How to Sell a Private Mortgage Note in Texas: Key Steps

A private mortgage note is one of the most common financial instruments in Texas real estate, and if you hold one, you are part of a vast network of private lenders who make the state's property market run. Every time a homeowner, landowner, or investor sells a property with owner financing instead of requiring the buyer to go through a bank, a private mortgage note is born. And every one of those notes can be sold for cash on the secondary market when the holder decides the time is right.

The term "private mortgage note" simply means a promissory note created between private parties — as opposed to an institutional lender like a bank or credit union — that is secured by real estate through a deed of trust or mortgage. In Texas, these notes are secured by deeds of trust almost exclusively, and they cover every imaginable property type: single-family homes, duplexes, condos, raw land, ranches, farms, and commercial buildings. If you financed the sale of any type of Texas real estate to a private buyer, you hold a private mortgage note.

This guide lays out the key steps to selling your private mortgage note in Texas. Whether you have been collecting payments for six months or sixteen years, whether your note is on a starter home in San Antonio or a thousand-acre ranch in the Hill Country, the process follows a clear, predictable path that this guide will walk you through from beginning to end.

Step 1: Understand What You Own and Why It Has Value

Before you contact a single buyer, take a few minutes to understand why your private mortgage note is a valuable asset on the open market. This understanding gives you confidence in the process and helps you communicate effectively with prospective buyers.

Your Note Is a Cash-Flow Asset

Your private mortgage note entitles you to receive a stream of payments — typically monthly — for a defined period at a stated interest rate. That cash flow is backed by a real piece of Texas property through the deed of trust. Investors and note buying companies purchase these cash-flow streams because they represent predictable, collateralized returns. The buyer pays you a lump sum today in exchange for the right to collect those future payments. It is a straightforward exchange of future value for present value.

Texas Real Estate Strengthens Your Position

Texas is one of the most desirable real estate markets in the country. Steady population growth, a diversified economy, no state income tax, and a business-friendly regulatory environment all contribute to strong and generally appreciating property values. A private mortgage note backed by Texas real estate carries a level of collateral quality that notes in many other states cannot match. This is not abstract — it directly translates to better offers when you decide to sell.

The Secondary Market Is Active

The market for private mortgage notes is not a niche curiosity — it is a well-established, active marketplace with professional buyers who evaluate and purchase notes every day. Companies like Longhorn Note Buyers have been operating in this market for decades, purchasing over $47 million in notes. When you decide to sell, you are entering a market with real demand and competitive pricing.

Step 2: Gather Your Documentation

Documentation is the engine that drives the note selling process. Complete, organized documents accelerate every subsequent step — from getting an accurate initial offer to closing the deal quickly. Incomplete or missing documents, on the other hand, slow things down, create uncertainty, and can cost you money through lower offers.

The Essential Documents

Every note buyer will need to see the original signed promissory note with all terms clearly stated including principal amount, interest rate, monthly payment, maturity date, and any special provisions. They will also need the recorded deed of trust that secures the note against the property, a complete payment history showing every payment received with the date, amount, and any notes about late payments or partial payments, the title insurance policy from the original transaction, proof of current hazard insurance on the property, and any amendments, modifications, forbearance agreements, or other documents that have altered the original terms.

Supporting Documents That Strengthen Your Position

Beyond the essentials, additional documentation can help the buyer evaluate your note more favorably. A recent property tax statement showing the tax status and any exemptions, comparable sales data or a broker's price opinion supporting the property's current value, photographs of the property if available, information about any income the property generates such as rental income or agricultural leases, and the original closing statement from the sale that created the note all provide useful context.

The more complete your package, the more confident the buyer feels in their evaluation, and confident buyers make stronger offers. For a thorough documentation guide, see this resource on documents needed to sell a note in Texas.

Step 3: Determine Your Goals and Preferences

Before you start soliciting offers, clarify what you want to accomplish by selling your note. Your goals will guide your decisions about which offer to accept, whether a full or partial sale makes more sense, and how aggressively to push on timing.

Full Liquidity vs. Partial Cash

Do you need the maximum possible cash right now, or would a smaller lump sum serve your purpose while allowing you to keep some future income? If you need every dollar available, a full sale is your path. If you have a specific cash need — say $50,000 for a business investment — and your note is worth $120,000, a partial sale of a defined number of payments might get you the cash you need while preserving the rest of the income stream.

