Can I Sell a Land Note If the Borrower Is Late on Payments in Texas?

Dealing with a borrower who is late on payments is one of the most stressful aspects of holding a seller-financed land note in Texas. The monthly payment you were counting on does not arrive on time, then perhaps it comes a week late, or two weeks late, or not at all. You send reminders, make phone calls, and wonder whether the borrower is going through a temporary rough patch or whether the situation is going to get worse. If you have reached the point where the late payments are causing you real financial strain or simply eroding your confidence in the investment, selling the note may be the best path forward. The question is whether a buyer will purchase a note with late payments on the record, and the answer is yes — you can sell a land note with late payments in Texas, though the payment issues will affect the price you receive.

Note buyers who specialize in Texas land notes are experienced at evaluating notes with imperfect payment histories. Late payments are not uncommon in the seller-financed land market, and most buyers have a framework for assessing the severity of the payment issues, the likelihood of future performance, and the appropriate pricing adjustment. A note with one or two isolated late payments that were subsequently cured is a very different proposition from a note with chronic delinquency or a borrower who has stopped paying entirely, and buyers price these situations accordingly.

This guide will walk you through everything you need to know about selling a land note when the borrower has been late on payments. You will learn how buyers evaluate payment history issues, how different types of delinquency affect pricing, what steps you can take to improve your position before selling, and how the sale process works when the payment record is less than perfect. If your borrower's late payments have been keeping you up at night, this guide will help you understand your options and move toward a resolution.

How Note Buyers Evaluate Late Payment History

The Severity Spectrum — Not All Late Payments Are Equal

Note buyers evaluate late payments on a spectrum that ranges from minor and inconsequential to severe and deal-altering. At the mild end of the spectrum are occasional late payments — payments that arrived a few days or even a couple of weeks past the due date but were made in full before the end of the month. These minor delays are common in the seller-financed land market, where borrowers often have variable income streams or simply imperfect bill-paying habits. Most buyers will treat occasional late payments as a minor negative that warrants a small pricing adjustment but does not fundamentally change the note's attractiveness.

Moving along the spectrum, thirty-day late payments — where the borrower misses an entire payment cycle before catching up — are more concerning because they indicate a more significant disruption in the borrower's cash flow or commitment. Multiple thirty-day late payments, especially if they form a pattern, will result in a more substantial pricing adjustment. At the severe end, sixty-day and ninety-day delinquencies, partial payments that leave the account perpetually behind, and outright payment cessation represent serious challenges that significantly affect both pricing and the pool of buyers willing to consider the note.

Pattern Versus Isolated Incident

Buyers pay close attention to whether late payments represent a pattern or an isolated incident. A borrower who was consistently on time for twenty-four months, missed one payment during a documented hardship such as a job loss or medical emergency, and then resumed on-time payments is a fundamentally different risk profile than a borrower who has been chronically late throughout the life of the note. The isolated incident borrower has demonstrated a baseline of reliability and a willingness to recover from a setback, while the chronically late borrower has demonstrated that timely payment is not their norm.

When presenting your note to a buyer, provide the complete payment history and be prepared to offer context for any late payments. If you know why the borrower was late — a job transition, a family emergency, a seasonal income dip — sharing that information helps the buyer understand the situation and may result in more favorable pricing. Context does not erase the late payment from the record, but it helps the buyer assess whether the issue is likely to recur. For a broader understanding of how payment history affects note value, this resource on what determines note value in Texas provides detailed insight.

Current Status Matters Most

While the historical payment record is important, the borrower's current status carries significant weight in the buyer's analysis. A note where the borrower was late several times in the past but has been current for the last six or twelve months tells a recovery story that buyers find encouraging. The recent on-time payments suggest that whatever caused the delinquency has been resolved, and the borrower is back on track. Conversely, a note where the borrower is currently behind — even if the historical record was previously clean — presents a more immediate concern because the buyer would be purchasing a note with an active delinquency that needs to be managed from day one.

If your borrower is currently behind but you believe they will catch up, consider waiting until the account is current before approaching a buyer. A few months of resumed on-time payments after a period of delinquency can meaningfully improve the buyer's perception of the note and result in better pricing. Of course, this strategy requires patience and the risk that the borrower's situation may not improve, so it needs to be weighed against the possibility that the delinquency could worsen if you wait.

How Late Payments Affect the Price You Receive

Pricing Adjustments for Minor Delinquency

For notes with minor payment history issues — one or two late payments that were cured within the same month, or a single thirty-day late payment that was subsequently resolved — the pricing adjustment is typically modest. You might see an additional two to five percentage points of discount compared to what the same note would command with a perfect payment record. On a note with a $50,000 remaining balance, this translates to roughly $1,000 to $2,500 less than you would receive with a clean history. While no one likes to leave money on the table, this is a relatively small concession for a note that has otherwise performed well.

