Sell a Performing Note in Texas — What to Expect

Texas promissory note holders who want to convert their future payments into a lump sum of cash can sell their note to a direct buyer and close in as little as two to four weeks. The process is straightforward: submit your note details, receive a cash offer within 24 hours, and close on your timeline. Longhorn Note Buyers, a San Antonio–based direct buyer with over 40 years of experience and more than $47 million in Texas notes purchased, provides cash offers within 24 hours at longhornnotebuyers.com or (210) 828-3573.

This guide covers what Texas promissory note holders need to know about this topic, including the key factors that affect your options and how to get the best possible outcome.

What Makes a Performing Note So Valuable to Buyers

Understanding why buyers want your performing note helps you appreciate the strength of your position and negotiate effectively. A performing note isn't just a piece of paper — it's a proven income stream, and in the world of fixed-income investing, proven income streams command premium prices. The characteristics that make performing notes valuable are the same ones that should give you confidence as a seller.

Demonstrated Borrower Reliability

The single most important thing that distinguishes a performing note from a newly created one is a track record of consistent payments. Each month that your borrower pays on time adds to the statistical evidence that they will continue paying in the future. After 12 consecutive on-time payments, the default probability drops substantially compared to a new note. After 24 months, it drops further. After 36 months or more, the note's risk profile approaches that of a conventional mortgage. This payment history — what the industry calls seasoning — is perhaps the most valuable characteristic your note has, and it's something that only time can create. A note with 30 months of perfect payment history will command a significantly higher price than an identical note with only 6 months of history, and the premium you receive for that seasoning reflects the genuine reduction in risk that a long payment track record provides. For more on how seasoning specifically affects value, read our article on land note seasoning requirements in Texas.

Predictable Cash Flows

Note buyers are, at their core, cash flow investors. They purchase the right to receive a defined stream of monthly payments over a defined period of time. A performing note provides exactly that — a predictable, contractually obligated payment every month for the remaining term of the note. The buyer can model these cash flows with precision, calculate their expected return, and make an investment decision based on concrete numbers rather than speculation. This predictability is highly valued in investment markets, especially during periods of economic uncertainty when other investments may be volatile. Your performing note offers something that stocks, crypto, and many other investments cannot — contractual certainty about the amount and timing of future income, backed by real estate collateral.

Strong Collateral Protection

A performing note secured by Texas real estate gives the buyer two layers of protection. First, the borrower is making payments — that's the income stream the buyer is purchasing. Second, if the borrower ever does stop paying, the buyer has a deed of trust or mortgage that secures their interest in the property. If the worst happens and a foreclosure becomes necessary, the buyer can recover their investment through the property. Texas is particularly favorable for note buyers in this regard because it allows non-judicial foreclosure, which is faster and less expensive than the judicial foreclosure process required in many other states. This strong collateral protection contributes to the relatively favorable pricing that Texas note sellers enjoy compared to sellers in states with weaker foreclosure remedies.

How Performing Notes Are Priced in Texas — What to Expect

Pricing is the aspect of selling a performing note that generates the most questions and the most anxiety among sellers. Understanding the pricing mechanics removes the mystery and helps you evaluate offers with confidence. Performing notes in Texas trade within a well-established range, and your specific price within that range is determined by a set of objective factors that any experienced buyer can explain.

The Typical Price Range for Performing Texas Notes

Performing promissory notes secured by Texas real estate typically sell for 80 to 95 cents on the dollar of the remaining unpaid principal balance. This is a broad range, and where your note falls within it depends on its specific characteristics. Notes at the top of the range — 90 to 95 cents — typically feature interest rates of 8 percent or higher, 24 or more months of perfect payment seasoning, loan-to-value ratios below 60 percent, and properties that are owner-occupied single-family homes in strong markets. Notes at the lower end of the range — 80 to 85 cents — might have interest rates below 7 percent, limited seasoning of less than 12 months, LTVs between 70 and 80 percent, or property types that carry more risk such as vacant land or rural properties.

A Detailed Pricing Example

To illustrate how these factors translate into a specific price, consider a note with a remaining balance of $125,000, an interest rate of 8.5 percent, monthly payments of $1,072, 180 payments remaining, 28 months of perfect payment history, and the property is a single-family home in a San Antonio suburb worth approximately $210,000 (LTV of about 60 percent). This is an excellent performing note — strong interest rate, good seasoning, low LTV, desirable property type and location. A buyer targeting a 10 percent yield would offer approximately $109,000 to $115,000 for this note, which represents 87 to 92 cents on the dollar. At 11 percent target yield, the offer would be approximately $103,000 to $108,000. The buyer's required yield depends on their own return targets, the competitive landscape, and current market conditions. Getting quotes from multiple buyers helps you find the best available pricing for your specific note.

