Types of Notes You Can Sell

Mortgage notes, deed of trust notes, land contracts, mobile home notes, commercial notes and business notes can all be sold. What changes from one type to the next is what stands behind the payments, and that decides who will bid and how deep the discount is.

People often come to us unsure what they hold. They know a check arrives each month, but they could not say whether the paper in the drawer is a mortgage, a contract for deed or something else. This guide sorts the types out, explains how buyers look at each one, and says plainly which are easy to sell and which are hard.

What makes a note a note

Every note on this page starts from the same thing: one person, the payer or borrower, has promised in writing to pay another, the note holder, a set amount at a set interest rate until a set date.

A note worth selling nearly always comes as a pair of documents.

The promissory note. The promise itself, and the thing a buyer actually purchases.
The security instrument. The document that ties the promise to something of value, called collateral, which the holder can go after if the payer stops paying. For real estate this is a mortgage or a deed of trust, recorded in the county land records.

When you sell, the buyer pays a lump sum for the right to collect the remaining payments. The price is lower than the balance still owed, and the gap is called the discount. It exists because the buyer needs a return on their money, called a yield. The stronger the collateral and the payment record, the lower the yield a buyer will accept and the smaller your discount.

That is the whole reason the type of note matters: it tells a buyer what they would be left holding if the payments stopped.

The types at a glance

Type of note	What stands behind it	How buyers tend to see it
Mortgage or deed of trust note	A recorded lien on a house or other real estate	The widest pool of buyers
Land contract	The property itself, with the deed still in your name	Widely bought, with extra questions about title
Mobile home note	The home, and sometimes the land under it	Depends heavily on whether land is included
Commercial mortgage note	A lien on income or business property	Fewer buyers, more review of the property
Business note	Business assets, a personal guarantee, or nothing	The narrowest pool and the deepest discounts
Second-lien note	Real estate, behind another lender	Priced on the equity left after the first loan
Non-performing note	Whatever the collateral is	Priced on the collateral once the payments cannot be relied on

The rows mix collateral, lien position and payment status, and your note has one of each. It might be a first-lien deed of trust on a house that is paying on time, or a second-lien mortgage that has gone late. Each label moves the price on its own.

Notes secured by a house

This is the note people have in mind when they say “mortgage note”. You sold a home, the buyer could not or did not want to use a bank, and you carried the financing. They signed a promissory note and you recorded a mortgage or a deed of trust against the property. Whether you can sell it is answered in can I sell my mortgage note.

The two instruments do the same job, and which one you have depends largely on the state where the property sits. A mortgage involves two parties, you and the borrower. A deed of trust adds a third, a trustee, who holds a form of title until the loan is paid. The practical difference shows up if the loan defaults, because the route to taking the property back is generally different, and buyers take that into account when they price.

A first-lien note on an owner-occupied house, with a real down payment and a clean payment record, draws more bidders than anything else on this page. If that describes yours, start with selling a real estate note.

Land contracts and contracts for deed

Contract for deed, installment land contract, agreement for deed, bond for deed: these are all names for a land contract. The buyer moves in and makes payments, and you keep the deed until the final payment is made.

There is often no separate promissory note, because the contract is both the promise and the security. Selling it means assigning the contract to the buyer and, as a rule, deeding the property to them as well, since whoever collects the payments has to be able to deliver the deed at the end.

Land contracts do sell. When you come to sell a land contract, expect more questions than on a mortgage: about title, about whether the contract was recorded, and about how the state where the property sits treats a default.

Mobile homes, vacant land and commercial property

Property type is one of the first things a buyer asks about, because it sets how easy the collateral would be to resell.

Mobile and manufactured homes

Here the deciding question is whether the land is part of the deal. A manufactured home on land the borrower also bought from you, treated as real estate, is priced much like a house. A home alone, sitting in a park on a rented lot, is a different kind of collateral, and mobile home notes of that kind reach a much smaller pool of buyers.

Vacant land

Nobody lives on bare land, so a payer in trouble finds it easier to walk away. Buyers respond by asking for a higher yield, and they look closely at the down payment and at how long the payer has been paying.

Commercial property

A note secured by a shop, an office, a warehouse or an apartment building depends on the income the property produces and, often, on the health of the business inside it. Fewer buyers work in this space and each one asks for more documentation.

Business notes

If you sold a business and agreed to be paid over time, you hold a business note. It may be secured by the equipment, inventory and accounts of the business, by the buyer’s personal guarantee, by real estate, or by nothing beyond the promise. In the trade, business notes and real estate notes alike are known as cash flow notes.

These are the hardest notes to sell, and it is better to read that here than to learn it after sending us the file. Business assets lose value quickly and a failed business often has little left to collect, so the buyers who take these notes study the finances of the business and the person behind it, and they ask for a high yield. Some business notes do not sell at all.

