How to Sell a Note | Note Brokering

To sell a note you describe it, collect priced offers, choose between selling all of it and selling part, let the buyer verify the file, then sign and get paid. The price will come in below the balance owed, and how far below depends on the note itself and on how many buyers were asked to price it.

Anyone who sold a house, a parcel of land or a business and agreed to be paid over time is holding a note, and a note can be sold for cash. This guide follows a sale from the first question to the day the money arrives. Each section is kept short and points to a longer page where the detail lives.

What you are actually selling

The note is the signed promise to pay you a set amount on a set schedule. The person who signed it is the payer, or borrower, and you are the note holder. With a real estate note there is normally a second document that ties the promise to the property: a mortgage, a deed of trust or a land contract, depending on the state and the deal. That document gives you a lien, meaning a legal claim on the property if the payments stop. A note with a lien behind it is called secured, and one without is unsecured.

A sale transfers both pieces together, the right to collect and the lien that protects it. For the payer, the only thing that changes is where the payment is sent. Their rate, their payment and their payoff date stay as written.

Two terms come up in every conversation with a buyer. Yield is the annual return the buyer wants on the money they pay you. Discount is the gap between the balance your payer owes and the price the buyer pays. The buyer chooses a yield first and works backward to a price, so the discount is the result of a calculation and can be shown to you line by line. It is real money, and you should ask to see how it was reached.

Sell all of it, sell part of it, or keep it

Note holders are often handed a yes-or-no choice about selling. There is a middle course, the partial, in which you sell a set number of payments for a smaller lump sum and the note is assigned back to you once the buyer has collected them. A full sale hands over every remaining payment for one larger sum. Keeping the note means changing nothing and collecting as before.

The table runs one example note through all three. The note carries 6% interest and a $1,140 monthly payment, with 168 payments to go and roughly $129,400 owed, and the buyer is pricing at an 8% yield.

	Full sale	Partial, 60 payments	Keep the note
Cash at closing	$115,000	$56,200	$0
Payments you still collect	None	108 of $1,140	168 of $1,140
Total received over time	$115,000	$179,320	$191,520
Risk you still carry	None	Years 6 to 14	All 14 years

Illustrative example. Totals add up the scheduled payments, assume the payer keeps paying, and make no adjustment for the value of money over time. An offer on your own note will rest on its payer, its property and its paperwork.

The full sale carries a discount of $14,400, which is 11.1% of the balance. The partial raises less today and returns a note to you five years from now with about $94,950 still owed on it. The partial purchases guide explains how that works and which notes suit it. Keeping the note pays the most, pays it slowest, and leaves every year of risk with you.

Which of the three fits depends on how much cash you need, when you need it, and how far you trust the payer to keep paying.

Who buys notes

The companies that answer when you go looking for a buyer work in different ways. A direct buyer pays with its own money, or money it manages, and gives you one price. A broker takes your note to buyers and is paid out of the deal. One who shows the note to several buyers creates competition, while one who passes everything to the same buyer adds a layer and no competition. A listing board lets you post the note for bids and leaves the describing, the answering and the negotiating to you.

Plenty of companies are more than one of these, and a website will not always tell you which you have reached. We buy some notes ourselves and take the rest to other buyers, and we tell you which is happening on yours. With anyone else, ask who will fund the purchase and how they are paid, the two questions that tell a note buyer from a note broker.

What decides the price

Every buyer starts from the same raw facts: the payment, the rate, the number of payments left and the balance. Then they judge the risk, and the risk sets their yield. More risk means the buyer wants a higher yield, and a higher yield produces a lower price.

The same handful of things shape that judgment from one buyer to the next:

Seasoning. The number of payments already made. A long on-time record is the best evidence a buyer has that the payer will continue.
Equity. The more the property is worth compared with the debt against it, the safer the buyer’s position.
Lien position. A first lien stands ahead of later loans against the property. A second lien waits behind the first, so buyers pay less for it.
The payer. Their credit and the size of their down payment both tell a buyer how committed they are.
The property. An owner-occupied house is easier to value and to resell than raw land or a special-use building.
The paperwork. Complete, recorded documents remove doubt, and gaps add it.