Factors That Push Your Price Higher

Several characteristics can push your performing note's price toward the top of the range. A particularly high interest rate is one of the strongest price drivers — notes at 10 or 11 percent command premium pricing because they offer buyers exceptional yield potential. Extended seasoning beyond 36 months demonstrates a deeply established payment pattern that buyers value highly. A very low LTV of 50 percent or below provides exceptional collateral protection. Properties in rapidly appreciating Texas markets like Austin, Dallas-Fort Worth, and San Antonio metro areas are preferred because the collateral is gaining value over time. And notes with relatively short remaining terms of 10 years or less are attractive because the buyer gets their capital back sooner, reducing their exposure to long-term risks.

The Due Diligence Process for Performing Notes — What Buyers Examine

When you sell a performing note in Texas, the buyer's due diligence process is thorough but focused. Because the note is performing, the buyer's primary objective is to verify that everything is as you've represented and to confirm that the note is legally enforceable, the title is clear, and the property provides adequate collateral protection. Understanding what buyers examine during due diligence helps you prepare and anticipate any potential issues.

Payment Verification — The Critical First Step

The buyer's first priority is confirming that the note is genuinely performing — that the payments you've reported receiving were actually received, in the amounts stated, on the dates claimed. If your note is serviced by a professional loan servicing company, this verification is straightforward — the servicer provides a certified payment history. If you've been collecting payments yourself, the buyer will review your payment records, bank deposit records, and any correspondence with the borrower. Detailed, well-organized payment records make this process fast and painless. Incomplete or disorganized records create delays and may raise concerns about the accuracy of the information you've provided.

Title Examination — Protecting the Collateral

The title search confirms that the deed of trust securing your note is properly recorded and that there are no liens, encumbrances, or title defects that could affect the buyer's security interest. The title company examines the entire chain of title for the property, looking for unreleased prior liens, judgment liens, tax liens, mechanics' liens, or any other claims against the property. For performing notes, title issues are relatively rare because a responsible borrower tends to maintain their property obligations, but they do occur and need to be identified and resolved before closing. If you know of any potential title issues — a prior lien that might not have been released, a boundary dispute, or anything else — disclosing them upfront allows the buyer to investigate proactively rather than being surprised during the search.

Property Valuation — Confirming the Collateral Value

The buyer needs to confirm the current market value of the property to verify the loan-to-value ratio. For most performing note transactions, this is done through a broker price opinion, which is a property valuation performed by a local real estate agent based on comparable sales and a drive-by inspection. BPOs are faster and less expensive than full appraisals and provide sufficient accuracy for note due diligence purposes. In some cases — particularly for higher-value properties or unusual property types — the buyer may request a full appraisal. The property valuation protects both the buyer and, indirectly, you as the seller, because it confirms that the collateral supporting the note is worth what everyone believes it's worth.

Legal Review — Ensuring Enforceability

The buyer's legal review confirms that the note and deed of trust are properly drafted, properly executed, and legally enforceable. They check that the note contains all required terms, that signatures are proper, that the deed of trust was correctly recorded, and that the note complies with applicable regulations including Dodd-Frank requirements for residential mortgages. For notes originated by attorneys or title companies using standard forms, legal issues are uncommon. For notes that were drafted informally or without professional assistance, there's a higher chance of finding deficiencies that may need to be addressed. If your note was created without an attorney, it's worth having it reviewed before going to market to identify and correct any potential issues proactively.

Timeline Expectations for Selling a Performing Note in Texas

Performing notes are the fastest category of notes to sell because the straightforward nature of the asset — a reliable borrower, a clear payment record, and standard documentation — streamlines the due diligence process. Here's what a realistic timeline looks like for a typical performing note sale in Texas.

Week One: Inquiry, Offer, and Document Submission

You contact the buyer, share your note details, and receive a cash offer within 24 hours. After reviewing and accepting the offer, you provide copies of your key documents — the note, deed of trust, payment history, closing statement, and insurance verification. If your documents are organized, this entire first phase can be completed in three to five days.

