Note Broker Fees vs Direct Buyer: Texas Land Note Cost Analysis

When you're ready to sell your Texas land note, the fees you pay can make a difference of thousands—even tens of thousands—of dollars. Understanding exactly what note brokers charge versus what direct buyers charge isn't just helpful information; it's essential knowledge that directly impacts how much cash you'll walk away with. In this detailed cost analysis, I'll expose every fee, commission, and hidden charge in the note-selling process so you can make the most profitable decision.

After more than 42 years buying land notes across Texas, I've seen the fee structures from every angle. I've competed against brokers for deals, I've bought notes that brokers couldn't sell, and I've talked to countless sellers who came to me after getting shocked by broker fees. The industry has a transparency problem, and my goal with this article is to pull back the curtain completely.

Whether you're holding a $30,000 note or a $300,000 note, the percentage of value lost to fees matters enormously. By the time you finish this article, you'll understand exactly what every participant in the note industry charges, why those charges exist, and how to structure your sale to minimize costs and maximize proceeds.

Note Broker Fee Structures: The Complete Breakdown

Note brokers use several different fee structures, and understanding each one helps you evaluate any broker you might consider working with. Let's examine every common fee structure in detail.

Percentage Commission Model

The most common broker fee structure is a straight percentage commission on the transaction value. Typical ranges are:

• Small notes (under $30,000): 5-10% commission
- Mid-size notes ($30,000-$100,000): 3-7% commission
- Larger notes ($100,000+): 2-5% commission

Here's what this looks like in real dollars:

A $50,000 note with a 5% commission costs you $2,500.
A $100,000 note with a 4% commission costs you $4,000.
A $200,000 note with a 3% commission costs you $6,000.

The percentage might seem small, but the dollars add up fast. And that commission comes directly off the top—reducing what you receive by that amount regardless of how much or how little work the broker actually does.

Flat Fee Model

Some brokers charge a flat fee regardless of note size. This might be $1,500-$5,000 depending on the broker and note complexity. Flat fees can work in your favor on larger notes (a $3,000 flat fee on a $200,000 note is only 1.5%) but hurt significantly on smaller notes (that same $3,000 fee on a $25,000 note is 12%).

Net Pricing / Spread Model

This is where brokers can really profit at your expense—and where many sellers get taken advantage of. Here's how it works:

The broker quotes you a "net" price for your note. Let's say they tell you they can get you $60,000. You think that's what the buyer is paying. In reality, the broker shops your note and finds a buyer willing to pay $67,000. The broker pockets the $7,000 spread without disclosing it to you. The broker presents this as "no commission"—but you're actually paying a hidden 10.4% fee.

This model lacks transparency by design. The broker has no obligation to tell you what the actual buyer is paying—they just pocket the spread. Some brokers combine this with explicit commissions, earning money on both ends of the transaction.

Minimum Fee Structures

Many brokers have minimum fees regardless of note size. If a broker has a $2,500 minimum and you're selling a $20,000 note, you're paying 12.5% in fees even if their stated percentage is only 4%. Always ask about minimums before engaging any broker.

Hidden Broker Costs Most Sellers Don't Know About

Beyond the stated commission, brokers often layer in additional fees that reduce your proceeds further. Let's expose every hidden cost:

Document Processing Fees

Many brokers charge $200-$500 in "document processing" or "administrative" fees. They justify this as covering their costs to organize your paperwork, communicate with the buyer, and coordinate closing. In reality, these are basic activities that should be included in their commission. It's double-dipping.

Due Diligence Fees

Some brokers charge $300-$1,000 for due diligence review. They may call it an "underwriting fee," "review fee," or "analysis fee." This covers their time to evaluate your note and determine its value—work they do to earn the commission you're already paying.

Wire Transfer Fees

While wire fees are typically $25-$50, some brokers inflate these charges or add "expedited processing" fees that can run $100-$200. When selling direct to a buyer, wire fees are typically absorbed or minimal.

Closing Coordination Fees

Fees for "coordinating" the closing with title companies, escrow agents, or attorneys. These can run $150-$400 and are often undisclosed until closing. The work being charged for is typically minimal—a few emails and phone calls.

Failed Transaction Fees

If a deal falls through after significant work has been done, some brokers will charge you for their time anyway. These "kill fees" or "break-up fees" can range from $500-$2,000 and are often buried in broker agreements. You end up paying even though you received nothing.

Markup on Third-Party Services

Brokers sometimes arrange for title reports, property valuations, or other services and mark them up significantly before passing costs to you. A $200 title search might be billed at $400. These markups are rarely disclosed.

Direct Buyer Cost Structure: The Transparent Alternative

Now let's look at what you pay when selling to a direct note buyer like Longhorn Money Services. This section will be short because there simply aren't many costs to discuss.

