Can I Sell Part of My Land Note in Texas? Partial Sale Explained

If you hold a promissory note on land in Texas and you need cash but do not want to give up the entire payment stream, a partial note sale may be exactly the solution you are looking for. The concept is straightforward — instead of selling your entire note to a buyer, you sell only a portion of the future payments and retain the right to receive the remaining payments once the buyer has collected theirs. This approach allows you to access a lump sum of cash now while preserving a significant portion of your long-term investment, and it is a strategy that thousands of Texas note holders have used to meet their financial goals without sacrificing the full value of their note.

The question of whether you can sell part of your land note in Texas comes up frequently, and the answer is a definitive yes. Partial note sales are a well-established practice in the secondary note market, and experienced buyers like Longhorn Note Buyers handle them regularly. The key is understanding how partial sales are structured, how they differ from full sales in terms of pricing and economics, and when a partial sale makes more financial sense than selling the entire note. This guide will cover all of those topics in detail so you can evaluate whether a partial sale is the right move for your situation.

Whether you need cash for a specific purpose — a down payment on another property, a business investment, medical expenses, or education costs — or you simply want to reduce your exposure to a single borrower while retaining upside potential, a partial note sale offers flexibility that a full sale does not. By the end of this guide, you will understand exactly how partial sales work, what factors affect the pricing, and how to structure a partial sale that maximizes your benefit.

How Partial Note Sales Work in Texas

The Basic Structure of a Partial Sale

In a partial note sale, you sell a specified number of your note's future monthly payments to a buyer. The buyer pays you a lump sum in exchange for the right to receive those payments as they come in from the borrower. Once the buyer has collected all of the payments they purchased, the note reverts back to you, and you resume receiving the remaining payments directly from the borrower. The borrower is usually unaware that anything has changed on the back end because the servicing of the note continues seamlessly throughout the partial period and beyond.

For example, suppose your note has 120 remaining monthly payments of $500 each at eight percent interest. You could sell the next 60 payments to a buyer while retaining the right to receive payments 61 through 120. The buyer would pay you a lump sum — the present value of 60 payments of $500 discounted at the buyer's required yield — and would then collect those 60 payments over the next five years. After the buyer has received their 60 payments, you would begin receiving the remaining 60 payments, which would continue until the note is paid off. At no point do you give up ownership of the note — you are simply assigning a portion of the payment stream.

Full Sale Versus Partial Sale — Understanding the Trade-Offs

The fundamental trade-off between a full and partial note sale is straightforward: a full sale gives you more cash now but eliminates your future payment stream entirely, while a partial sale gives you less cash now but preserves a portion of your long-term income. Which option is better depends entirely on your financial circumstances and goals. If you need the maximum amount of cash immediately and have no attachment to the future payment stream, a full sale is probably the right choice. If you need some cash now but also value the ongoing income from the note, a partial sale gives you the best of both worlds.

There is also a pricing advantage to partial sales that many note sellers are not aware of. Because the buyer in a partial sale is purchasing a shorter payment stream and the note seller retains a residual interest in the note, the buyer's risk is lower than in a full sale. The seller's retained interest creates an alignment of incentives — the seller has a financial stake in the borrower's continued performance — and the shorter investment horizon reduces the buyer's exposure to long-term risks like market downturns, collateral depreciation, and changing interest rates. These reduced risks typically result in a smaller percentage discount on the purchased payments compared to a full sale. For a comprehensive comparison of the two approaches, this article on full versus partial land note sales in Texas provides detailed analysis.

How Many Payments Should You Sell?

The number of payments you sell in a partial sale is flexible and can be tailored to your specific cash needs. You could sell as few as twelve payments or as many as the buyer is willing to purchase — though most partial sales involve selling somewhere between twenty-four and eighty-four payments. The right number depends on how much cash you need and how much of the future payment stream you want to retain.

A useful approach is to start with the amount of cash you need and work backward to determine how many payments would need to be sold to generate that amount. Your note buyer can help with this calculation — simply tell them how much cash you are looking for, and they can structure a partial sale that hits your target while maximizing the number of payments you retain. This approach ensures that you are not selling more of your payment stream than necessary to achieve your financial goals.

How Partial Sales Are Priced

The Present Value Calculation

A partial note sale is priced using the same present value methodology as a full sale, but applied to a shorter payment stream. The buyer calculates the present value of the specific payments being purchased, discounted at their required yield rate. Because the payment stream is shorter, the total discount in dollar terms is smaller, and the percentage discount is often smaller as well because of the reduced risk profile discussed earlier.

