If you sell homes in Texas on owner-finance terms, January is a busy month. For many executory contracts, such as a contract for deed or a lease with an option to buy, the seller must send the buyer an annual accounting statement every January.
The short answer: under Texas Property Code Section 5.077, a seller under a covered executory contract must provide an annual statement in January showing what was paid, what is still owed, how many payments remain, and any taxes or insurance paid on the buyer’s behalf. If the statement is mailed, it must be postmarked by January 31. The cleanest way to hit that date is to start organizing records in October, not on January 30.
This guide explains what the statement covers, which deals it may apply to, and a simple October to January workflow. It is general education, not legal advice. Your contracts, your attorney, and your CPA should guide the final calls.
Which owner-finance deals does this apply to?
Texas Property Code Chapter 5, Subchapter D covers executory contracts for the conveyance of residential property. In plain terms, these are deals where the buyer moves in and makes payments, but the deed is not delivered until later.
Based on Section 5.062, here are some key points to review with your attorney:
- Residential use: the subchapter applies when the property is used, or will be used, as the buyer’s residence (or a close relative’s). A lot of one acre or less is presumed residential.
- Lease-options count: an option to buy that is combined with a residential lease is treated as an executory contract for this subchapter.
- Short deed timelines: a contract that delivers the deed within 180 days of final execution is excluded.
- Exceptions exist: some family transactions with a written waiver, and some short lease-options of three years or less, follow narrower rules.
Many Texas owner-finance sales are structured differently, with a deed delivered at closing plus a promissory note and deed of trust. Those deals are generally outside Subchapter D, so Section 5.077 may not apply. Even so, a clean year-end payment summary is a strong habit. Ask your attorney which rules fit each file.
What the January annual statement must include
Section 5.077(b) lists the information the statement must include:
- The amount paid under the contract
- The remaining amount owed
- The number of payments remaining
- Amounts paid to taxing authorities on the buyer’s behalf, if the seller collected them
- Amounts paid to insure the property on the buyer’s behalf, if the seller collected them
- If the property was damaged and the seller received insurance proceeds, an accounting of how the proceeds were applied
- If the seller changed insurance coverage, a legible copy of the current policy, binder, or other evidence of coverage
Two related rules are worth knowing. Section 5.068 says that if negotiations were conducted mainly in a language other than English, documents such as annual accounting statements must also be provided in that language. And Section 5.077(e) says the statement requirement continues even after a buyer obtains title by conversion or another process.
Why the deadline matters
The statute sets specific consequences for missing the January requirement. A seller who does fewer than two of these transactions in a 12-month period can owe $100 in liquidated damages for each late statement, plus reasonable attorney’s fees. A seller who does two or more in a 12-month period can owe $250 for each day after January 31 that the statement is not provided, capped at the property’s fair market value, plus reasonable attorney’s fees.
Buyers can also ask for payoff information during the year. Under Section 5.082, a buyer under a covered executory contract (other than a lease-option) may make a written request for the amount owed, and the seller must respond in writing on or before the 10th day after receiving it. If your payment history lives in five places, that 10-day window can feel very short.
Penalties are not the only reason to stay organized. A clear statement builds trust with your buyer, and it makes any later payoff, refinance, or dispute far easier to handle.
An October to January workflow for Texas owner-finance sellers
You do not need complex software. You need a calendar and one place for each file. Here is a practical rhythm.
October: inventory every contract
- List every active owner-finance file with the property address, buyer names, and contract type.
- Flag which files your attorney has identified as executory contracts covered by Subchapter D.
- Note any file where negotiations were mainly in another language.
- Confirm current mailing addresses for each buyer.
November: reconcile the payment ledger
- Match every payment received this year to bank deposits or your servicer’s records.
- Separate principal, interest, late fees, and any tax or insurance amounts, as your contract defines them.
- List missing, partial, or returned payments so you can review them before the statement goes out.
- Confirm the remaining balance and number of payments left against the amortization schedule.
December: confirm taxes, insurance, and drafts
- If you collect for taxes, gather receipts or statements showing what was paid to each taxing unit.
- If you collect for insurance, confirm premiums paid and whether coverage changed this year.
- Note any insurance claim and how proceeds were applied.
- Prepare draft statements and send them to your attorney or CPA for review if needed.
January: deliver and document
- Send each statement early in the month, using the delivery method your attorney recommends.
- If you mail statements, keep proof of the postmark date, which must be no later than January 31.
