Sell Land Note vs Foreclose in Texas: Which Option Is Better?

When your Texas land note borrower stops making payments, you face a critical decision: do you pursue foreclosure to recover the property, or sell the note to a buyer who takes over the problem? This choice can mean the difference between months of legal hassles and immediate cash in your pocket. After 42 years of buying both performing and non-performing land notes across Texas, I've helped hundreds of note holders navigate this exact decision. Let me share what I've learned.

The instinct when payments stop is often to foreclose. You want to "get your property back" and teach the defaulting borrower a lesson. These feelings are understandable—you trusted someone, extended credit, and they let you down. But emotions aside, the financial math often points in a different direction.

Before we dive into the detailed comparison, let me be clear: there's no universal right answer. Your specific situation—the property, the borrower, the note terms, your timeline, and your goals—all factor into the best decision for you. What I can do is give you the complete picture so you can make an informed choice rather than an emotional one.

Understanding Foreclosure in Texas

Texas is a non-judicial foreclosure state for most instruments, which means you can foreclose without going to court—as long as your deed of trust includes a power of sale clause (most do). This makes Texas foreclosures faster than many states, but "faster" is relative. Let's examine what foreclosure actually involves.

The Foreclosure Timeline

Even in Texas, foreclosure isn't instant. Here's the typical timeline:

• Default and Notice Period: After default, you must send a notice of default giving the borrower 20 days to cure (catch up on payments). This notice must be sent by certified mail and posted on the property.
- Notice of Sale: If the borrower doesn't cure, you file a Notice of Sale with the county clerk and post it at the courthouse at least 21 days before the sale date.
- Foreclosure Sale: Sales happen on the first Tuesday of each month at the county courthouse. You must hold the sale between 10 AM and 4 PM.
- Eviction (if necessary): If the borrower doesn't vacate, you'll need to file for eviction, which adds another 30-60 days.

Realistically, from first missed payment to actually having possession of a vacant property, you're looking at 3-6 months minimum—and that's if everything goes smoothly.

Foreclosure Costs in Texas

Foreclosure isn't free. Even a straightforward, uncontested foreclosure involves costs:

• Attorney fees: $1,500-$4,000 for a typical land foreclosure
- Filing fees and court costs: $200-$400
- Title search/update: $200-$400
- Posting and mailing costs: $50-$150
- Foreclosure trustee fee: $300-$750
- Eviction costs (if needed): $500-$1,500
- Property securing/cleanup: Varies widely

Total typical foreclosure costs range from $2,500-$7,000 or more. And this assumes no complications.

Complication Risks

Foreclosures can become complicated—and expensive—quickly:

• Borrower contests the foreclosure, requiring judicial proceedings
- Title issues emerge during the foreclosure process
- Borrower files bankruptcy, halting foreclosure (automatic stay)
- Borrower claims procedural errors in your notices
- Property has liens, back taxes, or other encumbrances
- Borrower damages property before vacating

Any of these complications can add months and thousands of dollars to the process. Bankruptcy alone can delay foreclosure by 6-12 months or longer.

What Happens After Foreclosure

Assuming your foreclosure completes successfully, you now own the property again. But your journey isn't over—it's just entering a new phase.

You Now Have Property to Manage

After foreclosure, you own vacant land that you previously sold. Now what? Your options are:

• Resell the property (cash sale)
- Resell with seller financing (start another note)
- Hold the property
- Develop or improve the property

If you seller-financed the property originally because you couldn't sell for cash at your desired price, you may face the same challenge again. The property market in that area might not have improved.

Property Condition Questions

When you foreclosed, was the borrower building on the land? Did they install improvements? Did they damage the property? Did they leave junk, debris, or structures that need removal? These unknowns can turn a foreclosure "win" into a headache.

Back Taxes and Other Issues

If the borrower fell behind on property taxes, those taxes likely still need to be paid. In Texas, property tax liens are superior to most other liens—they must be satisfied. You might foreclose only to find thousands in back taxes waiting for you.

