How to Sell a Farm Note in Texas: Expert Advice

Texas is home to more farms than any other state in the country, and a significant number of those farm transactions are financed by the sellers themselves. If you sold farmland with owner financing and now hold a promissory note secured by that agricultural property, you are carrying an asset that can be converted into a lump sum of cash whenever you decide the timing is right. But farm notes have characteristics that set them apart from residential or even general land notes, and understanding those differences is essential to getting the best price when you sell.

Farm notes in Texas span an enormous range of properties. You might hold a note on irrigated cropland in the Panhandle, dryland cotton acreage in the Rolling Plains, rice fields along the Gulf Coast, pecan orchards in the San Saba Valley, or diversified row crop operations in the Blackland Prairie. Each type of farm property carries its own valuation dynamics, and the note secured by that property reflects those dynamics in ways that a buyer will carefully analyze before making an offer.

This guide brings together expert advice from seasoned note buyers who regularly evaluate and purchase farm notes across Texas. You will learn what makes farm notes different, how to position yours for the strongest possible offer, and what to expect throughout the selling process from your first phone call to the day the funds hit your bank account.

Why Farm Notes Are a Distinct Category in the Texas Note Market

Farm notes are not simply land notes that happen to involve agricultural property. They carry unique characteristics that influence every aspect of the valuation and selling process. Buyers who specialize in Texas notes understand these distinctions, and so should you as a seller.

Agricultural Productivity Drives Value

The value of farmland is fundamentally tied to what the land can produce. Unlike a residential property where value is driven by location, school districts, and neighborhood appeal, farm property value is driven by soil quality, water availability, irrigation infrastructure, crop yields, and the income those yields generate. A buyer evaluating your farm note will consider all of these factors because they determine both the property's market value and the borrower's ability to generate income to make payments.

This creates an important dynamic for note sellers. A farm note secured by highly productive irrigated cropland with documented yields and reliable water access is fundamentally a different asset than a note on marginal dryland acreage that produces inconsistent results. The more you can document about the farm's productivity, the more accurately a buyer can assess the note — and accurate assessments tend to favor well-documented notes.

Income Seasonality and Payment Patterns

Farm income is inherently seasonal. A cotton farmer receives the bulk of their income after harvest in the fall. A cattle rancher's income fluctuates with market prices and calving schedules. This seasonality can create patterns in note payments that look different from a salaried homeowner making consistent monthly mortgage payments.

Some farm notes are structured with annual or semi-annual payments to align with agricultural income cycles rather than traditional monthly amortization. Others have monthly payments but may show occasional seasonal variations in timing. Note buyers who are experienced with agricultural paper understand these patterns and do not penalize sellers for payment structures that reflect the realities of farming. However, you should be prepared to explain the payment structure and any seasonal patterns to buyers who may be less familiar with agricultural lending.

Agricultural Exemptions and Tax Benefits

Most farm properties in Texas carry an agricultural tax exemption that dramatically reduces the property tax burden. This exemption is a significant financial benefit to the borrower and, by extension, to the note holder. Lower property taxes mean lower carrying costs for the borrower, which supports their ability to make note payments consistently.

When selling your farm note, make sure the buyer understands that the ag exemption is in place and what the current tax assessment is. A buyer who is unfamiliar with agricultural exemptions might look at the property's market value and assume a much higher tax burden than actually exists, which could lead to an undervaluation of the note. Being proactive about sharing this information ensures the buyer has the complete picture.

Evaluating Your Farm Note Before You Sell

Before you contact buyers, take the time to evaluate your own note from the buyer's perspective. This exercise helps you anticipate questions, identify strengths to highlight, and address potential concerns before they become negotiating leverage for the buyer.

Current Property Value and Loan-to-Value Ratio

The current market value of the farm property is the foundation of your note's collateral value. Texas farmland prices have experienced significant appreciation over the past decade, driven by a combination of strong agricultural commodity prices, low interest rates in earlier years, and demand from investors and recreational buyers entering the agricultural land market.

If you originated your note several years ago, the property may be worth considerably more today than when you sold it. This appreciation improves your loan-to-value ratio and directly increases your note's value to a buyer. Research current comparable sales in your county using resources like the Texas Real Estate Research Center, USDA land value surveys, or conversations with local farm and ranch real estate brokers.

For example, if you sold 200 acres of irrigated farmland five years ago for $3,000 per acre and financed $400,000, but comparable land in your area now sells for $4,500 per acre making the property worth approximately $900,000, your LTV ratio has improved from roughly 67 percent to around 44 percent. That improvement represents real value in the secondary note market and should be prominently featured when you present your note to buyers.

Borrower Financial Strength and Payment History

The borrower's payment track record is the single most impactful factor you can present to a note buyer. A farm borrower who has made every payment on time through multiple growing seasons — including years when weather or commodity prices were challenging — demonstrates a level of financial commitment and resilience that buyers find extremely reassuring.

