What Makes a Land Note Hard to Sell in Texas? Common Issues

The Texas land note market is remarkably active, and the vast majority of seller-financed notes can find a buyer when the holder decides to sell. However, not all notes are created equal, and some are genuinely harder to sell than others. If you have approached a buyer and been told that your note presents challenges, or if you have received an offer that seems much lower than you expected, understanding the specific issues that make a land note hard to sell in Texas is the first step toward either resolving those issues or setting realistic expectations for the sale.

The challenges that make a note difficult to sell fall into several broad categories: problems with the note's financial terms, problems with the borrower's performance, problems with the collateral, and problems with the documentation. Some of these issues can be fixed or mitigated before you approach a buyer, while others are inherent characteristics that simply need to be priced into the deal. In either case, knowledge is power — understanding what buyers are looking for and where your note falls short allows you to take strategic action rather than being blindsided by low offers or rejections.

This guide identifies the most common issues that make Texas land notes harder to sell, explains why each issue matters to buyers, and offers practical solutions or workarounds wherever possible. Whether your note has one of these issues or several, the information here will help you understand your position and make informed decisions about how to proceed.

Documentation Problems — The Most Fixable Category

Missing or Lost Original Promissory Note

The original promissory note is the legal instrument that evidences the debt, and its absence creates the most significant documentation challenge a note seller can face. Without the original note, the buyer cannot be certain that the instrument has not been transferred to someone else, and they face potential legal challenges in enforcing the debt if the borrower defaults. While lost note affidavits and indemnity agreements can address this issue under Texas law, the additional legal complexity and risk will result in a deeper discount and a longer closing timeline.

If you have lost the original note, the situation is not hopeless, but it does require additional effort. Search thoroughly for the original — check safe deposit boxes, filing cabinets, old storage boxes, and with any attorney or title company that may have handled the closing. If a thorough search is unsuccessful, a photocopy of the note is the next best thing because it provides a verified record of the terms. If you have neither the original nor a copy, the buyer will need to reconstruct the terms from the security instrument and other available records, which adds complexity and cost. For comprehensive guidance on handling missing documents, review this article on selling a land note without original documents in Texas.

Unrecorded Deed of Trust or Contract for Deed

The deed of trust or contract for deed is the document that gives the note holder a lien on the property, and it must be recorded in the county clerk's office to be enforceable against third parties. If your security instrument was never recorded — which happens more often than you might think with informal seller-financing arrangements — the note buyer faces the risk that the borrower could sell or encumber the property without the buyer's knowledge, and the buyer's lien would not take priority over subsequent interests. This is a serious issue that most buyers will require to be resolved before they will close the deal.

The fix is straightforward if you have the original security instrument: record it in the county clerk's office immediately. If the instrument has been lost and was never recorded, the situation is more complex and may require the borrower to execute a new deed of trust, which requires their cooperation. If the borrower is uncooperative, you may need to consult with a real estate attorney to explore your options. An unrecorded security instrument does not prevent a sale, but it creates additional risk that the buyer will price into their offer, and resolving it before approaching a buyer will improve your pricing significantly.

Incomplete or Missing Payment Records

Payment history is the most important factor in note pricing, and the inability to verify the borrower's payment record is a major obstacle for buyers. If you have been collecting payments informally — cash payments with no receipts, irregular amounts, no written records — the buyer cannot assess the borrower's reliability, and they will price the note as if the payment history is unknown, which means a substantially deeper discount.

Before approaching a buyer, do everything you can to reconstruct your payment records. Bank statements showing regular deposits in the payment amount are excellent evidence. If the borrower pays by check, your bank may have images of the deposited checks. Tax returns that show interest income from the note can corroborate that payments were being made. Even a signed letter from the borrower confirming the current balance and payment status — an estoppel certificate — can help fill the gap. The more payment evidence you can provide, the better your pricing will be.

Borrower Performance Issues

Chronic Late Payments or Active Delinquency

A borrower who is chronically late or currently delinquent is the most common borrower-related issue that makes a note harder to sell. Late payments signal that the borrower either lacks the financial resources to make timely payments or lacks the discipline and commitment to prioritize them. Either interpretation is concerning to a buyer who is counting on those payments for their investment return. The more severe and frequent the late payments, the larger the discount the buyer will apply.