A lien on real estate changes the picture for business notes, because it gives a buyer something to recover that does not depend on the business surviving.

Performing, non-performing and re-performing

These words describe payment status, and any of the types above can be any of them. A performing note is one where the payer pays as agreed. A non-performing note has a payer who is seriously behind or has stopped. A re-performing note is one where the payer fell behind and then resumed paying, sometimes under changed terms.

The length of the on-time record is called seasoning. A performing note with long seasoning is priced on the payments. A non-performing note is priced on the collateral: what the property is worth, what it would cost and how long it would take to recover it, and what could go wrong on the way. That calculation attracts a different set of buyers.

A note that has stopped paying can still be sold. The discount on non-performing notes is deeper, sometimes much deeper, and the right comparison is with what it would cost you to enforce the note yourself.

First liens and second liens

Lien position is the order in which claims on a property get paid if it is sold to satisfy a debt. The first lien is paid in full before the second receives anything, and the second is paid from whatever remains.

You may hold a second without having thought of it that way. If your buyer took a bank loan for the larger share of the price and you carried a smaller note for the rest, the bank is first and you are second. If the first lender forecloses, a second lien can be wiped out.

That risk is why second-lien notes sell for less. What a buyer measures is the equity above both loans combined. A second with a large cushion behind it and a long payment record does find buyers, while one with little equity is hard to place.

Inherited notes

An inherited note is any of the notes above, held by someone who did not create it. The pricing stays the same and the paperwork changes.

A buyer will want to know who has the legal authority to sell. That may be an executor, a trustee or the heirs themselves, depending on how the note was held and where the estate stands. The original documents may be hard to find, and the payment record may be in someone else’s handwriting. A sale can still go ahead with extra steps, some of which are questions for the estate’s attorney and a CPA.

What moves the price on every type

Whatever you hold, buyers ask the same questions. The type of note changes how much weight each answer carries.

What a buyer checks	What it means	Where it matters most
Equity	The property’s value minus what is owed against it	Second liens, vacant land, mobile homes
Seasoning	How many payments have been made on time	New notes and business notes
Payer strength	Credit, income and how much of their own money is in the deal	Business notes and anything lightly secured
Lien position	Who gets paid first	Any note behind another loan
Paperwork	The original note, the recorded instrument, clear title	Land contracts and inherited notes
Rate and term	The interest rate and the number of payments left	Every note

None of these is a pass or fail test, because a weakness in one place can be offset by strength in another. A second lien with a long, clean record behind a small first loan can price better than a first lien on raw land that was sold with almost nothing down.

It is also why no note can be priced from its label. If you send us the details of yours, we take it to the buyers who work with that type. Where the note can carry it, you will see more than one offer and a partial beside the full-sale price, each with a worksheet that shows how the number was reached. Asking costs nothing and commits you to nothing.

Does a partial work on every type

A partial sale means selling a set number of payments and keeping the rest. The buyer pays a lump sum, collects the payments they bought, and the note returns to you.

A performing first-lien real estate note is the kind that suits a partial best, because the payments are predictable and the collateral is easy to value. Our site-wide example is a note of that kind: $1,140 a month, with 168 payments to go and about $129,400 still owed. Sold whole to a buyer who wants an 8% yield, it brings $115,000. Selling only the next 60 payments brings $56,200, and the note comes back with 108 payments left on it.

Illustrative example. Your figures depend on your note, the payer and the property.

On weaker collateral, a partial can be the difference between an offer and no offer. A buyer who will not commit to fourteen years of a business note or a second lien may commit to three or four. Land contracts and mobile home notes with land can be structured this way too, with some extra paperwork. A non-performing note has no reliable payments to carve up, so a partial has to wait until the note is paying again.

Notes that are hard to sell

Buyers are hard to find for:

Unsecured notes, where nothing but the payer’s word stands behind the debt.
Notes with almost no equity, where the payer owes about what the property is worth.
Very new notes with only a few payments made.
Notes with missing or unrecorded documents and no clear way to repair them.
Second liens behind a first loan that is itself in default.

Some of these can be repaired. Waiting and collecting a longer run of on-time payments can make a new note sellable, and so can recording a document or finding a lost original. And sometimes the honest answer is that keeping the note, or working things out with the payer, will leave you with more than any sale would.

How to find out which type you hold

Pull out the documents from the sale and look for a promissory note, a recorded mortgage or deed of trust, or a single contract that does both jobs. Check whether a bank loan was part of the same sale. Note how many payments have arrived and whether any came late.

If the papers in the drawer do not settle it, the county land records are the next place to look. Whatever was recorded against the property when you sold it, whether a mortgage, a deed of trust or a land contract, is filed there, and the title company or attorney who handled the closing may still hold copies of the rest. Once you can name the collateral, the lien position and the payment status, you know which sections of this guide describe your note.