Time Without Income

During the foreclosure process (3-6+ months) and potentially during resale (weeks to months), you receive no income from the property. Compare this to selling the note quickly and having cash in hand.

Selling a Non-Performing Note: The Alternative

Instead of foreclosing yourself, you can sell the note to a buyer who specializes in non-performing notes. Companies like Longhorn Money Services have the resources, experience, and risk tolerance to take over problem notes. Here's how this option works:

How Note Buyers Evaluate Non-Performing Notes

When we evaluate a non-performing note, we consider:

• Current property value (what's it worth today?)
- Note terms and remaining balance
- Borrower situation (why did they stop paying?)
- Our cost to foreclose if necessary
- Probability of working out the note vs foreclosing
- Time and resources required

We then make an offer that accounts for our risk and costs while providing you immediate liquidity. Non-performing notes typically sell for 40-70% of the remaining balance, depending on these factors.

The Non-Performing Note Sale Process

Selling a non-performing note follows a similar process to selling any land note, with a few differences:

1. You provide note details and explain the default situation
2. We review documents and evaluate the property/note
3. We make an offer reflecting the non-performing status
4. You accept and we proceed with due diligence
5. We close and you receive cash
6. We become the new note holder and deal with the borrower

The entire process typically takes 2-4 weeks. Compare that to 3-6+ months for foreclosure, and the time savings become clear.

What Happens After You Sell

Once you sell a non-performing note, it's no longer your problem. The buyer (Longhorn Money Services, in our case) becomes the note holder and handles the situation—whether that means working with the borrower to resume payments, modifying the loan, or proceeding with foreclosure. You've converted an uncertain, time-consuming problem into immediate cash.

Financial Comparison: Sell vs Foreclose

Let's run through a realistic example comparing both options. This illustration uses typical numbers I see in actual transactions.

Scenario: Non-Performing Texas Land Note

Note Details:
- Original sale price: $50,000
- Down payment received: $5,000
- Original note balance: $45,000
- Current remaining balance: $38,000
- Interest rate: 9%
- Monthly payment: $475
- Payments received before default: 18 months
- Currently 4 months behind ($1,900 in arrears)
- Property: 5 acres rural Texas

Current property value (estimated): $55,000

Option A: Foreclose and Resell

Foreclosure costs: $3,500
Time to complete foreclosure: 4 months
Property cleanup/securing: $500
Back taxes (2 years): $800
Total invested to regain property: $4,800

After foreclosure, you have the property. Now you need to sell it:

Resale options:
- Cash sale at $45,000 (lower than value due to quick sale need)
- Seller finance again at $55,000 (but that creates another note with default risk)

Assuming cash sale at $45,000:
Gross from resale: $45,000
Less foreclosure costs: ($4,800)
Less holding period costs (insurance, etc.): ($400)
Net recovery: $39,800

But wait—this took 6-8 months (4 months foreclosure + 2-4 months to resell). And you took on risk throughout.

Option B: Sell the Non-Performing Note

With a current balance of $38,000 on a property worth $55,000, this note has good equity protection. A non-performing note buyer might offer 55-65% of balance given the circumstances.

Note sale offer: $22,800 (60% of $38,000)
Costs to sell: $0 (direct buyer, no fees)
Net recovery: $22,800

This happens in 2-3 weeks, not 6-8 months.

The Comparison

Option A (Foreclose + Resell): $39,800 over 6-8 months
Option B (Sell Note): $22,800 in 2-3 weeks

At first glance, foreclosure looks better—$17,000 more. But let's dig deeper:

• Foreclosure carries risk of complications (bankruptcy, legal challenges)
- Foreclosure requires your time and attention for months
- Resale price isn't guaranteed—you might get less
- Property condition after foreclosure is uncertain
- You might find more back taxes or liens
- You bear all risk; things can go wrong

If foreclosure complications arise, Option A could easily net you less than Option B—while taking a year instead of weeks.