Partial sales typically command a more favorable percentage discount than full sales because the buyer is taking on less risk over a shorter time horizon. If your cash need is specific and bounded, a partial sale is often the more efficient financial choice. For a detailed comparison, see this analysis of full vs. partial note sales.

Speed vs. Price Optimization

If you need cash urgently — medical bills, a time-sensitive investment, a closing deadline on another property — speed may be more important than squeezing out the last dollar. In that case, working with a single reliable buyer who can move fast makes more sense than shopping the note to multiple buyers over several weeks.

If you have the luxury of time, getting multiple offers and letting them compete can yield a better price. But the improvement from additional shopping diminishes after two or three offers, and the time cost of managing a broader process should be factored into your decision.

Clean Break vs. Ongoing Involvement

A full sale means you are done with the note forever — no more tracking payments, no more worrying about the borrower, no more administrative hassle. A partial sale means you will eventually resume receiving payments after the buyer collects their purchased portion, which means you remain involved with the note over the long term. Consider which scenario aligns better with your preferences and lifestyle.

Step 4: Request Offers From Qualified Buyers

With your documents assembled and your goals clear, it is time to approach buyers. This step is where your preparation pays off — a seller who can provide complete information upfront gets faster, more accurate, and generally better offers than one who trickles information out piece by piece.

Choosing Buyers to Approach

Look for buyers with verifiable experience purchasing private mortgage notes in Texas, a strong reputation evidenced by BBB ratings, testimonials, or public track records, a high close rate that demonstrates their offers are genuine rather than aspirational, the ability to close quickly and fund without relying on outside investors, and transparent pricing with no hidden fees or surprise deductions at closing.

Longhorn Note Buyers checks every one of these boxes. With an A+ BBB rating, over $47 million in notes purchased, a 100 percent close rate on quoted deals, and 24-hour turnaround on offers, they represent the standard for professionalism and reliability in the Texas note buying market.

Submitting Your Note for Evaluation

When you contact a buyer, provide the core information: remaining balance, interest rate, monthly payment, remaining term, borrower's payment history, property type and location, and your estimate of the property's current value. If you have your document package ready, offer to send it along with the initial inquiry. Buyers who receive complete information make better, more reliable offers.

Understanding What You Receive

The preliminary offer you receive is the buyer's estimate of what they can pay for your note based on the information provided. This number may be adjusted during due diligence if the buyer discovers material differences between what was presented and what their independent investigation reveals. However, with reputable buyers, adjustments are typically minor or nonexistent when the initial information was accurate and complete.

Step 5: Evaluate Offers and Choose Your Buyer

If you have solicited multiple offers, now is the time to compare them and make your selection. Price is important, but it is not the only factor — and sometimes it is not even the most important factor.

Price

Obviously, a higher offer means more cash in your pocket. But compare prices in the context of the other factors below. A $2,000 price advantage from a buyer with a history of re-trading during due diligence is not really a $2,000 advantage — it is a number that might evaporate before closing.

Close Rate and Reliability

Ask each buyer about their close rate — the percentage of deals they quote that actually close at the quoted price. A buyer with a 100 percent close rate is telling you that their number is real. A buyer who closes 80 percent of their deals is telling you there is a one-in-five chance your deal falls through or gets repriced. That uncertainty has a real cost.

Timeline

How long will the process take from acceptance to funding? Most residential note sales close in two to four weeks. If a buyer is quoting six to eight weeks, ask why. Longer timelines mean more time exposed to market risk and borrower risk, and they delay your access to the cash you need.

Fees and Deductions

Reputable direct buyers like Longhorn Note Buyers do not charge sellers any fees. The quoted price is the price you receive at closing. Some less scrupulous buyers add processing fees, closing costs, or other deductions that reduce your net proceeds below the quoted price. Ask explicitly whether the quoted price is net to you or whether any deductions will apply.

Step 6: Navigate the Due Diligence Process

After you accept an offer, the buyer conducts their independent investigation of the note, the borrower, and the property. This phase is systematic and predictable — here is what to expect.