The modest adjustment reflects the buyer's assessment that the minor delinquency is unlikely to be predictive of future behavior, especially if the rest of the payment history is strong and the current status is current. Buyers understand that life happens — borrowers occasionally have a bad month due to circumstances beyond their control — and they do not penalize a single hiccup excessively as long as the overall pattern is positive.

Pricing Adjustments for Moderate Delinquency

Notes with more significant payment history issues — multiple thirty-day late payments, a sixty-day delinquency, or a pattern of chronic lateness — will see larger pricing adjustments, typically in the range of five to fifteen additional percentage points of discount. A note that might have sold at a fifteen percent discount with a perfect payment history might sell at a twenty-five to thirty percent discount with a moderately troubled payment record. The adjustment is larger because the buyer is taking on more risk — a borrower with a pattern of late payments is statistically more likely to default in the future, and the buyer must price that risk into their offer.

At this level of delinquency, the buyer's analysis shifts from evaluating the note primarily as a performing investment to evaluating it partially as a potential workout or foreclosure scenario. The buyer will place more weight on the collateral value and the LTV ratio because they need to be confident that they can recover their investment through the property if the borrower eventually stops paying. A strong collateral position — low LTV, desirable property type, good location — can partially offset the negative impact of the payment history and keep the discount from climbing too high.

Pricing for Seriously Delinquent or Non-Performing Notes

If your borrower has stopped paying entirely and the note is in default, the pricing dynamic changes fundamentally. The buyer is no longer purchasing a stream of future payments — they are purchasing the right to collect on a delinquent debt and, if necessary, to foreclose on the property. The purchase price for a non-performing note is driven primarily by the value of the collateral minus the estimated costs of collection, foreclosure, and resale. Depending on the specific circumstances, you might receive anywhere from forty to seventy percent of the remaining balance, or even less if the collateral is in poor condition or located in a weak market.

Non-performing notes are a specialized niche in the note market, and not all buyers handle them. Buyers who do specialize in non-performing notes have the legal infrastructure, the patience, and the expertise to work through the collection and foreclosure process, and they price their purchases based on a detailed analysis of the expected costs and timeline. If your note is seriously delinquent or in default, working with a buyer who has specific experience in non-performing Texas land notes is essential to getting a fair offer. For more information about selling a note in this situation, this article on selling non-performing land notes in Texas provides comprehensive guidance.

Steps You Can Take Before Selling to Improve Your Position

Bring the Account Current If Possible

The single most impactful thing you can do before selling a note with a troubled payment history is to get the borrower current. If the borrower is behind, communicate with them directly, understand their situation, and work out a plan for bringing the account up to date. A formal forbearance agreement or payment plan that gets the borrower back on track over a period of two to three months can dramatically improve how a buyer perceives the note. Once the borrower is current and has maintained on-time payments for three to six months after the delinquency period, the note begins to look like a recovery story rather than an ongoing problem.

If the borrower is willing to communicate and cooperate but genuinely cannot bring the account fully current, consider whether a partial cure — catching up some of the past-due amount and committing to regular payments going forward — might be achievable. Even partial progress is better than no progress in the eyes of a buyer, and demonstrating that you have actively managed the situation shows the buyer that the delinquency has been addressed rather than ignored.

Document Everything

When selling a note with late payments, documentation is even more important than usual. Compile a complete and detailed payment history that shows every payment received, including dates and amounts. If there were late fees charged, note those as well. If you have correspondence with the borrower about the late payments — emails, text messages, letters, or notes from phone conversations — organize that correspondence and be prepared to share it with the buyer. If you entered into any formal arrangements with the borrower such as a forbearance agreement or a modified payment plan, copies of those documents are essential.

The goal is to present the buyer with a complete, honest picture of the payment history and your efforts to manage it. Buyers respect transparency and are more likely to offer fair pricing when they feel they have the full story. Hiding or downplaying payment issues only backfires when the truth comes out during due diligence, potentially causing the buyer to renegotiate the price or walk away from the deal entirely.

Assess Your Collateral Position

Because late payments shift the buyer's focus toward the collateral as a recovery mechanism, taking stock of your collateral position before approaching a buyer is important. What is the current estimated market value of the property? How does the remaining balance compare to that value? Has the borrower made any improvements to the property that might increase its value? Are there any liens, encumbrances, or title issues that could complicate a potential foreclosure? Knowing the answers to these questions — and being able to share them with the buyer — helps the buyer evaluate the note more quickly and more accurately.

