Texas Residential Mortgage Note Sale

The Note

The seller had created a seller-financed mortgage note on a single-family residence in Frisco, Texas back in August 2018. The property is a 4-bedroom, 2.5-bathroom home with 2,399 square feet of living space on a 6,534 square foot lot. The original sale price was $295,000, with the buyer putting $50,000 down (approximately 17% of the purchase price). That left an original note amount of $245,000, structured as a 30-year fully amortizing loan at 6% interest with monthly payments of $1,468.90.

By the time this file reached our desk, the borrower had made 91 monthly payments — over 7.5 years of seasoning — bringing the unpaid principal balance down to $181,719.90. The borrower had also made approximately $33,600 in additional principal pre-payments over the life of the note, which accelerated the paydown beyond what regular amortization would have produced. The property was owner-occupied, and at the time of our evaluation, the estimated property value had appreciated to approximately $456,700.

How We Evaluated This Note

On paper, this was one of the stronger notes we had seen in a while. The fundamentals were excellent: 17% down payment at origination, over 7.5 years of seasoning (91 payments), a 6% interest rate, owner-occupied property, and significant property appreciation. The borrower had even made extra principal payments totaling $33,600, which is a strong indicator of financial commitment. The loan-to-value ratio had improved substantially — the remaining balance of $181,720 against an estimated property value of $456,700 put the current LTV at roughly 40%, which is outstanding from a collateral standpoint.

However, during due diligence we identified three payments that were more than 30 days late during 2023 and 2024. In the note industry, late payments — even a small number — are a red flag for investors. While the borrower had resumed regular payments and the note was current at the time of sale, those three delinquencies caused the purchasing investor to adjust pricing downward from the initial quote of $166,000.

This case is a good example of how payment history can overshadow otherwise excellent note characteristics. The down payment, seasoning, rate, and property appreciation were all above average. But three late payments in a 91-payment history were enough to move the needle on pricing. Investors price risk, and late payments — regardless of the reason — introduce uncertainty about future performance.

What the Seller Received

The seller received $158,531.11 in cash at closing, which represented 87.2% of the unpaid principal balance of $181,719.90. The transaction closed on March 10, 2026. All costs associated with the sale, including the title update, appraisal, and closing fees, were paid for by the purchasing entity. The seller paid zero out of pocket to complete the transaction.

What This Means for Note Holders

At 87.2% of the unpaid balance, this was a strong result — and it would have been even stronger without the late payment history. The lesson here is straightforward: payment history matters, and even a small number of late payments can cost you real money at the time of sale.

Everything else about this note was textbook. The 17% down payment gave the borrower meaningful skin in the game. The 6% interest rate was at market. The 91 payments of seasoning demonstrated a long and (mostly) reliable track record. The property had appreciated substantially, pushing the LTV down to roughly 40%. And the borrower's extra principal payments were a strong signal of financial stability.

If you are considering seller financing a property, we would encourage you to build in protections that minimize the chance of late payments — including verifying the borrower's ability to pay before you close. We cover this and more in our guide on how to create a mortgage note for resale.

If you already hold a mortgage note and you are ready to sell, we provide free, no-obligation quotes within 48 hours. Good luck.