Title Search

The buyer orders a title search to verify that the deed of trust is properly recorded, that you are the current holder of the note, and that there are no unexpected liens, judgments, or encumbrances on the property. A clean title search typically takes one to two weeks.

Property Valuation

The buyer obtains a current estimate of the property's value through a broker's price opinion, a comparative market analysis, or a formal appraisal depending on the property type and note size. This valuation determines the actual LTV ratio, which is one of the most important factors in the buyer's final pricing.

Payment Verification

The buyer verifies your payment history by cross-referencing the records you provided with any available independent documentation. This is why having a clean, detailed payment ledger is so important — it makes verification straightforward and prevents delays.

Document Review

The buyer's attorney or closing team reviews the promissory note and deed of trust for legal sufficiency, proper execution, and conformity with Texas law. They are looking for anything that could affect the enforceability of the note or the security interest in the property. Properly drafted and executed documents pass this review without issues. Documents with errors or omissions may require remediation before closing.

Your Role

Be responsive. When the buyer or their service providers need something — a document, an answer to a question, access to information — provide it as quickly as you can. Responsiveness is the number one factor you can control that affects the speed of due diligence. Sellers who respond within 24 hours to every request consistently close faster than those who take days to reply.

Step 7: Close the Deal and Get Paid

Closing on a private mortgage note sale is straightforward and typically does not require an in-person meeting. Here is what happens.

Closing Documents

The buyer prepares the closing documents, which typically include an allonge or endorsement transferring the promissory note to the buyer, an assignment of the deed of trust transferring your security interest in the property, a seller's affidavit confirming the accuracy of the information you provided, and a closing statement detailing the transaction terms. You sign these documents, usually through a mobile notary at your home or office, and return them to the buyer or their closing agent.

Recording and Funding

The assignment of the deed of trust is recorded with the county clerk's office, creating a public record of the transfer. Once recording is confirmed, the buyer releases the funds. Wire transfer is the standard method, and funds typically hit your account the same day or the next business day after recording.

Borrower Notification

The buyer sends a formal notification to the borrower informing them of the change in note ownership and providing new payment instructions. The borrower's terms are unchanged — same payment amount, same interest rate, same remaining balance, same maturity date. They simply redirect their payments to the new note holder. Your involvement with the note is complete.

Common Questions Private Mortgage Note Sellers Ask

Throughout the process, certain questions come up consistently. Addressing them here saves you time and uncertainty.

What If My Note Is on an Unusual Property Type?

Private mortgage notes in Texas are secured by every imaginable type of property. While notes on single-family homes in populated areas are the most liquid and generally command the best pricing, notes on land, ranches, farms, commercial buildings, duplexes, and other property types are all sellable. The property type affects the pricing but not the process. An experienced buyer like Longhorn Note Buyers evaluates notes on all property types and can provide you with an accurate offer regardless of what your note is secured by.

What If the Borrower Has Been Late on a Few Payments?

A note with some late payments can still be sold. The price will reflect the additional risk, but a note where the borrower is currently in good standing with a few historical late payments is very different from a note where the borrower is currently delinquent. Be transparent about the payment history and let the buyer price accordingly. Trying to hide late payments only leads to price reductions when the truth surfaces during due diligence.

What If I Created the Note Without a Lawyer?

Many private mortgage notes in Texas were created without legal counsel — the parties drafted the documents themselves or used templates. These notes can usually be sold, but the buyer's attorney will review the documents carefully for legal sufficiency and enforceability. If there are issues — missing provisions, improper execution, unrecorded deeds of trust — they may need to be remediated before closing. A reputable buyer will identify these issues and work with you to resolve them rather than simply walking away.

What If I Do Not Know the Property's Current Value?

You do not need a formal appraisal before contacting buyers. An estimate based on comparable sales, online valuation tools, or a conversation with a local real estate agent is sufficient for the initial inquiry. The buyer will obtain their own independent valuation during due diligence, so your estimate is a starting point, not the final word. That said, having a reasonable estimate helps you evaluate the initial offer in context.

Maximizing Your Private Mortgage Note's Value

A few practical strategies can help you achieve the best possible price.