If your borrower is currently behind, the best course of action before selling — if feasible — is to work with the borrower to bring the account current and then allow a few months of on-time payments to accumulate. This recovery period demonstrates that whatever caused the delinquency has been resolved, which significantly improves the buyer's perception of the note. If the borrower cannot or will not catch up, selling the note as-is to a buyer who specializes in impaired notes is still an option, though the pricing will reflect the elevated risk. For more detail on this scenario, this guide on selling a land note when the borrower is late on payments in Texas provides comprehensive advice.

Limited Seasoning — Too Few Payments Made

A note with only a few months of payment history is harder to sell because the buyer has very little data on which to base their assessment of the borrower's reliability. A borrower who has made three payments might look like a perfect performer or might default on payment number four — and the buyer has no way to know which scenario is more likely. Most buyers require a minimum of six to twelve months of seasoning before they will purchase a note, and notes with twenty-four or more months of history receive the best pricing.

If your note is relatively new, the most effective strategy is simply to wait. Every month of on-time payments strengthens the note's profile and improves the pricing you can expect. If you cannot wait because you need cash urgently, some buyers will purchase newer notes at deeper discounts, and you may need to accept a less favorable price as the cost of selling early. Alternatively, a partial sale — selling just a few years of payments — can be a way to access some cash now while allowing the note to continue seasoning for a potential future sale of the remaining interest.

Unresponsive or Uncooperative Borrower

While the borrower's approval is generally not required to sell a note, their cooperation can be helpful during the process — particularly for providing an estoppel certificate, confirming payment information, or facilitating contact during due diligence. A borrower who is unresponsive or actively uncooperative can make the process more difficult for the buyer, which may affect the buyer's willingness to proceed or the price they offer.

If your borrower is difficult to reach or has expressed hostility toward the idea of the note being sold, let the buyer know upfront. An experienced buyer has dealt with uncooperative borrowers before and has procedures for completing due diligence without the borrower's active participation. Transparency about this issue allows the buyer to plan accordingly rather than being surprised during the process.

Collateral Issues — Problems With the Property

Remote Location With Limited Market Activity

The location of the collateral property is a critical factor in note pricing, and properties in extremely remote areas with minimal market activity present a challenge for buyers. If the property is in a county with very few land sales, the buyer cannot easily establish a current market value through comparable sales data. Additionally, remote properties may be harder to sell in a foreclosure scenario, which increases the buyer's liquidation risk and drives a larger discount.

Texas is an enormous state, and while the major metropolitan corridors and popular recreational areas have robust land markets, some of the state's 254 counties see very little real estate activity. Notes on properties in these areas can still be sold, but the buyer will apply a collateral risk premium that reflects the uncertainty about the property's value and marketability. If your property is in a remote area, providing any available comparable sales data, tax appraisal information, or market knowledge can help the buyer form a more accurate valuation.

High Loan-to-Value Ratio

An LTV ratio above eighty percent makes a note significantly harder to sell because the buyer has very little equity cushion protecting their investment. If the borrower defaults and the buyer has to foreclose and sell the property, there is a real risk that the sale proceeds will not cover the buyer's investment plus the costs of foreclosure and resale. This scenario is the note buyer's worst case, and they will price aggressively to protect against it.

If your LTV is high because the borrower made a small down payment and has not been paying long enough to build significant equity, time may be your best ally. As the borrower makes payments and the principal balance decreases, the LTV improves. Simultaneously, if land values in the area are appreciating, the denominator of the LTV ratio increases, further improving the ratio. If you can wait for the LTV to improve to a more comfortable level — below seventy-five percent and ideally below sixty-five percent — the pricing you receive will be meaningfully better.

Access Issues, Landlocked Properties, and Easement Problems

Properties with questionable legal access are among the hardest collateral types for note buyers to accept. If the property is landlocked — meaning it has no direct frontage on a public road — or if access depends on an easement across neighboring land that is not properly documented, the property's marketability is severely compromised. A buyer who has to foreclose on a landlocked property may find it extremely difficult to resell, which fundamentally undermines the collateral's value as a safety net.

