Buying pre-construction in Texas

No filing, a statement instead

In Florida, New York and California, a state office reviews a new condominium’s documents before any unit is sold. Texas does not. Its condominium law, in chapter 82 of the Property Code (opens in a new tab), puts the duty on the developer, called the declarant, who must give every buyer a condominium information statement.

Under section 82.153 of the Texas Property Code (opens in a new tab), the statement carries the declaration, bylaws and rules, a projected budget for the association’s first year with the assumptions behind it, a description of the insurance and the fees for common facilities. Read the budget closely. It sets your monthly assessment, and it is the developer’s own projection, not a figure any agency has checked.

1. Before signingInformation statementThe declaration, bylaws, budget and insurance, from the developer rather than a state office.
2. SigningDeposit into escrowHeld in Texas by a title company, an attorney, a broker or an insured institution.
3. 5 daysCancel if it came lateIf the statement arrives after you sign, five days to cancel, with every payment refunded.
4. As it buildsThe contract governsThe deposit schedule, the completion date and any extension are set by the contract, not by statute.
5. CompletionClosingThe deposit applies to the price, and the escrow closes.

Five days to cancel

If the statement reaches you only after you sign, section 82.156 (opens in a new tab) gives you five days from receiving it to cancel, without penalty, and every payment you made comes back. Cancel in writing, by hand delivery or by certified mail with a return receipt.

Many developers hand over the statement first and have you confirm, in bold or underlined print in the contract, that you received it and were advised to read it. Once you have signed that, the five days fall away, so read the statement before you sign.

Your deposit stays in escrow

Under section 82.158 (opens in a new tab), a deposit paid to the declarant is held in escrow in Texas by a licensed title company, an attorney, a broker or an insured institution. It stays there until closing, a default under the contract or a refund. The escrow may earn interest, and the contract says who receives it.

That puts Texas closer to New York than to Florida, where deposits above 10 percent of the price may pay for construction. Ask which title company holds your deposit, and read the escrow terms in the contract.

What the statute leaves to the contract

Texas law does not set the size of the deposit, a deadline to finish or what happens when a building runs late. The purchase contract does: the deposit schedule, the estimated completion date, the developer’s right to extend it and what you may do once it passes. Improvements labeled “must be built” on the plats and plans bind the developer to finish them under section 82.163 (opens in a new tab). Anything else on the drawings is not a promise.

Questions to ask before you sign

1. Have I received the full condominium information statement, with every amendment?
2. Who holds my deposit in escrow, and who earns the interest?
3. What is the estimated completion date, and how far can the developer extend it?
4. What happens to my deposit if the building is never finished?
5. Which amenities are marked “must be built” on the plans?
6. What does the first-year budget assume about occupancy and inflation?
7. Has the developer completed buildings like this one before? Can I see them?

Our guide to buying new construction in Texas covers property taxes, the homestead exemption and the builder’s warranty.

Why an advisor helps

With no state review, a Texas buyer is often the first person outside the developer to read the documents closely. A buyer’s advisor adds what they leave out: how this building’s prices compare with the towers around it, which lines sell first and what the budget is likely to become. If you are weighing a new building in Dallas, Austin or Houston, we are glad to talk it through. 

General information only, not legal or tax advice. Texas law changes, and every contract is different. Review your documents with a Texas real estate attorney before you sign.