How to Sell a Seller-Financed Note in Texas: Step by Step

If you sold a property in Texas using seller financing, you are sitting on something valuable — a promissory note that pays you monthly income backed by real estate. But monthly payments are not always what you need. Sometimes life demands a lump sum, and the good news is that selling your seller-financed note is a well-established process that thousands of Texans take advantage of every year.

Seller financing has become increasingly popular across Texas, especially in the land and rural property markets where traditional bank loans can be difficult for buyers to obtain. As a result, there is a thriving secondary market for these notes. Experienced note buyers actively seek out well-structured seller-financed notes because they represent predictable cash flows secured by tangible assets. That demand works in your favor when you decide to sell.

This step-by-step guide covers everything you need to know about selling a seller-financed note in Texas. You will learn how the process works from first contact to closing, what affects the price you receive, and how to avoid the most common mistakes that cost note holders money or time.

What Exactly Is a Seller-Financed Note?

When you sold your property and agreed to let the buyer pay you over time instead of requiring them to get a bank loan, you created a seller-financed note. The arrangement typically involves two documents: a promissory note that spells out the repayment terms — principal amount, interest rate, monthly payment, and maturity date — and a deed of trust that secures the loan against the property.

In practical terms, you became the bank. The buyer makes payments to you each month, and you hold a lien on the property until the loan is paid off. This arrangement gave you a stream of income, and it gave the buyer access to property they might not have been able to purchase through conventional lending.

The important thing to understand is that the rights you hold under this arrangement — the right to receive those future payments and the security interest in the property — are yours to keep or to sell. Selling the note does not affect the buyer in any way. They keep making the same payments under the same terms. The only change is that those payments go to the new note holder instead of to you.

Why Seller-Financed Notes Are Attractive to Buyers

Note buyers like seller-financed paper for several reasons. First, the terms are often more favorable than what you find in institutional lending — higher interest rates, reasonable loan-to-value ratios, and straightforward amortization schedules. Second, the borrower has typically demonstrated their commitment by making a down payment and establishing a payment history. Third, the underlying collateral is real property in Texas, one of the strongest real estate markets in the country.

All of this means that when you go to sell your note, you are offering something that buyers genuinely want. You are not begging someone to take a risky asset off your hands. You are offering a performing investment backed by Texas real estate, and the market recognizes that value.

Step 1: Assess Your Note and Your Goals

Before you pick up the phone and call a note buyer, take a few minutes to assess your situation. Understanding your note and what you want to accomplish will help you have a more productive conversation and set realistic expectations.

Review Your Note Terms

Pull out your promissory note and deed of trust and refresh yourself on the key terms. What is the current unpaid balance? What is the interest rate? What is the monthly payment? How many payments remain? Is there a balloon payment? Are there any special provisions or modifications that have been made since the original agreement?

You should also check your payment records. How many payments has the borrower made? Have they all been on time, or have there been late payments? A clean payment history is one of the most valuable attributes your note can have, so knowing where you stand is essential.

Decide Between a Full Sale and a Partial Sale

You do not have to sell your entire note. If you only need a specific amount of cash, a partial sale might make more sense. In a partial sale, you sell a defined number of future payments to a buyer while retaining the right to receive all payments after that.

For example, if your note has 180 remaining payments and you only need $30,000 for a specific purpose, you might sell the next 60 payments and keep the remaining 120 for yourself. This approach often results in a smaller percentage discount because the buyer is taking on less risk over a shorter time horizon. If you want to compare the two approaches in depth, this breakdown of full vs. partial note sales is a helpful resource.

Know Your Minimum

Before you get quotes, think about the minimum amount you would accept. This is not a number you share with the buyer — it is your internal benchmark. Knowing your floor prevents you from making an emotional decision and helps you evaluate offers objectively.

Step 2: Gather Your Documentation

Having your documents organized before you start the selling process will speed things up dramatically and signal to potential buyers that you are a serious seller. Buyers deal with people who have their paperwork together and people who do not, and the ones who do always get a smoother, faster experience.

Essential Documents

At minimum, you should have the original promissory note, the recorded deed of trust, a complete payment history showing every payment received with dates and amounts, a copy of the title insurance policy from when the property was sold, proof of hazard insurance on the property, and any amendments or modifications to the original agreement.

If you are missing any of these documents, do not panic. Some can be reconstructed or obtained from the county records office. But the more complete your package, the faster and smoother the process will be. For a detailed checklist of what you need, refer to this guide on documents needed to sell a note in Texas.