To illustrate, consider the example from above — a note with 120 remaining payments of $500 at eight percent interest. If a buyer requires a twelve percent yield to purchase the full note, they would pay approximately $34,900 for all 120 payments, a discount of roughly thirty percent from the total payment stream. If instead you sell only 60 payments, the same buyer at the same twelve percent yield would pay approximately $22,400 for those 60 payments. The dollar discount on the 60 payments is smaller, and when you factor in that you will still receive the remaining 60 payments (with a present value of approximately $18,300 at the note's eight percent rate), your total economic outcome from the partial sale may be superior to the full sale.

Why Partial Sale Discounts Are Often Smaller

Several factors contribute to the typically smaller discount percentage on partial note sales compared to full sales. First, the shorter investment horizon means the buyer's capital is at risk for less time, which reduces the overall risk of the investment. Second, the seller's retained interest creates a natural alignment of incentives — the seller has a financial motivation to ensure the borrower keeps performing because they will resume receiving payments after the buyer's portion is collected. Third, the buyer is purchasing the most imminent payments, which are the most predictable and least risky because they are closest in time to the present.

The risk reduction effect is most pronounced when the note has strong characteristics to begin with — good payment history, a reasonable LTV, and solid collateral. For notes with weaker characteristics, the discount difference between full and partial sales may be smaller because the underlying risk factors affect both the purchased and retained portions of the note. Regardless of the note's specific characteristics, asking your buyer to quote both a full and partial sale gives you the information you need to make the best decision for your situation.

Factors That Affect Partial Sale Pricing

The same factors that affect full note sale pricing also affect partial sale pricing — payment history, interest rate, LTV, collateral quality, and note structure all play a role. However, a few factors are especially important in the partial sale context. The number of payments being sold matters because selling a very small number of payments, say twelve, may not be economically efficient for the buyer due to the fixed costs of due diligence and closing. Most buyers have a minimum number of payments they are willing to purchase in a partial sale, typically twenty-four or more.

The position of the purchased payments in the overall payment stream also matters. In a standard partial sale, the buyer purchases the next consecutive payments, starting with the very next payment due. This is the most common and most straightforward structure. Less commonly, a buyer might purchase a block of payments from the middle or end of the note, but this type of structure is more complex and may be priced differently. For most sellers, the standard "next payments first" structure is the most practical and produces the best pricing. To understand how payment history and other factors influence overall pricing, review this resource on what determines note value in Texas.

When a Partial Sale Makes Sense

You Need a Specific Amount of Cash

Perhaps the most common reason note holders choose a partial sale is that they need a specific amount of cash for a defined purpose — a down payment on a new property, capital for a business venture, a medical expense, or a child's college tuition. In these situations, the seller knows exactly how much money they need, and a partial sale can be sized to generate that exact amount. By selling only enough payments to meet the cash need, the seller retains the maximum number of future payments and preserves as much of their long-term income as possible.

This targeted approach is far more efficient than a full sale when your cash need is less than the full note value. If your note is worth $40,000 in a full sale but you only need $20,000, selling the entire note means giving up $20,000 worth of future value that you do not need right now. A partial sale sized to generate $20,000 preserves the remaining payment stream, which continues to generate income for you after the buyer's portion is collected.

You Want to Diversify Your Risk

Holding a land note concentrates your financial exposure in a single borrower and a single piece of property. If the borrower defaults or the collateral loses value, your entire investment is at risk. A partial sale allows you to convert some of that concentrated risk into cash that you can deploy into other investments, diversifying your portfolio while retaining a smaller, more manageable exposure to the original note. This risk management strategy is particularly valuable if the note represents a large portion of your overall net worth.

By selling a portion of the payment stream and investing the proceeds in different asset classes — stocks, bonds, real estate, or another note — you reduce the impact that a single borrower default would have on your financial picture. You still retain an interest in the original note and will benefit from the borrower's continued performance, but you have hedged your risk by spreading your capital across multiple investments.

You Believe the Collateral Will Appreciate

If the property securing your note is in an area experiencing strong growth or development, you might believe that the collateral value will increase substantially over the coming years. In this scenario, holding the note long-term could become increasingly attractive as the LTV improves and the note becomes more valuable. A partial sale allows you to monetize some of the payment stream now while retaining the option to sell the remaining payments later at a potentially smaller discount, reflecting the improved LTV and stronger collateral position.

