 provides a related procedure for guarantors. A deficiency is not automatic money; it is a lawsuit with its own costs.
Alternatives: workout, deed in lieu, and judicial foreclosure
- Workout or modification. A written agreement changing payments or maturity. Section 16.036 says a recorded extension agreement can suspend limitations, and Section 16.037 says an unrecorded extension is void as to a later good-faith purchaser or lienholder for value without notice.
- Deed in lieu of foreclosure. The buyer deeds the property back. Section 51.006 lets the holder void a deed in lieu before its fourth anniversary if the debtor failed to disclose a lien the holder did not know about, and lets the holder foreclose the original deed of trust without first voiding it. A title search before accepting one matters.
- Judicial foreclosure. A lawsuit instead of a trustee's sale. Section 51.004 lets a person obligated on the debt, including a guarantor, sue for a determination of fair market value within 90 days after a judicial foreclosure sale.
Limitations: do not let the lien expire
As noted in the second answer above, Section 16.035 generally sets a four-year period to sue or sell under a power of sale, running for an installment note from the maturity of the last installment, after which the lien and power of sale are void. Acceleration and extensions affect the timeline. A seller holding a matured or defaulted note should talk to counsel promptly.
Taxes: reporting an installment sale
IRS Publication 537 describes the rules a CPA will apply. In summary:
- What qualifies. An installment sale is a sale where at least one payment is received after the tax year of the sale. Gain is generally reported as payments come in, on Form 6252.
- What does not. The installment method cannot be used to report a loss, and it does not apply to dealer sales or real property held for sale to customers in the ordinary course of business. A seller may elect out and report all the gain in the year of sale.
- Depreciation recapture. Recapture income on depreciated property is reported in full in the year of sale, even if no principal is received that year.
- Interest rules. Unstated interest may apply if the note carries little or no interest, and an interest charge on deferred tax can apply when the sales price is over $150,000 and the seller's outstanding installment obligations exceed $5 million at year end.
- Pledging the note. Pledging an installment note as security for a loan can be treated as a payment for certain sales with a price over $150,000.
- Repossession. Publication 537 includes specific rules for repossessing real property sold on an installment basis, including when gain is recognized and the basis of the property taken back.
- Foreign sellers. FIRPTA withholding still applies to a foreign seller's sale. The IRS lists applications under special installment sale rules among the categories for a withholding certificate on Form 8288-B. Our selling guide covers FIRPTA basics.
Documents folder for a seller-financed sale
Before closing, the seller's folder should hold:
- The purchase contract with the financing terms, and the title commitment
- Final note, deed of trust, deed with any vendor's lien, and any guaranty, as signed
- Recorded copies with Cameron County Clerk instrument numbers
- The Loan Policy of Title Insurance, if obtained
- Insurance declarations naming the seller, and tax-escrow instructions
- The buyer's entity documents, authority to sign, and notice addresses
- Survey, environmental reports, and any partial-release schedule
- The payment ledger and annual tax and insurance confirmations after closing
- The CPA's notes on installment-sale reporting
Common mistakes owners make
- Using a generic form. Residential forms and online templates may not fit a commercial sale or a phased land deal.
- Skipping the title company. An unrecorded deed of trust is void against a later purchaser or creditor without notice.
- Not checking taxes. A tax lien can take priority over the seller's lien.
- No insurance endorsement. If the seller is not named, a loss can leave the collateral damaged and the proceeds elsewhere.
- Accepting a deed in lieu without a title search. Other liens may have attached since closing.
- Letting a matured note sit. Section 16.035 can make the lien void.
- Assuming a guaranty reaches Mexico. Collection across the border is a separate legal question.
- Leaving the CPA out until April. Interest terms, prepayment, and recapture shape the tax result.
Questions to bring to counsel
- Should this sale be a note and deed of trust, a vendor's lien deed, or another structure, and why?
- What default, notice, cure, and acceleration language protects me without creating problems later?
- What interest rate, late charges, and default interest fit Texas commercial-loan rules for this note?
- Should I require escrows for taxes and insurance, and who should service the note?
- What guaranties or other security should I ask for, and how would I enforce them if the guarantor is in Mexico?
- If the buyer plans construction, how do I protect my lien position?
- How would a foreclosure, deed in lieu, or deficiency claim work on this property in Cameron County?
- And for the CPA: how will this sale be reported, what is recaptured in year one, and how do the interest rules apply?
How Alfredo Cristo Realty Group helps
We help Brownsville and Cameron County owners organize the real-estate side of a seller-financed sale: framing the property, the buyer conversation, and the terms to take to counsel; coordinating the title company, surveys, and inspections; and, after closing, keeping the payment, tax, and insurance records in order as part of management / stewardship. We connect owners with Texas real-estate attorneys, Mexican counsel, CPAs, title companies, and insurance brokers, and serve as an accountable Brownsville point of contact through consultation / contact. We are not lawyers or lenders, we do not give legal or tax advice, and we do not promise prices, payments, tax results, or the outcome of any default or foreclosure.
Review current properties and market context without pressure toward a listing, or read about Alfredo's background. Related reading: selling guide, buying a leased building, SBA financing, tenant default, inherited family land, land due diligence, and binational capital. More on the Insights hub. Spanish readers: Artículos.
The objective: help owners decide whether to carry a note with the documents, records, and specialists in place before the buyer's first payment is due.
Sources
- Texas Property Code, Chapter 51 (Provisions Generally Applicable to Liens), Sections 51.0001, 51.002, 51.0021, 51.003, 51.004, 51.005, 51.006, and 51.0074; Section 13.001; and Chapter 5, Subchapter D, Sections 5.061 and 5.062, via the Texas Legislature statutes site and a public statute mirror (accessed November 4, 2026)
- Texas Legislature Online, Senate Bill 372 (89th Legislature, Regular Session, 2025), enrolled text amending Section 51.0001 (accessed November 4, 2026)
- Texas Civil Practice and Remedies Code, Chapter 16, Sections 16.035, 16.036, 16.037, and 16.038 (accessed November 4, 2026)
- Texas Tax Code, Sections 32.05 and 32.06 (accessed November 4, 2026)
- Texas Finance Code, Section 306.002 and Chapter 159, Section 159.001 (accessed November 4, 2026)
- Consumer Financial Protection Bureau, Regulation Z, 12 CFR 1026.3 (Exempt transactions), via the Electronic Code of Federal Regulations (accessed November 4, 2026)
- Internal Revenue Service, Publication 537, Installment Sales, and "Withholding Certificates" (FIRPTA) (accessed November 4, 2026)
- Texas Department of Insurance, Title Insurance Basic Manual, Section II, Forms T-1 and T-2 (accessed November 4, 2026)
- Cameron County Clerk, Real Property Land Records page (recordings, notices of trustee sales, foreclosure sale location) (accessed November 4, 2026)
Educational disclaimer (repeated): This page is owner education only. It is not legal, tax, lending, or investment advice, and it does not recommend any interest rate, down payment, term, or structure, or predict the result of any default, foreclosure, or tax filing. Do not rely on it to draft notes, deeds of trust, notices, or sale documents. Work with a Texas real-estate attorney, a CPA, a title company, and your insurance broker, and with Mexican counsel when buyers, guarantors, or assets are in Mexico. Verify current statutes, county procedures, and IRS guidance before acting.
This guide is also available in Spanish: /es/articulos/financiamiento-del-vendedor-propiedad-industrial-comercial-brownsville-pagare-gravamen.