Commission: $0

Direct buyers don't charge commissions. There's no middleman to pay. The capital for purchasing your note comes directly from the buyer's own funds. When we make you an offer of $65,000, you receive $65,000 at closing. Nothing is deducted.

Processing Fees: $0

Reputable direct buyers don't charge processing fees, documentation fees, administrative fees, or any other seller-side charges. At Longhorn Money Services, we never charge sellers anything. Ever. Our profit comes from the investment side—the spread between what we pay for notes and the income we receive over time.

Due Diligence Costs: $0

We conduct due diligence on every note we purchase—reviewing documents, ordering title reports, verifying payment history. These costs are built into our pricing model and never passed to sellers.

Closing Costs: Minimal to $0

In most transactions, there are no seller-paid closing costs. Title company fees and recording costs are typically handled by the buyer. In some cases, you might pay for a mobile notary if you want signing at your location rather than at a title company—this is usually $100-$200 and completely optional.

The Direct Buyer Total: Essentially Zero

When you sell to a direct buyer, the offer you receive is the money you get. No mathematical gymnastics required. No surprised deductions at closing. No invoices showing up after the fact. The number we quote is the number you receive.

Real-World Cost Comparison: Five Scenarios

Let's run through five realistic scenarios comparing broker and direct buyer costs. These examples reflect actual situations I've seen over 42 years in the business.

Scenario 1: Small Balance Note

Note Details: $25,000 remaining balance, 8% interest, $225/month payment, small lot in rural Texas.

Broker Route:
Buyer offer obtained by broker: $19,500 (78% of balance)
Broker commission (7%): $1,365
Processing fee: $350
Your net proceeds: $17,785 (71.1% of balance)

Direct Buyer Route:
Longhorn offer: $18,750 (75% of balance)
Fees: $0
Your net proceeds: $18,750 (75% of balance)

Direct buyer advantage: $965 more in your pocket, plus faster closing.

Scenario 2: Mid-Size Note

Note Details: $65,000 remaining balance, 7.5% interest, $545/month payment, 5 acres Hill Country.

Broker Route:
Buyer offer obtained by broker: $53,300 (82% of balance)
Broker commission (5%): $2,665
Processing fee: $400
Your net proceeds: $50,235 (77.3% of balance)

Direct Buyer Route:
Longhorn offer: $52,000 (80% of balance)
Fees: $0
Your net proceeds: $52,000 (80% of balance)

Direct buyer advantage: $1,765 more in your pocket.

Scenario 3: Larger Note

Note Details: $125,000 remaining balance, 8.5% interest, $1,050/month payment, 20 acres outside Austin.

Broker Route:
Buyer offer obtained by broker: $103,750 (83% of balance)
Broker commission (4%): $4,150
Processing fee: $500
Due diligence fee: $400
Your net proceeds: $98,700 (79% of balance)

Direct Buyer Route:
Longhorn offer: $102,500 (82% of balance)
Fees: $0
Your net proceeds: $102,500 (82% of balance)

Direct buyer advantage: $3,800 more in your pocket.

Scenario 4: Note With Complications

Note Details: $45,000 remaining balance, several late payments in history, borrower behind on property taxes.

Broker Route:
Many brokers won't touch complicated notes. Those who do charge premium fees.
Buyer offer (if found): $29,250 (65% of balance)
Broker commission (8%): $2,340
"Risk assessment" fee: $750
Processing fee: $400
Your net proceeds: $25,760 (57.2% of balance)

Direct Buyer Route:
Longhorn offer: $28,000 (62% of balance)
Fees: $0
Your net proceeds: $28,000 (62% of balance)

Direct buyer advantage: $2,240 more in your pocket, plus we actually bought the note rather than maybe finding a buyer.

Scenario 5: Net Pricing Trap

Note Details: $80,000 remaining balance, 9% interest, $700/month payment, excellent payment history.

Broker Route (Net Pricing Model):
Broker tells you: "I can get you $62,000 net."
Broker actually finds buyer paying: $70,400 (88% of balance)
Broker keeps spread: $8,400 (10.5% hidden fee)
Your net proceeds: $62,000 (77.5% of balance)

Direct Buyer Route:
Longhorn offer: $68,000 (85% of balance)
Fees: $0
Your net proceeds: $68,000 (85% of balance)

Direct buyer advantage: $6,000 more in your pocket. The broker's "net pricing" hid the true transaction value.

Understanding Fee Impact: A Simple Calculator Framework

Here's a simple way to calculate the true cost of broker fees on any note sale:

Step 1: Get the Broker's Quote
Ask for the total they're offering you, including all fees. Let's call this the "net to you" figure.

Step 2: Ask What the Buyer Pays
Many brokers won't tell you this. If they won't, that's a red flag. If they do, note the amount.

Step 3: Calculate the Total Take
Buyer pays minus your net = total fees and spread.