The Time Value of Money

Money now is worth more than money later. If you need funds for another opportunity, waiting 6+ months has a real cost. Let's quantify this:

If you sell your note for $22,800 today and invest that in an opportunity earning 12% annually, in 8 months you'd have approximately $24,600. Meanwhile, if your $39,800 from foreclosure arrives in 8 months, you've lost 8 months of potential returns.

Time value alone can close much of the gap between the two options—especially if you have investment opportunities waiting for capital.

The Stress and Hassle Factor

Numbers don't capture everything. Let's talk about the less quantifiable aspects:

Foreclosure Stress

Foreclosure means:
- Dealing with attorneys and legal procedures
- Tracking deadlines and notice requirements
- Potential conflict with the borrower
- Court appearances if the borrower contests
- Uncertainty about outcome and timeline
- Making decisions under pressure
- The emotional weight of displacing someone

Many note holders underestimate how draining this process can be. If you have a full-time job, family responsibilities, or health concerns, adding foreclosure management to your plate is a significant burden.

Selling Stress

Selling the note means:
- A few phone calls and document submissions
- Reviewing and accepting an offer
- Signing closing documents
- Receiving your money

The process is measured in hours of your time, not months. You make one decision (accept the offer or not) and move on with your life. Someone else handles the problem.

If reducing stress and freeing up your time has value to you—and for most people, it absolutely does—this factors significantly into the decision.

When Foreclosure Might Make Sense

Despite the advantages of selling, there are situations where foreclosure might be the better choice:

Very High Equity Situations

If the property is worth significantly more than the note balance (say, 2x or more), foreclosure recovery potential might justify the hassle. This is rare with land notes but does happen when property values appreciate substantially.

You Want the Property Back

Maybe you sold property you wish you'd kept, and this is your chance to reclaim it. Sentimental value or development plans might make foreclosure worthwhile regardless of pure financial math.

Extremely Small Balances

On very small balance notes (under $10,000), note buyers may offer very little, making foreclosure economics more competitive. However, foreclosure costs are relatively fixed, so they eat up more of a small-balance recovery.

You Have Time and Expertise

If you're a real estate professional or attorney who handles foreclosures regularly, your costs are lower and the process is less daunting. In this case, the DIY route might make sense.

Borrower Behavior Concerns

If you believe the borrower will damage the property during a prolonged process, you might want to foreclose quickly before things get worse. However, experienced note buyers move quickly too—selling the note gets you out immediately.

When Selling the Note Makes Sense

Selling becomes the clearly better choice in many common situations:

You Need Cash Quickly

If you need funds for medical expenses, business opportunities, debt payoff, or other urgent needs, waiting 6+ months for foreclosure isn't realistic. Selling puts cash in your hands within weeks.

You Don't Want to Deal With It

The hassle factor is real. If managing a foreclosure doesn't appeal to you—if you'd rather pay a financial price to be done with the situation—selling makes sense. Your time and peace of mind have value.

The Note Has Complications

If the borrower has hinted at bankruptcy, if there are title issues, if you're uncertain about your documents or foreclosure rights, selling transfers all that complexity to someone else. Note buyers like us are equipped to handle complications; most individual note holders aren't.

You Live Far From the Property

Managing a foreclosure remotely is challenging. Local attorneys, property visits, and sale attendance all become more difficult when you live in another state or can't easily travel to the property's county.

The Property Market is Uncertain

If you're unsure you can resell the property after foreclosure—if the local market is slow or the property has challenges—selling the note avoids that gamble entirely.

Hybrid Options to Consider

Beyond the binary sell vs foreclose choice, consider these alternatives:

Partial Note Sale

Sell a portion of your note to generate immediate cash while retaining some future payments. This might work better for notes that are just temporarily behind rather than truly non-performing. Learn more about partial note sales to see if this fits your situation.

Loan Modification

Before giving up on the borrower, consider whether modified terms could get payments restarted. Sometimes borrowers facing temporary hardship can resume paying with adjusted terms. This isn't "selling" or "foreclosing"—it's attempting to save the performing status of your note.