Let the Note Season

If you are not in an immediate rush, every additional month of on-time payments from your borrower adds value. The jump from 6 to 12 months of seasoning is significant, and the jump from 12 to 24 months is even more meaningful. If you can afford to wait and your borrower is paying reliably, patience pays dividends.

Keep Immaculate Records

A clean, detailed, verifiable payment history eliminates uncertainty and builds buyer confidence. If your records have been informal, invest the time to organize them into a proper ledger before approaching buyers. This single action can meaningfully improve your offers.

Know Your LTV

Research the property's current value and calculate your LTV ratio. If the LTV has improved since you originated the note — through a combination of principal paydown and property appreciation — that improvement is a selling point you should highlight. Every percentage point of LTV improvement represents better collateral protection for the buyer, which supports a higher price for you. For a comprehensive look at how all pricing factors interact, see this guide on what determines note value in Texas.

Be a Serious Seller

Buyers allocate their time and attention to sellers who are serious and prepared. Show up with your documents organized, your numbers clear, and your questions thoughtful. Demonstrate that you have done your homework and that you are ready to move forward. Professional buyers respond to professional sellers with their best pricing and most efficient service.

Why Longhorn Note Buyers for Your Private Mortgage Note

Longhorn Note Buyers has been purchasing private mortgage notes across Texas since 2007, and founder Nick McFadin has been in the note business since 1983. That four-decade track record, combined with over $47 million in notes purchased, an A+ BBB rating, and a 100 percent close rate on quoted deals, makes Longhorn one of the most experienced and reliable note buyers in the state.

Their process is built around the seller's experience: 24-hour turnaround on cash offers, transparent pricing with no hidden fees, a streamlined due diligence process, and closings that typically happen in two to four weeks. When Longhorn gives you a number, that number is what you receive at closing. No re-trading, no last-minute surprises, no games.

Ready to Sell Your Note?

If you hold a private mortgage note in Texas and you are ready to find out what it is worth, the first step is simple and free. Contact Longhorn Note Buyers today at (210) 828-3573 or visit longhornnotebuyers.com to get your free, no-obligation cash offer within 24 hours. Whether your note is on a home, land, a ranch, or a commercial property, Longhorn has the expertise and capital to make you a fair offer and close the deal on your timeline.

Frequently Asked Questions

What is the difference between a private mortgage note and a bank mortgage?

The primary difference is who holds the note. A bank mortgage is originated and held by a financial institution that is subject to banking regulations, underwriting standards, and capital requirements. A private mortgage note is created between private parties — typically when a property seller finances the sale directly to the buyer. Private notes may have more flexible terms but are also more variable in their structure and documentation quality. Both types of notes can be sold on the secondary market.

Is there a minimum balance required to sell a private mortgage note?

Most note buyers prefer notes with remaining balances of at least $10,000 to $15,000, though this varies. The fixed costs of due diligence — title search, property valuation, document review, closing — remain roughly the same regardless of the note size, so very small notes may not be economical for buyers to pursue. That said, notes with higher interest rates and strong payment histories can be attractive even at lower balances. The best approach is to request a quote and let the buyer determine whether your note fits their purchasing criteria.

Can I sell a private mortgage note that I inherited?

Yes. Inherited notes are sold regularly on the secondary market. You will need the legal authority to act on behalf of the estate or trust that holds the note, which typically comes through probate, a trust agreement, or letters testamentary. The process is the same as for any note sale — the only additional requirement is documenting your legal authority to assign the note to the buyer.

How does the borrower's credit score affect my note's value?

The borrower's credit score at the time of the original sale is less important than their actual payment performance on your note. A borrower with a mediocre credit score who has made 36 consecutive on-time payments on your note is a more compelling investment than one with an excellent credit score who has only made 3 payments. Buyers focus primarily on demonstrated payment behavior rather than credit scores, though a borrower's overall financial profile is part of the evaluation.

What if I want to sell my note but the borrower wants to pay it off early?

If the borrower pays off the note before you complete the sale, the issue is moot — you receive the full payoff amount directly from the borrower. If the borrower indicates they want to pay off soon but has not done so yet, you have a choice: wait for the payoff, which gives you the full remaining balance, or sell the note now for a discounted lump sum with certainty. The right choice depends on your confidence in the borrower's ability and timeline for the payoff versus your need for immediate cash.