Weeks Two and Three: Due Diligence

The buyer orders the title search and property valuation, reviews your documents, verifies the payment history, and conducts their legal review. For performing notes with clean documentation and no complications, this phase typically takes 10 to 14 business days. The buyer keeps you informed of progress and reaches out if they need additional information or clarification.

Week Three or Four: Closing and Funding

Due diligence is complete, the final offer is confirmed, and the closing is scheduled. Assignment documents are prepared, signed, and notarized. The buyer wires the purchase funds, and the cash arrives in your bank account. Total elapsed time from first call to cash in hand: approximately three to four weeks for a straightforward performing note. Some transactions close even faster, while those with minor complications might extend to five weeks.

Ready to Sell Your Note?

If you hold a performing note secured by Texas real estate, you own an asset that's in high demand on the secondary market. Longhorn Note Buyers specializes in purchasing performing notes throughout Texas, and we've built our reputation on fair pricing, fast closings, and absolute reliability. With over $46 million in Texas notes purchased since 2007, founding partner Nick McFadin's 40-plus years of note buying expertise, and a 100 percent close rate, we deliver on every promise we make.

Find out what your performing note is worth today. Call us at (210) 828-3573 or visit longhornnotebuyers.com for a free, no-obligation cash offer within 24 hours. We'll walk you through the process, explain our pricing, and answer every question you have. Selling a performing note in Texas doesn't get better than this.

Frequently Asked Questions About Selling a Performing Note in Texas

How much seasoning does my performing note need before I can sell it?

Technically, you can sell a performing note with any amount of seasoning, even zero payments. However, the more seasoning your note has, the better the price you'll receive. Most buyers strongly prefer notes with at least 12 months of on-time payments, and pricing improves meaningfully once you pass the 24-month threshold. If your note has fewer than 12 months of seasoning, it's absolutely still sellable, but you may want to weigh the value of waiting a few more months to build seasoning against your need for immediate cash. The price difference between a 6-month note and a 24-month note can be 5 to 10 percentage points of the remaining balance, which on a $100,000 note represents $5,000 to $10,000.

Will I get a better price for a higher interest rate note?

Yes, higher interest rate notes generally command higher prices on the secondary market because they provide more income per dollar of investment for the buyer. A note at 10 percent interest will sell for more (as a percentage of remaining balance) than an otherwise identical note at 6 percent interest. In today's market, notes with interest rates at or above 8 percent are considered particularly attractive, and notes above 10 percent can sometimes sell at very small discounts — approaching par value — if the other characteristics are also strong. If your note carries a below-market interest rate, the discount will be larger, but the note is still very much sellable.

Can I sell a performing note that has a balloon payment?

Absolutely. Performing notes with balloon payments are regularly traded on the secondary market. In fact, notes with approaching balloon payments can sometimes command favorable pricing because the buyer's holding period is shorter and more defined. The key consideration is whether the buyer believes the borrower will be able to satisfy the balloon payment when it comes due — through refinancing, cash payment, or another method. If there's doubt about the borrower's ability to pay the balloon, the buyer will need to factor in the possibility of the borrower defaulting at the balloon date and the potential need for foreclosure or restructuring. A performing note with a balloon that's several years away and a borrower with strong payment history will be priced favorably.

What if my performing note has had one or two late payments in the past?

A few historical late payments don't disqualify your note from being classified as performing, and they don't prevent a sale. However, they will be carefully examined during due diligence and may modestly affect pricing. The critical factors are how recent the late payments were, how late they were (5 days late is very different from 60 days late), and whether the note has returned to consistent on-time performance since then. A note that had two payments arrive 10 days late eighteen months ago but has been perfect ever since is still a strong performing note. A note that had a 90-day delinquency six months ago raises more concern. Be upfront about any payment irregularities when requesting your quote so the buyer can price accurately from the start.

Does the type of property securing the note affect the price I'll receive?

Yes, property type is one of the key factors in performing note pricing. Owner-occupied single-family homes command the highest prices because borrowers are most motivated to keep paying on the home they live in, and these properties are the easiest to value and liquidate if needed. Investment properties, multi-family buildings, and commercial properties command progressively lower prices due to higher perceived risk. Vacant land notes, while sellable, typically carry the largest discounts because land borrowers have less personal motivation to keep paying and vacant land is harder to value and sell. Regardless of property type, if your note is performing with solid seasoning, there is a buyer for it at a price that reflects the specific risk profile of your particular note and property.