This strategy requires a degree of confidence in your market assessment, and there is always the risk that property values do not appreciate as expected. But for note holders who have informed views about the trajectory of land values in their area, a partial sale preserves the optionality to benefit from future collateral appreciation while still providing cash flow today.

How the Partial Sale Process Works

Getting a Quote for a Partial Sale

The quote process for a partial sale is similar to a full sale, with one additional piece of information: you need to specify either how many payments you want to sell or how much cash you need. If you know the number of payments, the buyer can quickly calculate the purchase price. If you know the cash amount, the buyer can work backward to determine how many payments would need to be sold to generate that amount. Either way, the buyer can typically provide a partial sale quote within 24 hours of receiving your note information.

When you request a quote, it is a good idea to ask for both a full sale quote and a partial sale quote so you can compare the two options side by side. Seeing both numbers allows you to evaluate the trade-offs clearly — how much more cash would a full sale generate versus a partial, and is the additional cash worth giving up the retained payment stream? Having both options in front of you empowers you to make the best decision for your specific situation.

Due Diligence and Closing

The due diligence and closing process for a partial note sale is essentially identical to a full sale. The buyer will verify the note terms and payment history, order a title search, evaluate the collateral, and prepare closing documents. The primary difference is in the closing documents themselves — instead of a full assignment of the note, the buyer will receive a partial assignment that specifies which payments they are entitled to collect, along with a reversion agreement that confirms your right to resume receiving payments after the buyer's portion has been collected.

The timeline for a partial sale is generally the same as a full sale — two to five weeks from initial quote to funding, depending on the complexity of the transaction. The buyer's due diligence is equally thorough because they are making the same type of investment and need the same level of confidence in the borrower and collateral. Once closing is complete, the funds are wired to your account, and the buyer begins collecting the purchased payments.

What Happens After the Buyer Collects Their Payments

After the buyer has collected all of the payments they purchased, the note reverts to you automatically under the terms of the reversion agreement. The servicer — whether it is the buyer's servicer, your original servicer, or a new servicer — will redirect the borrower's payments to you beginning with the first payment after the buyer's purchased stream is complete. In most cases, this transition is seamless and requires no action on your part.

It is worth noting that during the period when the buyer is collecting their purchased payments, you remain the owner of the note. If the borrower defaults during this period, both you and the buyer have a shared interest in the outcome, and the handling of a default situation is typically addressed in the partial purchase agreement. Most agreements provide that the buyer has the first right to pursue remedies such as foreclosure, and that any recovery is applied first to the buyer's purchased payments before any excess is distributed to you. Understanding these provisions before you sign the agreement ensures there are no surprises if the borrower encounters financial difficulties during the partial sale period.

Common Questions and Misconceptions About Partial Sales

Can Any Land Note Be Sold Partially?

In theory, any land note can be sold partially, but in practice, some notes are better candidates for partial sales than others. Notes with a large number of remaining payments are the best candidates because there is enough of a payment stream to split meaningfully between the buyer and the seller. A note with 120 or more remaining payments offers ample room for a partial sale that provides a meaningful lump sum to the seller while still leaving a substantial retained interest. A note with only 24 remaining payments has less room for a partial split, and the economics may favor a full sale in that case.

The note also needs to meet the buyer's basic purchasing criteria — adequate payment history, acceptable LTV, and satisfactory collateral. A note that would not qualify for a full sale due to serious deficiencies is unlikely to qualify for a partial sale either, because the buyer is making the same fundamental investment decision in either case. However, notes that are borderline for full sale pricing sometimes fare better as partial sales because the reduced risk exposure allows the buyer to be more comfortable with the investment.

Does the Borrower Need to Approve the Partial Sale?

In most cases, no. The assignment of a promissory note — whether full or partial — does not require the borrower's consent under Texas law unless the note itself contains a specific provision requiring it, which is uncommon. The borrower will be notified of the assignment and given new payment instructions, but their approval is not needed to complete the transaction. The borrower's payment terms — the interest rate, monthly amount, and due date — remain unchanged regardless of whether you sell the full note or a partial interest.