Step 4: Calculate the Percentage
Total fees divided by buyer pays = true fee percentage.

Example:
Broker says you'll net $47,000.
You learn buyer is paying $52,000.
Total fees/spread: $5,000
True fee percentage: 9.6%

Now compare that to a direct buyer quote of $50,000 with zero fees. You're keeping an extra $3,000 by going direct.

When evaluating broker versus direct buyer options, always do this math. The broker's stated commission percentage rarely tells the full story.

Why Brokers Charge These Fees (And Why Direct Buyers Don't)

Understanding the business models helps explain the fee differences:

The Broker Business Model

Brokers don't invest capital. They make money purely from transaction fees. This creates several dynamics:

• They need to charge enough per transaction to cover overhead (office, marketing, staff)
- They need to justify their existence as middlemen
- They're incentivized to maximize fees, not your proceeds
- They have no long-term relationship with the note—they just facilitate the sale

Because brokers don't invest in notes themselves, they must extract all their profit from fees. There's no other revenue source for them.

The Direct Buyer Business Model

Direct buyers like Longhorn Money Services make money from the investment itself—buying notes at a discount and collecting payments over time. Our revenue comes from:

• Interest income on performing notes we hold
- Principal payoff when borrowers refinance or pay off
- Appreciation potential if we foreclose and sell property

Because we profit from the investment rather than the transaction, we don't need to charge sellers fees. Our business model actually benefits when we pay sellers fairly—happy sellers refer friends and family with notes, and our reputation brings us deal flow.

This is why direct land note buyers consistently offer better net outcomes for sellers. Our interests are aligned differently than brokers' interests.

Can You Negotiate Broker Fees?

If you decide to work with a broker despite the fee disadvantage, can you negotiate better terms? Sometimes, yes. Here's what might be negotiable:

Commission Percentage

Brokers will sometimes reduce their commission percentage for larger notes, repeat clients, or sellers who push back. However, they rarely drop below a certain floor because they need to cover their costs. Expect to negotiate 1-2% reduction at most.

Eliminating Extra Fees

Processing fees, administrative fees, and similar charges are pure profit for brokers and have the most negotiation room. Push back firmly and get any fee waivers in writing before proceeding.

Transparency on Net Pricing

If a broker uses net pricing, insist on knowing what the buyer actually pays. Make this a condition of working with them. If they refuse, walk away—they're planning to profit significantly from hidden spreads.

Written Fee Agreements

Get everything in writing before submitting your note details. The agreement should specify exact fees, when they're due, and confirm no additional charges will appear at closing. If the broker won't put it in writing, find another broker—or better yet, skip the broker entirely.

Even with successful negotiation, broker fees will still exceed direct buyer fees (which are zero). Negotiation helps you lose less money, but selling direct helps you lose none.

Special Consideration: Fees on Small Balance Notes

If you're holding a smaller note—say under $30,000—the fee impact is even more severe. Small balance notes are disproportionately hurt by broker fees for several reasons:

Higher Percentage Commissions

Brokers typically charge higher percentages on smaller notes because the absolute dollar amount of their commission would otherwise be too low to justify their effort. A 3% commission on a $100,000 note ($3,000) might be acceptable to a broker, but 3% on a $20,000 note ($600) isn't enough. So they charge 7-10% on small notes.

Minimum Fee Impact

Broker minimums hit small notes especially hard. A $2,500 minimum fee on a $25,000 note is 10% of value. That same minimum on a $100,000 note is only 2.5%.

Fixed Fees Proportion

Fixed fees (processing, documentation, etc.) represent a larger percentage of smaller notes. A $400 processing fee is 2% of a $20,000 note but only 0.4% of a $100,000 note.

For small balance notes, selling direct is even more important. The fee savings represent a larger portion of your total proceeds. Many sellers with small notes find that brokers won't even work with them because the commissions are too small to bother. Direct buyers like Longhorn Money Services buy notes of all sizes—we don't have minimum balance requirements.

The Connection Between Fees and Timeline

There's an often-overlooked relationship between fees and timeline: broker fees extend the time until you receive cash, while direct buyers get you money faster with no fees.

Time Cost of Broker Fees

The broker process typically takes 6-14 weeks. During that time, your capital is tied up earning you nothing (or continuing to collect note payments, which may or may not be reliable). When you finally close, fees are deducted from your proceeds.

Consider the opportunity cost: if you need that capital for an investment earning 8% annually, a 10-week delay costs you roughly 1.5% in lost returns on top of the broker fees.

Time Savings of Direct Buyers

Direct buyers typically close in 2-4 weeks—sometimes faster. At Longhorn Money Services, we can close in as little as 7 days for urgent situations. You get your money faster, with no fees deducted, and can put that capital to work immediately.

The combined value of zero fees plus faster funding makes direct buyers even more advantageous than a simple fee comparison suggests.