- Save a copy of each statement and proof of delivery in the property file.
- Log any buyer questions and route disputes to you or your attorney.
Hypothetical example: A Texas investor holds six owner-finance files, including two lease-options and one contract for deed on a mobile home lot. In October, a team member builds a one-page tracker for all six. In November, the ledgers are reconciled and one missing September payment is flagged for the owner to review. In December, drafts go to the investor’s attorney. Statements are mailed in the first week of January with certified mail receipts saved to each file. This example is illustrative only.
Common mistakes to avoid
Waiting until late January. Reconciling a year of payments in a few days leads to errors. Start in the fall.
Mixing payments across files. One shared deposit account is fine, but each payment needs a clear note showing which contract it belongs to.
Guessing on tax and insurance amounts. Use receipts and statements, not estimates. If you did not collect those amounts, say so in a way your attorney approves.
Assuming every deal is the same. A contract for deed, a lease-option, and a deed with a note can follow different rules. Confirm each file’s status with counsel.
No proof of delivery. If a buyer later says they never got a statement, a saved mailing receipt and copy can help your attorney respond.
How virtual administrative support can help, under your direction
VREMCO (Virtual Real Estate Machine Company), also called the Virtual Real Estate Machine, provides virtual administrative and operational support as an extension of your team. Owner-financed property administration is one of the administrative services VREMCO provides, and you can see the broader list of support areas on the services section of vrem.co.
For year-end owner-finance work, administrative support can include:
- Building and updating a contract tracker for every active file
- Reconciling payment ledgers against deposits or servicer reports
- Gathering tax receipts and insurance documents you provide or authorize
- Preparing draft statements on templates you or your attorney approve
- Scheduling mailings, saving proof of delivery, and filing copies
- Logging buyer questions and routing them to you
What stays with you: deciding which law applies to each file, approving every statement, resolving payment disputes, choosing remedies on default, and instructing your attorney or CPA. VREMCO does not give legal or tax advice and does not make decisions on your behalf. You can learn more about the team on the About Us section.
Limitations and alternatives
Organized records do not replace legal review. If a contract was drafted without proper disclosures, a tidy statement will not fix that. Talk with a Texas real estate attorney about any file with open questions.
There are other ways to handle this work. Some sellers use a third-party loan servicing or escrow company to collect payments and send annual statements. Others use servicing software and do the work themselves. Virtual administrative support fits owners who want to keep control and decisions in-house while handing off the recurring paperwork. Pick the model that fits your volume and comfort level.
FAQs
When is the Texas owner-finance annual statement due?
For executory contracts covered by Section 5.077, the statement is due in January of each year for the term of the contract. If it is mailed, it must be postmarked no later than January 31.
Does Section 5.077 apply to a sale with a deed and a promissory note?
Generally, Subchapter D covers executory contracts where the deed is delivered later. A sale with a deed at closing plus a note and deed of trust is usually structured differently. Ask your attorney to confirm how each file is classified.
Does a lease with an option to buy count?
Under Section 5.062, an option to purchase combined with a residential lease is treated as an executory contract for this subchapter. Some shorter lease-options follow narrower rules, so review each one with counsel.
What if a buyer asks for their balance mid-year?
Section 5.082 lets a buyer make a written request for the amount owed. The seller must respond in writing on or before the 10th day after receiving the request. That section does not apply to lease-options. Keeping ledgers current all year makes requests easy to answer.
Can VREMCO send statements without my approval?
No. VREMCO works under your written procedures. You approve the templates and the final statements, and you decide how disputes are handled.
Conclusion
January annual statements are a predictable deadline. Inventory your contracts in October, reconcile payments in November, confirm taxes and insurance in December, and deliver with proof in January. That rhythm protects your buyers, your records, and your time.
If you want help with the administrative side while you keep every decision, VREMCO can support that workflow. Founded in 2020, VREMCO supports 100+ units and is backed by 35+ years of combined real estate and operational experience across its ownership and leadership team. Have questions first? The FAQ section is a good place to start.
Ready to talk through your year-end owner-finance process? Use the contact form, email support@vrem.co, or call 713-360-0789.
Photo: “Property Contract Law and Mortgages” by advokatsmart.no, CC BY 2.0. Cropped, mirrored, and combined with VREMCO branding.
This article is general information about Texas law and is not legal or tax advice. Consult a licensed Texas attorney or CPA about your situation.