If you're holding a seller-financed land note in Texas and considering cashing it out, the biggest question is usually: “How much less than the remaining balance will I actually get?”
The answer: a discount is inevitable, but it's not arbitrary. In 2026, well-seasoned performing notes typically sell at 10-30% discount, while higher-risk notes can see 30-40% or more. Understanding the factors behind the discount is the key to maximizing your payout.
This comprehensive guide breaks down why discounts exist, current market ranges, real examples, and actionable steps to reduce your discount when selling to a direct buyer like Longhorn Money Services.
Why Every Land Note Sells at a Discount
A note buyer is purchasing your future income stream today. They assume all risk and tie up capital, so the price reflects the time value of money and risk compensation. Unlike a bank CD, notes aren't FDIC-insured, so the discount is the buyer's margin for:
- Time value of money
- Default and foreclosure risk
- Servicing costs (collecting payments, monitoring taxes/insurance)
- Opportunity cost (capital could earn higher returns elsewhere)
For a deeper overview of the full selling process, check our complete guide to selling your land note in Texas.
Typical Discount Ranges in the 2026 Texas Market
Based on current market conditions and thousands of note purchases:
- Prime performing notes (24+ months seasoning, ≥8% interest, ≤65% LTV): 10-20% discount
- Average performing notes: 20-30% discount
- Higher-risk performing notes (low interest, higher LTV, shorter seasoning): 30-40% discount
- Non-performing notes: 50-80%+ discount (depending on recovery potential)
The 7 Key Factors That Determine Your Discount
1. Payment History (Seasoning)
The strongest factor. A note with 24+ months of on-time payments proves the payer's reliability → significantly lower discount.
2. Interest Rate
Notes at 8% or higher provide attractive yield → smaller discount. Below 6% makes it harder to justify the risk.
3. Loan-to-Value Ratio (LTV)
Lower LTV = more equity cushion for the buyer in case of default → better pricing. Ideal is under 70%.
4. Remaining Term and Balance
Shorter terms (under 10 years) reduce long-term risk → lower discount. Larger balances can sometimes command slightly better pricing due to economies of scale.
5. Property Type and Location
Improved land in growing areas (near cities, with utilities) is less risky than remote raw land → better offers.
6. Payer Credit and Down Payment
Strong credit and large original down payment (20%+) signal commitment → reduced discount.
7. Overall Documentation and Title
Clean title and complete documents speed closing and reduce buyer risk → higher offer.
Real-World Pricing Examples (2026)
| Balance | Rate | LTV | Seasoning | Discount | Cash Offer |
|---|---|---|---|---|---|
| $100,000 | 9% | 60% | 36 mo | 15% | $85,000 |
| $100,000 | 6% | 80% | 12 mo | 28% | $72,000 |
| $100,000 | 4% | 90% | 6 mo | 38% | $62,000 |
How to Minimize Your Discount
- Shop direct buyers (avoid broker fees) — see direct vs broker comparison.
- Consider a partial sale to keep some future payments.
- Bring payments current if behind.
- Provide all documents upfront.
- Get quotes early, before urgency forces a lower offer.
Ready for a no-obligation quote? Call Sandy Henderson at (210) 828-3573 or submit your note details here.
Frequently Asked Questions
Is a 30% discount normal when selling a land note?
Yes — 20-30% is typical for average performing notes in Texas. Prime notes often see only 10-20%.
Can I sell my note with no discount?
No, some discount is always required due to risk and time value of money. But strong notes can minimize it to 10-15%.
What makes my discount higher?
Low interest rate, high LTV, short seasoning, or remote property location are the biggest drivers.
Do partial sales have lower discounts?
Yes — since the buyer's risk period is shorter, partials often price 5-10% better than full sales.
Will a broker get me a better (lower) discount?
Not usually — brokers add commission (3-10%) that reduces your net proceeds. Direct buyers like us typically offer more.
How quickly does the discount change with market rates?
When prevailing interest rates rise, note yields become more attractive → discounts tend to shrink.
Have questions about your specific note? Contact Sandy today for a free, transparent quote.