If your property's access depends on an easement, make sure the easement is properly documented and recorded. An unrecorded verbal agreement with a neighbor does not constitute legal access and will be a red flag for buyers. If access issues exist and cannot be resolved, the note may still be sellable, but the discount will be substantial because the buyer is essentially purchasing a note with impaired collateral. Working with a buyer who has extensive experience with Texas rural land — like Longhorn Note Buyers — is particularly important in these situations because they are more likely to understand and fairly evaluate properties with complex access situations.

Environmental Concerns and Flood Zone Issues

Properties with known or suspected environmental contamination — such as former industrial sites, properties near oil and gas operations, or parcels with illegal dumping — present significant challenges for note buyers because environmental cleanup liability can be enormous and can exceed the property's value. Similarly, properties where the primary buildable area is within a FEMA-designated Special Flood Hazard Area face limitations on development, insurance requirements that increase the borrower's costs, and the ongoing risk of flood damage.

If your property has environmental or flood zone issues, disclose them to the buyer upfront. Hiding these issues only delays the inevitable, as the buyer will discover them during due diligence. A buyer who learns about environmental or flood concerns from you at the outset can factor them into their initial quote accurately, whereas a buyer who discovers them during due diligence may use them as leverage to renegotiate the price downward.

Note Structure Issues

Very Low Interest Rate

Notes with interest rates significantly below the prevailing market rate are harder to sell because the buyer earns less income per dollar invested, requiring a deeper discount to achieve their target yield. In the current market, notes below five percent are particularly challenging from a pricing perspective. The mathematical relationship between rate and price is unavoidable, and sellers of low-rate notes should expect deeper discounts than sellers of higher-rate notes with otherwise similar characteristics. For a detailed discussion of how to approach selling a low-rate note, review this guide on selling a land note with a low interest rate in Texas.

Very Small Remaining Balance

Notes with remaining balances below $5,000 to $10,000 are disproportionately expensive for buyers to purchase because the fixed costs of due diligence, title work, and closing represent a larger percentage of the investment. A buyer who spends $2,000 in transaction costs on a $50,000 note absorbs a four percent drag, but the same $2,000 on a $7,000 note represents a twenty-nine percent drag. This economic reality means that very small notes receive deeper percentage discounts, and some buyers may decline to purchase them at all because the economics simply do not work.

If you hold a very small note and want to sell, your best strategy is to work with a buyer who specializes in Texas land notes and handles a high volume of transactions, as they may have more efficient processes that make small note purchases economically viable. Alternatively, if you hold multiple small notes, bundling them into a portfolio can improve the economics for the buyer and result in better per-note pricing.

Imminent Balloon Payment With Uncertain Borrower Ability to Pay

A balloon payment that is due within the next twelve to eighteen months creates urgency and uncertainty that makes the note harder to sell. The buyer must evaluate whether the borrower can satisfy the balloon through refinancing, sale of the property, or cash reserves, and if the answer is uncertain, the buyer faces the immediate prospect of managing a default and foreclosure shortly after purchasing the note. This near-term risk is one of the most challenging pricing scenarios in the note market, and the discount will be substantial.

If your balloon is approaching and you are considering selling, the sooner you act, the better. A note with a balloon due in eighteen months will command better pricing than the same note with a balloon due in six months, simply because the buyer has more time to work with. If the balloon has already passed and the borrower has not paid, the note transitions from a performing note with balloon risk to a non-performing note, which is a different product entirely with its own set of pricing dynamics.

Practical Solutions and Next Steps

Fix What You Can Before Approaching a Buyer

Many of the issues that make notes harder to sell are fixable or at least improvable with some effort on your part. Record unrecorded security instruments. Reconstruct missing payment records from bank statements. Get the borrower current on payments. Locate missing documents or obtain copies from county records. Resolve access issues by properly documenting easements. Each of these steps addresses a specific concern that buyers have and can translate into meaningfully better pricing.

The effort required to fix these issues is usually modest compared to the pricing improvement they generate. Spending a few hours tracking down documents or a few hundred dollars to record a deed of trust can result in thousands of dollars of additional value when you sell. Think of it as preparation that pays dividends — the more issues you resolve before approaching a buyer, the stronger your negotiating position and the better your outcome.

Be Transparent About Issues You Cannot Fix

For issues that are inherent to the note — a low interest rate, a remote property location, a high LTV — transparency is your best strategy. Disclose everything upfront so the buyer can price the note accurately from the start. Hiding issues or hoping the buyer will not notice only leads to renegotiation during due diligence or, worse, a collapsed deal after weeks of wasted time. Buyers respect sellers who are upfront about their note's challenges, and that respect often translates into a fairer offer and a smoother process.