Compile a detailed payment ledger showing every payment received, the date it was received, and the method of payment. If the borrower has paid early, paid extra, or made lump sum principal reductions, document those as well. Every positive data point strengthens your position. For more on how payment history and other factors affect pricing, review this comprehensive guide on what determines note value in Texas.

Water Rights and Irrigation Infrastructure

For farm notes in Texas, water is arguably the most critical variable affecting property value. A farm with proven water rights, permitted irrigation wells, and functioning irrigation infrastructure is worth substantially more than an equivalent acreage of dryland. This is especially true in areas like the Panhandle where Ogallala Aquifer access defines the difference between highly productive irrigated farms and lower-value dryland operations.

Document the water situation on the property thoroughly. Include information about water rights, well permits, groundwater conservation district regulations, pump capacities, pivot or drip irrigation systems, and any water usage history. Buyers evaluating your note need to understand the water picture because it directly affects the property's long-term viability and value as collateral.

Positioning Your Farm Note for the Best Possible Offer

Once you have evaluated your note, the next step is positioning it to attract the strongest offers from buyers. The way you present your note can meaningfully affect the price you receive.

Create a Comprehensive Note Package

Professional note buyers evaluate dozens or hundreds of notes at any given time. The notes that stand out are the ones that come with complete, well-organized documentation that makes the buyer's job easy. Assemble a package that includes the original promissory note and deed of trust, a complete payment history with dates and amounts, current property tax statements showing the agricultural exemption, documentation of any farm income such as crop receipts or lease agreements, information about water rights and irrigation, a recent property tax appraisal or comparable sales data, and any environmental assessments or soil surveys.

This level of preparation signals to the buyer that you are a serious, organized seller — and it reduces the uncertainty that buyers price into their offers. When a buyer has to guess about information because the seller has not provided it, they almost always guess conservatively, which costs you money. For a complete rundown of documentation requirements, see this guide on documents needed to sell a note in Texas.

Highlight Income-Generating Capacity

If the farm generates income — whether through crops, grazing leases, hunting leases, government conservation programs like CRP, wind energy leases, or any other source — make sure buyers know about it. Farm income supports the borrower's ability to make payments and demonstrates that the property has productive value beyond just the raw land.

Provide copies of any current lease agreements, recent crop income records, CRP payment documentation, or other income evidence. A note where the underlying property generates $40,000 per year in farm income is a fundamentally different asset than a note on idle farmland, and buyers will price accordingly.

Address Environmental and Regulatory Factors

Farm properties in Texas may be subject to various environmental and regulatory considerations that can affect their value. Wetlands, endangered species habitats, proximity to playa lakes, floodplain designations, and pesticide or chemical use histories are all factors that a sophisticated buyer may investigate during due diligence.

If you are aware of any environmental considerations related to the property, disclose them upfront. Proactive disclosure builds trust and prevents nasty surprises during due diligence that can derail a deal. If environmental reports or assessments were done as part of the original sale, include them in your note package.

The Selling Process for Farm Notes: What to Expect

The process of selling a farm note follows the same general framework as selling any real estate note, with some additional steps and considerations during the due diligence phase.

Initial Quote and Offer

Contact reputable note buyers and share the details of your note along with your documentation package. An experienced buyer like Longhorn Note Buyers can provide a preliminary cash offer within 24 hours. For farm notes, the buyer may ask additional questions about the property's agricultural use, water situation, and income potential that would not come up with a typical residential note.

Request offers from two or three buyers to get a sense of the market. Compare not just the price but also the buyer's familiarity with farm properties, their close rate, and their expected timeline to closing.

Due Diligence on Farm Notes

Due diligence on farm notes can be more involved than on residential notes due to the complexity of agricultural property valuation. Expect the buyer to order a title search to verify ownership and check for liens, obtain a property valuation which may involve a certified agricultural appraiser rather than a standard residential appraiser, verify the status of agricultural tax exemptions, review water rights and irrigation permits, assess the property's income history and productivity, and confirm that all insurance requirements are being met.

This process typically takes two to four weeks. Your responsiveness in providing requested information is the biggest factor you can control in keeping the timeline on track. Farm note due diligence occasionally takes longer than residential notes because agricultural appraisals require specialized expertise and may have longer turnaround times.

Closing and Funding

Once due diligence is complete, closing proceeds much like any other note sale. The promissory note is endorsed to the buyer, the deed of trust is assigned and recorded with the county, and the purchase price is wired to your account. The borrower is notified of the change in ownership and receives new payment instructions. Their terms remain unchanged — same rate, same payment, same maturity date.

Full Sale vs. Partial Sale for Farm Notes

Farm notes, especially those on larger operations, can involve substantial balances and long remaining terms. The discount on a full sale of a large-balance, long-term farm note can represent a significant dollar amount. If you do not need to convert the entire note to cash, a partial sale is worth serious consideration.

In a partial sale, you sell a fixed number of future payments while retaining the rest. For a farm note with a $2,500 monthly payment and 20 years remaining, you might sell the next 60 payments to a buyer and keep the remaining 180 payments for yourself. This gives you a substantial lump sum now — potentially six figures — while preserving a long stream of future income.