How to Evaluate Whether Broker Fees Are Worth It

I've been clear that direct buyers are usually the better choice, but intellectual honesty requires acknowledging that there might be rare situations where broker fees are justified. Here's how to evaluate:

The Broker Must Add Value Greater Than Their Cost

If a broker charges 5% ($4,000 on an $80,000 note), they need to either:
- Get you a price more than $4,000 higher than any direct buyer offered
- Provide $4,000 worth of time savings or service value
- Have access to buyers that direct buyers can't match

In practice, this rarely happens. Direct buyers often match or beat broker-obtained prices, and without the fees, sellers net more money. The "shopping to multiple buyers" value that brokers claim is largely negated by their fees.

Test the Market Yourself

Before committing to a broker, get quotes from 2-3 direct buyers. Compare those quotes (which are your full proceeds with zero fees) to what the broker is offering (their quote minus all fees). If direct buyers are competitive or higher, there's no rational reason to use a broker.

The Complexity Test

Extremely complex notes with unusual legal structures, multi-property collateral, or participation agreements might benefit from specialized broker expertise. But most Texas land notes are straightforward—a promissory note secured by a deed of trust on a single property. These standard notes don't require broker "expertise."

How to Protect Yourself From Excessive Fees

Whether you choose a broker or direct buyer, here's how to ensure you're not overpaying:

Get Multiple Quotes
Contact at least 2-3 different buyers or brokers. Compare NET proceeds, not gross offers. This quickly reveals who's offering the best actual value.

Demand Fee Transparency
Ask for a complete, written list of all fees before submitting detailed note information. If they won't provide this, find someone who will.

Ask Direct Questions
"Are you a direct buyer or a broker?" "What is the buyer actually paying for my note?" "What will I receive at closing after all fees?" Don't accept vague answers.

Read Everything Before Signing
Any agreement with a broker should be reviewed carefully. Look for fee schedules, minimum fees, cancellation penalties, and exclusivity clauses. Understand exactly what you're agreeing to.

Verify Direct Buyer Claims
Some brokers market themselves as "direct buyers" to seem more attractive. Ask where their capital comes from. A true direct buyer purchases notes with their own funds for their own portfolio.

Frequently Asked Questions

How much do note brokers typically charge?
Note broker fees typically range from 2-10% of the transaction value, with most charging 4-7%. Additional fees for processing, documentation, and other services can add another 1-3%. Total broker costs commonly run 5-12% of your note's sale price.

Do direct note buyers charge any fees?
Reputable direct note buyers don't charge sellers any fees. At Longhorn Money Services, we never charge commissions, processing fees, or any other seller costs. The offer we make is exactly what you receive at closing.

Why would a broker charge fees if direct buyers don't?
Brokers and direct buyers have different business models. Brokers make money only from transaction fees since they don't invest capital. Direct buyers profit from the investment itself—buying notes at a discount and collecting payments over time—so they don't need to charge seller fees.

Can I negotiate broker fees?
Yes, broker fees are often negotiable, especially the percentage commission and extra processing fees. However, even negotiated broker fees will typically exceed what direct buyers charge (which is nothing). Get any fee reductions in writing before proceeding.

What are hidden broker fees I should watch for?
Watch for processing fees, documentation fees, due diligence fees, wire transfer markups, closing coordination fees, and "net pricing" arrangements where brokers keep the spread between buyer price and your proceeds. Always ask for a complete fee disclosure in writing.

Is using a broker ever worth the fees?
In rare cases involving extremely complex notes or institutional-size portfolios, specialized broker expertise might add value exceeding their fees. For standard Texas land notes, selling direct almost always produces better net proceeds.

How do I know if someone is a real direct buyer or a broker?
Ask directly whether they purchase notes with their own funds for their own portfolio. Ask about fees—true direct buyers don't charge seller fees. Brokers may dodge these questions or admit they "place" notes with other buyers.

The Bottom Line on Note Selling Fees

The math on note selling fees is straightforward: brokers take 5-12% of your transaction value, while direct buyers take nothing. For a $75,000 note, that difference is $3,750-$9,000. That's real money—money that should stay in your pocket.

I've spent 42 years in this business, and I've watched fee structures evolve, new charges get invented, and brokers find creative ways to extract money from sellers. Throughout it all, one truth has remained constant: sellers who work directly with buyers keep more of their money.

At Longhorn Money Services, we've built our business on transparency and value. We don't charge fees because our business model doesn't require them. We buy notes with our own capital, hold them for income, and profit when our investments perform well. Your proceeds are your proceeds—every dollar.

If you have a land note in Texas and want to explore selling it, I encourage you to get quotes from direct buyers before considering a broker. You might be surprised how competitive direct buyer offers are—and delighted to discover that 100% of the offer goes to you.