That said, the borrower's cooperation can be helpful during the process. If the buyer needs an estoppel certificate — a document in which the borrower confirms the current balance, payment status, and any defenses or claims — the borrower's willingness to provide this document can speed up due diligence and contribute to a smoother closing. Most borrowers are cooperative when asked to sign an estoppel certificate because it does not change their obligations in any way.

Can I Do Multiple Partial Sales Over Time?

Yes, it is possible to do multiple partial sales over the life of a note, effectively selling the payment stream in segments as your cash needs arise. This approach provides maximum flexibility — you can access cash when you need it while retaining as much of the payment stream as possible when you do not. Each partial sale is a separate transaction with its own pricing, and the discount on later partial sales may be different from earlier ones depending on how the note's characteristics have changed in the interim.

The main limitation on multiple partial sales is the number of remaining payments. After each partial sale, the remaining unsold payment stream becomes shorter, which reduces your future options and may affect pricing on subsequent partials. If you anticipate needing cash at multiple points in the future, discuss a long-term strategy with your buyer upfront so they can help you plan the most efficient approach to sequencing multiple partial sales.

Ready to Sell Your Note?

If you are interested in exploring a partial sale of your land note in Texas, Longhorn Note Buyers can provide you with a detailed quote that shows exactly how many payments you would need to sell to generate the cash you need, along with a comparison to a full sale so you can evaluate both options. With over $46 million in Texas notes purchased since 2007 and a 100% close rate on quoted deals, Longhorn has the experience and flexibility to structure a partial sale that meets your goals. Whether you want to sell 24 payments or 84 payments, Longhorn can tailor the transaction to your specific needs.

Call Longhorn Note Buyers today at (210) 828-3573 or visit longhornnotebuyers.com to request your free, no-obligation quote. Let Longhorn's team show you how a partial sale can put cash in your hand today while preserving your long-term income from the note. With an A+ Better Business Bureau rating and a reputation for fair dealing, Longhorn Note Buyers is the partner you need for a successful partial note sale in Texas.

Frequently Asked Questions About Partial Land Note Sales in Texas

How much cash can I get from a partial note sale?

The amount of cash you receive from a partial sale depends on the number of payments you sell, the payment amount, the interest rate on the note, and the buyer's required yield. As a rough guideline, selling 60 payments of $500 at a twelve percent buyer yield would generate approximately $22,000 to $25,000 in cash, though the exact amount varies by note. The best way to determine how much you can get is to request a quote from a buyer, specifying either the number of payments you want to sell or the cash amount you need.

Is the discount on a partial sale really smaller than on a full sale?

In most cases, yes. The discount percentage on a partial sale is typically smaller than on a full sale because the buyer's risk is reduced by the shorter investment horizon and the seller's retained interest. The difference varies by note, but it is common for the partial sale discount to be two to five percentage points lower than the full sale discount. While this may not sound like much, on a $50,000 note, a three percent improvement translates to $1,500 of additional value — and you also get to keep the retained payment stream.

What happens if the borrower defaults during the partial sale period?

If the borrower defaults while the buyer is collecting their purchased payments, the default provisions of the partial purchase agreement govern the outcome. In most cases, the buyer has the right to pursue remedies such as late fees, demand letters, and foreclosure. Any recovery from these efforts is typically applied first to the buyer's outstanding purchased payments before any excess is distributed to the note seller. The specific default provisions vary by buyer and should be reviewed carefully before you sign the purchase agreement.

Can I sell a partial interest if my note has a balloon payment?

Yes, partial sales are possible on notes with balloon payments, though the structure may be different depending on when the balloon is due relative to the number of payments being sold. If the balloon is due within the partial sale period, the buyer will factor the balloon into their pricing and their assessment of the borrower's ability to pay it. If the balloon is due after the buyer's purchased payments are collected, the balloon becomes your responsibility to collect or manage when the note reverts to you. Discuss the balloon timing with your buyer so they can structure the partial sale appropriately.

Do I need a lawyer to do a partial note sale?

While you are not legally required to have a lawyer represent you in a partial note sale, the transaction does involve legal documents — including a partial assignment and a reversion agreement — that define your rights and obligations. Having a real estate attorney review these documents before you sign is a prudent step, particularly if the note has a large remaining balance or if the partial sale structure is complex. The cost of a legal review is modest and the protection it provides is significant. Most note buyers welcome the involvement of the seller's attorney because it helps ensure that both parties are comfortable with the terms and that the closing proceeds smoothly.