Partial sales on farm notes are particularly attractive because the larger payment amounts mean each payment sold generates significant cash. The discount on a partial sale is also typically more favorable in percentage terms than on a full sale because the buyer is taking on a shorter period of risk. For a detailed comparison of the two approaches, this guide on full vs. partial note sales walks through the considerations.

Common Challenges With Farm Notes and How to Overcome Them

Farm notes present some challenges that are less common with other types of real estate notes. Being aware of these challenges and having strategies to address them puts you in a stronger selling position.

Complex Appraisals

Farm properties are harder to appraise than houses because there are fewer comparable sales, the properties are highly variable in terms of soil quality, water access, and improvements, and the valuation methods used for agricultural land differ from residential approaches. This can lead to longer due diligence timelines and sometimes disagreements about property value.

Overcome this by providing as much comparable sale data as you can find. County extension offices, agricultural lenders, and farm and ranch real estate brokers are all good sources of recent transaction data. The more market data you can provide to the buyer and their appraiser, the smoother the valuation process will be.

Commodity Price Sensitivity

Buyers evaluating farm notes may have concerns about the borrower's exposure to commodity price fluctuations. A cotton farmer who relies entirely on crop sales to make note payments faces different risks than a diversified operator with multiple income streams.

If your borrower has demonstrated the ability to make payments through both strong and weak commodity markets, highlight that resilience. Several years of consistent payments through varying market conditions is powerful evidence that the borrower can withstand price volatility. If the borrower has crop insurance or other risk management tools in place, mention those as well.

Seasonal Payment Structures

As mentioned earlier, some farm notes have non-traditional payment structures — annual payments after harvest, semi-annual payments, or balloon provisions timed to agricultural cycles. These structures can be unfamiliar to note buyers who primarily deal with residential paper.

Explain the rationale behind the payment structure and provide evidence that the borrower has met their obligations under it. An annual payment note where the borrower has made five consecutive on-time annual payments is just as strong as a monthly note with 60 consecutive payments — the consistency is what matters, not the frequency.

Why Longhorn Note Buyers Understands Farm Notes

Longhorn Note Buyers operates out of San Antonio, in the heart of Texas agricultural country. With over $47 million in notes purchased across the state and founder Nick McFadin's experience dating back to 1983, the company has evaluated and purchased farm notes on properties ranging from Panhandle irrigation farms to South Texas citrus groves to Blackland Prairie row crop operations.

That depth of experience matters because farm notes require a buyer who understands the nuances of agricultural property valuation, seasonal income patterns, water rights, and the regulatory environment that affects Texas farms. Longhorn's A+ BBB rating and 100 percent close rate on quoted deals mean that when they make you an offer on your farm note, you can trust the number and expect a professional, efficient closing process.

Ready to Sell Your Note?

If you hold a farm note in Texas and you are ready to explore what it is worth on today's market, the next step takes less than five minutes. Contact Longhorn Note Buyers at (210) 828-3573 or visit longhornnotebuyers.com to get your free, no-obligation cash offer within 24 hours. Whether your note is on irrigated cropland, a diversified family farm, or grazing pasture, Longhorn has the expertise and capital to give you a fair price and close the deal on your schedule.

Frequently Asked Questions

Does the type of crop grown on the farm affect my note's value?

The specific crop does not directly affect the note's value, but the income it generates and the stability of that income do. High-value irrigated crops like cotton, corn, or pecans on productive land with reliable water support stronger property values and borrower incomes than marginal dryland operations. The key question a buyer asks is whether the farm's agricultural use supports both the property's value and the borrower's ability to pay.

What if the farm is enrolled in a CRP or other government conservation program?

Conservation Reserve Program enrollment is generally viewed positively by note buyers because it provides a guaranteed annual income stream from the federal government. CRP payments are reliable and predictable, which supports the borrower's ability to make note payments. Include documentation of the CRP contract, payment amounts, and remaining term in your note package.

Can I sell a farm note if the agricultural exemption has not been maintained?

Yes, but the loss of an agricultural exemption affects the property's carrying costs because property taxes will be based on market value rather than agricultural use value, which can be dramatically higher. Buyers will factor in the increased tax burden when evaluating the note. If the exemption was recently lost, it may be possible for the borrower to reapply and restore it, which would improve the note's value.

How do irrigation water rights affect my farm note's value?

Water rights are one of the most significant value drivers for farm notes in Texas, particularly in regions that depend on groundwater for irrigation. A farm with established water rights, permitted wells, and functioning irrigation systems is worth substantially more than equivalent dryland. The certainty and volume of water access directly affect the property's productivity and long-term value, which in turn affects the note price a buyer will offer.

What if the farm includes a homestead that the borrower lives in?

A farm note that includes an occupied homestead can actually be more valuable because the borrower has both a financial and personal investment in the property. A borrower who lives on the farm is statistically less likely to default than one who owns it purely as an investment. However, Texas homestead protections may limit some foreclosure options, which a knowledgeable buyer will account for in their evaluation. Be transparent about the homestead situation so the buyer can factor it into their offer accurately.