If the LTV is favorable — meaning the remaining balance is well below the property's current value — that strong collateral position partially compensates for the weak payment history. The buyer knows that even in a worst-case scenario where the borrower stops paying and foreclosure becomes necessary, the property can be sold for more than enough to cover their investment. This collateral cushion gives the buyer comfort and can meaningfully improve the price they offer, even on a note with significant payment issues.

The Sale Process When Late Payments Are Involved

Getting a Quote — Full Transparency From the Start

When you contact a buyer to request a quote on a note with late payments, lead with the complete payment history. Do not wait for the buyer to discover the issues — present them upfront with context and any supporting documentation. A reputable buyer will evaluate the note based on the totality of the information you provide, including the payment issues, and will give you a quote that reflects the note's realistic value. Longhorn Note Buyers, with over $46 million in Texas notes purchased since 2007, has extensive experience evaluating notes with imperfect payment histories and will price your note fairly regardless of the borrower's track record.

When you receive the quote, do not be surprised if it is lower than what you might have expected based on the note's face value. Remember that the discount reflects the real risk that the buyer is taking on, and a note with payment issues carries more risk than a perfect performer. Evaluate the quote in the context of your alternatives — continuing to hold a note with a problematic borrower, pursuing collection or foreclosure yourself, or accepting the buyer's offer and converting your uncertain future payments into guaranteed cash today.

Due Diligence — What Buyers Investigate More Closely

When a note has late payments in its history, the buyer's due diligence will be more thorough than for a clean note. In addition to the standard checks — title search, document review, collateral valuation — the buyer will pay particular attention to the pattern and severity of the late payments, the borrower's current financial situation and ability to continue paying, the equity position and the feasibility of foreclosure if the borrower defaults, and any legal notices that have been sent or actions that have been taken regarding the delinquency.

The buyer may also contact the borrower directly to discuss the payment history and the borrower's intentions going forward. This is a normal part of due diligence for notes with payment issues, and it gives the buyer firsthand insight into the borrower's situation. If the borrower is cooperative and communicative, that is a positive signal. If the borrower is unresponsive or evasive, the buyer will factor that into their risk assessment. For more detail on the overall timeline and process, review this article on the timeline to sell a land note in Texas.

Closing and Moving Forward

The closing process for a note with late payments is the same as for any other note sale — you sign the assignment documents, the buyer wires your funds, and the note is transferred. The buyer assumes all responsibility for managing the borrower going forward, including dealing with any future late payments, pursuing collection efforts if necessary, and handling foreclosure if the situation deteriorates to that point. For you, the sale represents a clean break from the stress and uncertainty of managing a problematic borrower.

Many note sellers describe the feeling of relief that comes from selling a note with payment issues. The constant worry about whether the next payment will arrive, the awkward conversations with the borrower, and the nagging question of whether you should pursue legal action all disappear the moment the sale closes and the wire hits your account. The buyer is now the one managing the situation, and they have the resources, experience, and legal infrastructure to do it effectively.

Special Scenarios — Chronic Late Payers, Partial Payments, and Defaults

The Chronic Late Payer Who Always Eventually Pays

Some borrowers have a pattern of paying late every single month but always eventually making the payment. They are never truly in default because the payments arrive, but they are never on time either. This pattern is frustrating for note holders and creates a specific challenge for note buyers. The buyer knows that the payments are coming but cannot predict exactly when, which makes cash flow planning difficult. Notes with this pattern will see a moderate discount adjustment, typically five to ten additional percentage points, reflecting the unpredictability and the additional servicing effort required to manage a chronically late borrower.

If you hold a note with a chronically late borrower, selling may actually be one of the best decisions you can make. Professional note buyers and their servicers have systems for managing chronically late borrowers — automated reminders, late fee structures, formal demand notices — that may be more effective than the informal approach you have been using. The borrower may actually become more compliant when dealing with a professional servicing operation that has clear procedures and consistent follow-through.

The Borrower Making Partial Payments

A borrower who is making partial payments — sending less than the full monthly amount due — presents a unique challenge. Partial payments keep the conversation alive and suggest that the borrower is trying, but they also cause the account to fall increasingly behind over time as the shortfall accumulates. Note buyers will evaluate partial payment situations by looking at how much the borrower is paying relative to the amount due, how long the partial payment pattern has been going on, and the total arrearage that has accumulated.