Work With an Experienced Texas Buyer Who Handles Challenging Notes

Not all buyers are equipped to handle notes with significant challenges. Some buyers have narrow purchasing criteria and will simply decline any note that does not fit their ideal profile. Others, like Longhorn Note Buyers, have broad experience across the full spectrum of Texas land notes and can evaluate challenging situations fairly. With over $46 million in Texas notes purchased since 2007, Longhorn has seen every type of challenge described in this guide and has the expertise to price impaired notes based on their realistic value rather than simply applying a worst-case discount.

Ready to Sell Your Note?

If your land note has challenges and you are unsure whether it can be sold or what it might be worth, the best thing you can do is get a professional evaluation from an experienced buyer. Longhorn Note Buyers has been purchasing Texas land notes of every description since 2007, including notes with documentation gaps, payment history issues, collateral challenges, and structural complexities. With a 100% close rate on quoted deals, Longhorn stands behind their offers and will not waste your time with a quote they cannot back up.

Call Longhorn Note Buyers today at (210) 828-3573 or visit longhornnotebuyers.com to request your free, no-obligation quote. Even if you have been turned down by other buyers or received offers that seemed unfairly low, Longhorn's experienced team may see value in your note that others missed. With an A+ Better Business Bureau rating and a reputation built on fair dealing, Longhorn Note Buyers is the partner you need when your note presents challenges.

Frequently Asked Questions About Hard-to-Sell Land Notes in Texas

Is there any Texas land note that absolutely cannot be sold?

It is extremely rare for a Texas land note to be completely unsellable, though some notes may only attract buyers who specialize in distressed or impaired assets. The combination of a lost original note with no copies, an unrecorded security instrument, no verifiable payment history, a hostile or defaulted borrower, and collateral with questionable value or access might push a note to the very edge of marketability. Even in that extreme scenario, a buyer who specializes in workouts and foreclosures might see enough value in the collateral to make an offer, though the price would reflect the extraordinary risk and effort involved.

How much will fixing documentation issues improve my price?

The improvement depends on which documents are missing and how critical they are. Recording an unrecorded deed of trust might improve your offer by three to five percentage points. Providing a reconstructed payment history might improve it by five to ten points. Locating the original promissory note or providing a clear photocopy can make the difference between a buyer being willing to purchase the note at all and declining. In aggregate, fixing documentation issues before approaching a buyer can improve your proceeds by ten to twenty percent or more compared to selling with significant gaps.

Should I lower my price expectations if my note has challenges?

Yes, it is important to have realistic expectations based on the actual characteristics of your note. A note with significant challenges — high LTV, limited payment history, remote collateral, missing documents — will receive a deeper discount than a note with strong characteristics across the board. This is not a reflection of unfair treatment by buyers — it is a reflection of the real risk that the buyer is taking on. Understanding the factors that drive pricing and honestly assessing where your note stands on each factor will help you evaluate offers fairly and avoid the frustration of comparing your note to an idealized version that does not match reality.

Can I improve my note's sellability by modifying the terms?

In some cases, yes. If the borrower is willing to cooperate, you may be able to modify the note to improve its marketability. Common modifications include increasing the interest rate in exchange for a term extension, extending or eliminating a balloon payment, adding a personal guarantee if one does not currently exist, or formalizing payment arrangements that have been informal. Any modification requires the borrower's agreement and should be documented in a formal loan modification agreement. The improvement in pricing from a favorable modification can be significant, though the effort and time involved in negotiating with the borrower must be considered.

What if multiple buyers have turned down my note?

If you have been declined by multiple buyers, it suggests that your note has one or more issues that fall outside the purchasing criteria of those specific buyers. This does not necessarily mean the note is unsellable — it may mean you have not yet found the right buyer. Different buyers have different risk tolerances, specializations, and purchasing criteria. A buyer who declined your note because of a high LTV might be replaced by a buyer who focuses on the collateral value and is comfortable with the ratio. Expanding your search to include buyers who specialize in challenging or non-performing notes can sometimes uncover a willing purchaser that the mainstream market would not produce.