Nearly all of that is settled long before you think about selling. The number of buyers who price the note is the part still in your hands, and it costs you only a little time at the start.

The sale, stage by stage

Stage	What happens	Your part
1. Describe	The note’s basic facts go to buyers	Answer a short list of questions
2. Price	Buyers return offers based on what you told them	Nothing yet
3. Choose	You compare offers and structures	Decide, or decide not to sell
4. Check	The buyer verifies documents, title, value and payer	Send copies and answer questions
5. Close	Transfer documents are signed and the original note is delivered	Sign, with a notary where a document will be recorded
6. Hand over	You are paid and the payer is told where to send payments	Keep your copies

A quote commits you to nothing, and you can walk away at any point before you sign the purchase agreement. For what each stage asks of you and where sales tend to stall, read the note sale process, step by step.

What to have ready

A first price needs facts, and the file can follow later. The facts are the balance, the payment, the rate, the payments left, what the property is and how the payer has paid.

After you accept an offer the buyer will want the documents behind those facts: the note itself, the recorded mortgage, deed of trust or land contract, the closing statement from when you sold the property, and a record of the payments you have received. Copies will do until closing, when the original note is handed over.

If something is missing, say so before the buyer prices the note. A gap disclosed at the start is priced in once, while the same gap discovered during the buyer’s checks reopens the whole offer.

Reading the offers

An offer is more than a price. Before setting two of them side by side, find out the following about each:

What is being bought: every remaining payment, or a set number of them.
What reaches you once any costs have been taken out at closing.
What the buyer still has to check, and which result would change the number.
Who is paying: the company quoting, or someone behind them.

Ask every buyer for the yield they used as well. It lets you put a full offer beside a partial, or one buyer beside another, on equal terms, and a buyer who keeps it back is asking you to accept a number without its reasoning. How to compare offers on your note has a grid to fill in.

Why the buyer checks, and why offers sometimes change

A first offer rests on what you said about the note. Before paying, the buyer confirms it, in a stage called due diligence: reading the documents, searching the title for other liens, getting an opinion of the property’s value, looking at the payer’s credit and matching your payment record against the terms.

When everything matches, the offer stands and the sale moves to closing. When something does not, the buyer may ask for a fix, change the price or withdraw. A lower price at this stage can be fair, because a real problem turned up, or it can be a tactic by a buyer whose first number was never meant to hold. You tell the two apart by asking what changed and seeing it in writing.

What it costs and what you keep

The discount is the largest cost of selling in nearly every case, because it applies to the whole amount sold while the other charges are fixed sums for specific jobs. It is built into the price, so it never shows up as a line on a bill.

The smaller costs are a title search, a property valuation, recording charges and a closing agent. Buyers differ on who pays them. Some absorb the lot and some deduct them from your proceeds, and the offer letter should say which. If a broker is involved, the broker’s pay comes out of the deal too.

What you want is the net, meaning the amount that reaches your account, stated in writing before you accept. Fees and costs when you sell a note takes each cost in turn.

Tax is a separate matter. Selling can change when and how the gain from your original sale is taxed, and the rules depend on your situation and your state, so speak with a CPA before you commit to a closing date.

When selling is the wrong move

A note that pays on time is a good asset. If you have no use for a lump sum, keeping it pays you more in total than any sale would: $191,520 against $115,000 in the example above, provided the payer keeps paying for all 14 years.

Selling makes sense when the cash does more for you now than the payments would over time, or when holding the note has become a burden. That might be a payer who is slipping, an estate that has to be divided, a move, or plain tiredness with collecting. If what you need is a specific amount that is well short of the note’s full price, a partial sized to that amount leaves more of the note in your hands than a full sale does.

When the numbers favor keeping the note we tell you, and we count that as a proper result of asking.

Getting a first price

Every other decision follows from a price, so that is the place to begin. Send us your note details and we will put the note in front of buyers and bring back what they offer. We aim to show you more than one bid, and where a partial is workable for your note we price that alongside the full sale. Each offer arrives with a worksheet setting out the balance, the yield used, the resulting discount and our own pay. The quote costs nothing and you are under no obligation to sell.

Then set the offers beside what the note pays if you keep it, and decide in your own time.

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