Notes with partial payment histories can be sold, but the pricing will reflect the increased risk and the accumulated arrearage. The buyer will typically calculate their offer based on a realistic assessment of what the borrower is likely to pay going forward — which may be the partial amount rather than the full contractual payment — and will factor in the possibility of eventual default and foreclosure. If the collateral is strong and the partial payments represent a meaningful percentage of the amount due, the buyer may see the note as a worthwhile investment that can be managed to a successful outcome.

The Complete Default — Borrower Has Stopped Paying

If your borrower has stopped paying entirely and the note is in full default, you are holding what the industry calls a non-performing note. Non-performing notes are a specialized product in the secondary market, and the pricing is driven primarily by the value of the collateral and the estimated costs of resolution. Buyers of non-performing notes typically plan for one of two outcomes: they will either work with the borrower to reinstate the note and resume payments, or they will foreclose on the property and sell it to recover their investment.

Selling a non-performing note can be a better option than pursuing foreclosure yourself for several reasons. Foreclosure in Texas, while faster than in many states, still involves legal fees, court costs, and a timeline of several months. By selling the note, you transfer all of those costs and responsibilities to the buyer and receive your cash immediately. The price you receive will be lower than what a performing note would command, but it may be more than what you would net after spending months and thousands of dollars on a foreclosure and property resale. Longhorn Note Buyers has experience with non-performing Texas land notes and can evaluate your specific situation to provide a fair offer.

Ready to Sell Your Note?

If your borrower's late payments have been causing you stress and you are ready to convert your uncertain payment stream into guaranteed cash, Longhorn Note Buyers is here to help. With over $46 million in Texas notes purchased since 2007 and a 100% close rate on quoted deals, Longhorn has the experience to evaluate notes with all types of payment histories — from perfect performers to challenging delinquencies — and to offer fair, transparent pricing based on a thorough analysis of the note's real value.

Call Longhorn Note Buyers at (210) 828-3573 or visit longhornnotebuyers.com to request your free, no-obligation quote. There is no judgment and no cost — just an honest evaluation of your note and a clear offer for your consideration. Whether your borrower is a month behind or a year behind, Longhorn can provide a solution that puts money in your pocket and relieves you of the burden of managing a difficult payment situation.

Frequently Asked Questions About Selling Notes With Late Payments

Will a buyer purchase my note if the borrower is currently behind?

Yes, note buyers regularly purchase notes where the borrower is currently behind on payments. The pricing will reflect the increased risk and the cost of bringing the account current or pursuing remedies if the borrower does not resume paying. Buyers who specialize in Texas land notes have the experience and infrastructure to manage delinquent borrowers effectively, and they price their offers based on realistic assessments of the likely outcomes. The stronger the collateral and the lower the LTV, the better the offer you can expect even with an active delinquency.

How much less will I get for a note with late payments compared to a perfect note?

The pricing impact depends on the severity and pattern of the late payments. Minor issues such as one or two late payments that were quickly cured might reduce your offer by two to five percentage points. Moderate issues such as multiple thirty-day lates or a pattern of chronic lateness might reduce it by five to fifteen points. Serious issues such as sixty-day or ninety-day delinquencies or a complete default will have a larger impact that depends heavily on the collateral value and the specific circumstances. Your buyer can provide exact numbers based on your note's complete payment history and collateral profile.

Should I try to get the borrower current before selling?

If it is feasible, yes. Getting the borrower current and allowing a few months of on-time payments to accumulate after the delinquency period will meaningfully improve the buyer's perception of the note and the price they offer. However, if the borrower is uncooperative, unable to catch up, or if the situation is causing you significant stress, selling now may be the better choice. Waiting carries the risk that the situation could deteriorate further, and the certainty of cash today has value that should not be underestimated.

Can I sell just the delinquent payments to a buyer?

In most cases, buyers purchase the note itself — the right to all future payments — rather than specific delinquent payments. If the borrower is behind, the buyer acquires both the right to the future payment stream and the right to collect any past-due amounts. The buyer's offer will account for the arrearage and the likelihood of collecting it. Some buyers may also factor in late fees and other charges that have accrued on the delinquent amounts, depending on the terms of the note and the deed of trust.

What happens to the borrower after I sell a note with late payments?

After you sell the note, the new holder will manage the borrower relationship going forward. If the borrower is behind, the new holder will typically reach out to the borrower to discuss the situation and work toward a resolution — whether that means setting up a catch-up plan, modifying the terms temporarily, or pursuing more formal remedies if the borrower is unresponsive. Professional note buyers generally prefer to work with borrowers cooperatively whenever possible because it produces better outcomes for everyone involved. The borrower's terms under the original note do not change, and the new holder must follow the same notice and cure procedures that were in the original documents.