Property Information

Buyers will also want to know about the property securing the note. The address, a general description of the property type and condition, the approximate current market value, and any information about improvements or changes since the sale are all helpful. You do not need a formal appraisal at this stage — the buyer will handle their own valuation during due diligence — but having a ballpark sense of the property's current worth helps frame the conversation.

Step 3: Get Cash Offers From Note Buyers

With your documents assembled and your goals clear, it is time to contact note buyers and request offers. This is where many note holders make the mistake of either contacting too few buyers or contacting too many. Two to three reputable buyers is the sweet spot — enough to get a sense of the market without turning the process into a full-time job.

What the Buyer Will Ask

Expect the buyer to ask for the basic details of your note: the unpaid balance, interest rate, monthly payment, remaining term, borrower's payment history, property type and location, and the original sale price and down payment. Some buyers will ask for copies of your documents upfront, while others will provide a preliminary quote based on the numbers and request documents only after you express interest in moving forward.

A buyer like Longhorn Note Buyers can typically provide you with a preliminary cash offer within 24 hours of receiving this information. That speed is not an indication of carelessness — it is the result of decades of experience evaluating notes and understanding what they are worth in the current market.

Evaluating Offers

When you receive offers, resist the temptation to simply go with the highest number. Price matters, of course, but so does the buyer's ability to actually close the deal. Ask each buyer about their close rate, their typical timeline from offer to funding, and whether their offers are firm or subject to change during due diligence.

A buyer who offers you $5,000 more than a competitor but then re-trades the price downward after two weeks of due diligence is not actually giving you a better deal. They are wasting your time. Look for a buyer who quotes a fair number and stands behind it.

Step 4: Accept an Offer and Enter Due Diligence

Once you accept an offer, the buyer begins their due diligence process. This is the phase where the buyer verifies everything about your note and the underlying property to make sure the deal is sound.

What the Buyer Verifies

During due diligence, the buyer will typically review all of your original loan documents for completeness and accuracy, order a title search to confirm there are no unexpected liens, judgments, or encumbrances on the property, evaluate the current market value of the property through a broker's price opinion or an appraisal, verify the borrower's payment history and current standing, and confirm that hazard insurance is in place on the property.

Your Role During Due Diligence

Your main job during this phase is to be responsive. When the buyer or their title company requests a document or asks a question, provide the answer promptly. Delays during due diligence are almost always caused by slow responses from the seller, not by the buyer. If you are on top of your communications, most due diligence processes wrap up within one to three weeks.

Potential Issues and How to Handle Them

Sometimes due diligence reveals issues that need to be addressed before closing. A title defect, a lapsed insurance policy, or a discrepancy between the payment records and the note terms are all things that can come up. None of these are deal-killers in most cases, but they do need to be resolved. A good buyer will work with you to find solutions rather than simply walking away.

Step 5: Close the Deal and Get Paid

After due diligence is complete and any issues have been resolved, the buyer prepares the closing documents. The closing process for a note sale is straightforward, and most transactions can be completed without an in-person meeting.

The Closing Documents

The primary documents in a note sale closing are the assignment of the promissory note, which endorses the note over to the buyer, and the assignment of the deed of trust, which transfers your security interest in the property to the buyer. The assignment of the deed of trust is recorded with the county clerk's office, creating a public record of the transfer.

You may also sign a seller's affidavit confirming the accuracy of the information you provided, and a closing statement detailing the financial terms of the transaction.

Getting Your Funds

Once all documents are signed and the assignment is recorded, the buyer releases the funds. Most closings are funded via wire transfer, which means the money hits your bank account the same day or the next business day. Some buyers also offer cashier's checks if you prefer.

Borrower Notification

After closing, the buyer sends a formal notice to the borrower informing them of the change in ownership and providing new payment instructions. This is handled entirely by the buyer — you do not need to contact the borrower or explain anything. The borrower's terms remain unchanged, and they simply redirect their payments to the new note holder.

What Affects the Price of a Seller-Financed Note

Understanding the factors that drive pricing will help you set realistic expectations and identify any steps you can take to maximize your payout before you sell. Several variables come into play.

Interest Rate

The interest rate on your note is one of the biggest drivers of value. Higher rates mean more income for the buyer, which translates to a higher purchase price for you. Most seller-financed notes in Texas carry rates between 6 and 12 percent, and notes at the higher end of that range tend to sell at smaller discounts.

Payment History and Seasoning

A note with a long track record of on-time payments is worth significantly more than a brand-new note or one with a spotty payment history. In the industry, this track record is called seasoning, and it is one of the first things a buyer evaluates. If your borrower has been paying consistently for two or more years, that history adds real value to your note. For a deeper look at all the pricing factors, check out this guide on what determines note value in Texas.