Cash for Keys

If the borrower wants out anyway, you might negotiate a voluntary deed-in-lieu of foreclosure. They walk away without a foreclosure on their record; you get the property without the legal process. This is faster than formal foreclosure but still leaves you with property to manage afterward.

Sell After Starting Foreclosure

You can begin the foreclosure process and then sell the note if a buyer's offer becomes more attractive. Starting foreclosure preserves your rights and timeline while keeping sale options open. Some buyers actually prefer notes where foreclosure has already commenced—it shows you're serious and reduces their timeline.

How Longhorn Money Services Approaches Non-Performing Notes

At Longhorn Money Services, we've been buying non-performing land notes for over 40 years. Here's what makes us different:

We Buy What Others Won't

Many note buyers only want clean, performing notes. We actively purchase non-performing notes because we have the systems, experience, and capital to work through them. Your problem note is an opportunity for us.

Fair Non-Performing Pricing

We price non-performing notes fairly based on realistic recovery potential. We don't lowball just because you're in a tough spot—our reputation depends on treating sellers right, and most of our business comes from referrals.

Quick Evaluation

We can evaluate a non-performing note and make an offer within 24-48 hours. We know what we're looking for and don't need weeks to analyze your situation.

All Texas Counties

We buy land notes in all 254 Texas counties. Whether your property is in Harris County, Webb County, or a rural county you've barely heard of, we can evaluate and purchase it.

We Handle the Borrower

Once we buy your note, we handle all borrower communication and any necessary legal action. You're completely done. No phone calls, no threats, no stress—you're out of the picture.

Frequently Asked Questions

How long does foreclosure take in Texas versus selling a note?
Foreclosure in Texas typically takes 3-6 months minimum, often longer if complications arise. Selling a non-performing note takes 2-4 weeks with a direct buyer like Longhorn Money Services. The timeline difference is significant when you need resolution quickly.

What percentage of note value can I get for a non-performing note?
Non-performing notes typically sell for 40-70% of the remaining balance, depending on property value, equity position, and circumstances of the default. Notes with strong equity protection (property worth significantly more than note balance) sell at the higher end of this range.

Will I owe taxes if I sell my non-performing note?
Potentially yes—consult a tax professional about your specific situation. You may owe capital gains on any profit from the note sale. However, you would also potentially owe taxes on foreclosure gains. The tax situation is similar either way; it's the timeline and certainty that differ.

Can I sell a note after starting foreclosure?
Yes, absolutely. Many note buyers purchase notes with foreclosure already in progress. In some cases, buyers prefer this because it shortens their timeline. You can begin foreclosure while exploring sale options and choose whichever path works best.

What if my borrower files bankruptcy?
Bankruptcy creates an automatic stay that halts foreclosure—potentially for months or longer. If you've sold your note before bankruptcy is filed, you're out clean. If you're mid-foreclosure when bankruptcy hits, you're stuck waiting. This uncertainty is one strong argument for selling rather than foreclosing.

Do you buy notes where the borrower is only a few months behind?
Yes, we buy notes at various stages of delinquency. A note that's only slightly behind might have more value than one that's deeply in default, because the workout potential is higher. Get a quote and we'll evaluate your specific situation.

What happens to the borrower when I sell the note?
The borrower's obligation doesn't change—they still owe payments on the note. But the new note holder (the buyer) may handle the situation differently. We often work out solutions with borrowers that benefit everyone. Regardless, what happens post-sale is no longer your concern.

Making Your Decision

The choice between selling your non-performing note and foreclosing comes down to your priorities. If maximizing absolute dollars recovered is your only goal and you have time, patience, and risk tolerance, foreclosure might produce slightly higher returns—if everything goes smoothly.

But if you value certainty, speed, simplicity, and freedom from hassle, selling your note is almost always the better choice. You trade some potential upside for immediate, guaranteed cash and complete peace of mind. For most note holders I've worked with over 42 years, that trade-off makes sense.

Don't let a non-performing note become a burden that drags on for months. Whether you decide to sell or foreclose, make the decision promptly and move forward. If selling appeals to you, working with a direct buyer ensures you get the best price with no fees or complications.