Selling a mortgage note in Texas isn’t just a financial move—it’s a strategy. Whether you’re holding a performing note from a seller-financed deal or an inherited note through probate, converting those monthly payments into a lump sum can give you immediate capital and reduce long-term risk.
Texas has its own real estate laws and nuances. Understanding how those impact the sale process helps you move quickly, avoid roadblocks, and get the most value out of your note.
What Makes Texas Unique for Note Sales
Texas is a non-judicial foreclosure state. That means if a borrower defaults, lenders (or future note buyers) can foreclose without going through the courts. The process is faster and less expensive than in many other states—usually around 60 to 90 days.
That speed makes Texas notes more attractive to investors. A note backed by Texas real estate generally sells at a smaller discount because buyers know they can enforce the agreement if needed.
On top of that, Texas real estate remains in demand. Cities like Austin, Dallas, Houston, and San Antonio—and even smaller areas like Lubbock or Waco—have strong housing markets and growing populations.
Bottom line: If your note is tied to property in Texas, you’re already starting from a position of strength.
What Buyers Look For in a Texas Note
A reputable Texas mortgage note buyer isn’t just looking at the unpaid balance. They’re evaluating risk, return, and documentation. Key factors include:
- Borrower payment history – Consistent, on-time payments are a major plus.
- Interest rate – Higher rates produce more income and improve resale value.
- Loan-to-value ratio (LTV) – A low LTV means more equity and less risk.
- Remaining loan term – Shorter terms are less risky but longer terms can be appealing for passive income.
- Property type and location – Residential properties in metro or suburban areas generally sell better than land or rural notes.
If your note checks most of those boxes, you’re likely to get competitive offers.
Step-by-Step: Selling a Mortgage Note in Texas
1. Organize Your Documents
Before you approach buyers, gather everything needed for due diligence:
- Original promissory note
- Recorded deed of trust (Texas equivalent of a mortgage)
- Payment history (bank records or servicing reports)
- Proof of property insurance
- Buyer’s information (optional, but helpful)
If you used a loan servicer, they can provide these documents in an organized package.
2. Get the Property Valued
Investors want to know what the collateral is worth today—not what it sold for originally. A recent appraisal or broker price opinion (BPO) helps establish current market value and support your asking price.
Texas markets can change quickly, especially in fast-growth areas. A current valuation helps justify a stronger offer.
3. Request Offers from Multiple Buyers
Different note buyers have different appetites. Some only want performing residential notes. Others specialize in partials or non-performing assets.
Cast a wide net, but focus on experienced buyers who know Texas. Ask for references, review their process, and avoid anyone who pressures you to move too quickly.
4. Review and Compare Offers
Offers are typically based on the present value of future payments, discounted for risk. In Texas, the discount tends to be lower due to favorable foreclosure laws.
Expect to receive anywhere from 70% to 95% of the unpaid balance—depending on the quality of the note. Strong payment history, low LTV, and a fair interest rate push you toward the higher end.
You can also explore a partial sale, where you sell the next X number of payments and keep the rest. This gives you cash now without giving up the entire asset.
5. Finalize the Sale
Once you accept an offer, the buyer will perform due diligence. That includes reviewing documents, confirming payment history, and sometimes running a title check.
After that, you’ll sign a purchase agreement and an assignment of the deed of trust. The buyer wires funds and takes over collection.
If you’re using a servicer, the transition is typically smooth. The borrower continues making payments as usual—just to a new recipient.
Tax Implications in Texas
While Texas has no state income tax, selling a mortgage note is still a taxable event at the federal level.
You may owe capital gains tax if the note is sold for more than your basis (what you originally received or invested). The exact amount depends on how the note was created, how long you’ve held it, and whether you sell it partially or in full.
Talk to a tax professional before closing to plan accordingly.
What If the Note Was Seller-Financed?
Many Texas homeowners use seller financing to close a deal faster, avoid underwriting headaches, or reach buyers who don’t qualify for traditional loans.
If that’s how your note was created, it’s even more important to:
- Confirm the deed of trust was properly recorded
- Verify a down payment was collected
- Document payments from day one
The better your records, the more your note is worth. Investors are cautious with seller-financed notes unless the structure is clean.
If you haven’t used a servicing company yet, consider hiring one before you list the note. It adds credibility and simplifies the handoff.
A Note on Marketing
How you marketed the original property matters more than you think. If you priced it fairly, used professional photos, and attracted a qualified buyer, chances are you created a stronger note.
That’s why marketing isn’t just for the home sale—it’s foundational to building a note investors will want to buy. If the original deal was rushed or cut corners, it shows up in the terms—and in the offers.
Final Thoughts
Selling a mortgage note in Texas is straightforward when you understand what buyers value and how to present your asset. With fast foreclosure timelines, strong housing markets, and flexible sale structures, Texas notes tend to perform well on the secondary market.
Prep your documents, verify your numbers, and shop the note to the right buyers. Whether you sell the full note or just part of it, you can unlock liquidity without sacrificing long-term value.
If your note is tied to Texas real estate, you’re already ahead. The rest is about positioning it well—and closing smart.
Citiesabc was created by a team of global industry leaders, academics and experts to create new solutions, resources, rankings and connections for the world’s top cities and populations.