Down Payment and Loan-to-Value Ratio

The size of the original down payment matters because it establishes how much equity the borrower has in the property. A buyer who put 20 percent down has a meaningful financial stake in the property and is statistically less likely to walk away. This lower risk for the note buyer translates to a higher price for you.

The current loan-to-value ratio is equally important. If property values have increased since you created the note, the LTV has improved even beyond what the original down payment established. Lower LTV means more protection for the buyer and a better price for you.

Property Type and Location

Notes secured by improved residential properties in growing Texas metros typically command the best prices. Notes on raw land, rural acreage, or commercial properties may carry steeper discounts because these property types are harder to liquidate in a foreclosure scenario. That said, every note is sellable — it is just a matter of pricing to the risk.

Common Mistakes When Selling a Seller-Financed Note

A few recurring mistakes cost note holders money or cause unnecessary frustration. Here is what to watch out for.

Waiting Too Long to Sell

Some note holders wait until they are desperate for cash before exploring a sale. The problem with waiting is that circumstances can change. A borrower who has been paying perfectly might start falling behind. Property values might dip. Interest rates might shift in a way that makes your note less attractive. If selling is something you have been considering, there is rarely a benefit to procrastination.

Not Understanding the Discount

Every seller-financed note sells at a discount to its face value. This is not a penalty — it is the time value of money at work. A buyer is paying you today for cash flows they will receive over years or decades, and they need a return on that investment. Note holders who understand this concept going in have a much better experience than those who expect to receive dollar-for-dollar what the note is worth on paper. You can learn more about how discounts work when selling a note.

Choosing the Wrong Buyer

Not all note buyers are created equal. Some operate with integrity, close what they quote, and treat sellers with respect. Others make inflated offers they have no intention of honoring, drag out the process, and then drop the price at the last minute. Do your homework. Look for buyers with verifiable track records, strong BBB ratings, and a history of closed transactions.

Why Longhorn Note Buyers Is a Trusted Choice

Longhorn Note Buyers has been purchasing promissory notes in Texas since 2007, and founder Nick McFadin has been in the note buying business since 1983. With over $47 million in notes purchased and an A+ rating from the Better Business Bureau, Longhorn brings the experience and credibility that sellers need when making a significant financial decision.

What makes Longhorn particularly appealing for sellers of seller-financed notes is their 100 percent close rate — when they quote you a price, that is the price you get. There are no last-minute surprises, no re-trading, and no games. Combined with 24-hour turnaround on offers and a streamlined closing process, Longhorn makes selling your note as straightforward as it should be.

Ready to Sell Your Note?

If you are holding a seller-financed note in Texas and you are ready to see what it is worth, the process starts with a single conversation. 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 you want to sell the whole note or just a portion, the Longhorn team will walk you through every step and help you make the best decision for your financial future.

Frequently Asked Questions

Can I sell a seller-financed note if the borrower has only been paying for a few months?

Yes, you can sell a note at any point regardless of how many payments have been made. However, notes with shorter payment histories are considered less seasoned and typically sell at a larger discount. Buyers have less data to assess the borrower's reliability, which increases their perceived risk. If possible, waiting until the borrower has made at least 12 months of on-time payments can improve your note's value.

Does the borrower have to agree to the sale of my note?

No. You have the legal right to sell or assign your promissory note and deed of trust without the borrower's consent. The borrower will be notified after the sale closes and given new payment instructions, but their approval is not required. Their loan terms, interest rate, and payment amount remain exactly the same.

What if I created the note without using a lawyer or title company?

Notes that were created informally — without proper legal documentation or title work — can still be sold, but they may require additional steps to clean up before a buyer will purchase them. Missing documents, unrecorded deeds of trust, or title issues will need to be resolved. A reputable buyer will identify these issues during due diligence and can often help you work through the solutions.

How much of a discount should I expect when selling my note?

Discounts on seller-financed notes vary widely depending on the specific characteristics of your note. Notes with high interest rates, strong borrower payment histories, low LTV ratios, and desirable properties typically sell at discounts of 10 to 20 percent. Notes with less favorable characteristics may see discounts of 25 to 40 percent or more. The only way to know what your specific note is worth is to request a quote based on your actual terms.

Will I owe taxes on the sale of my note?

Potentially, yes. The sale of a promissory note can create a taxable event, and the tax treatment depends on several factors including how you originally acquired the note, your tax basis, and whether any of the gain qualifies for installment sale treatment. Consulting with a tax professional before finalizing a sale is always a smart move. For a general overview, read about the tax implications of selling a note in Texas.