There is no standard minimum. Each buyer sets its own floor as a dollar amount paid out, and the number of payments follows from that. If your partial would raise less than one buyer’s floor, that buyer will pass and another may still quote.
Where the floor comes from
Buying part of a note takes the same steps as buying all of it. The buyer reviews the note and the recorded mortgage or deed of trust, checks the payment history, orders title work, forms a view of the property’s value, prepares the partial agreement and records the assignment, and somebody is paid for each step.
Those costs stay the same when the deal gets smaller. A buyer’s return comes from the gap between what they pay you and the payments they collect, and on a small partial that gap is small in dollars. Once the fixed costs would consume it, the buyer declines.
Dollars first, payments second
Sellers ask how few payments they can sell. A buyer starts from the other end, with how little money it can put out and still cover its costs, and the number of payments that takes depends on your note.
Illustrative example. On a note paying $1,140 a month, the next 36 payments raise $36,400 at an 8% buyer yield. A note paying half as much each month would need more than twice as many payments sold to raise a similar sum, because the added payments are further away.
So on a note with large payments the smallest partial may be a year or two long. On a note with small payments, the same buyer’s floor might take most of the remaining term, and a partial that long has little advantage over a full sale.
What moves a buyer’s floor
| Factor | Effect |
|---|---|
| The buyer’s own costs | Buyers are set up differently, so one may take a deal that another would not look at |
| How complete your file is | Clean documents and a provable payment record mean less work, so a smaller deal can pay |
| A servicer already collecting | Removes a setup cost and gives the buyer a ready payment record |
| The property and lien position | A second lien or an unusual property gives the buyer more to check, which raises the floor |
| Whether the buyer knows the note | A buyer who has already reviewed it can add payments more cheaply |
Lien position is your place in line if the property is sold to pay debts, with a first lien paid first.
If your need is below the floor
The first move is to ask another buyer, or to send us your note details with the amount you have in mind so that one request goes to several. Floors differ from one buyer to the next, and not every note buyer offers partials at all. If the floor is only just above your target, selling slightly more than you need costs you some discount and makes the deal possible. A different structure is another route: selling half of each note payment, or some other share, for longer can reach a buyer’s minimum while leaving you some monthly income.
The last choice is to leave the note alone. For a small sum, the note’s own payments over the next few months, or a small loan, may cost you less than any sale.
The floor on your side
Even where a buyer will write a very small partial, check that it is worth doing. Your own costs are fixed too: your time, any legal review of the agreement, and any closing costs taken from your proceeds. Ask for the net figure, then work out what is left after an attorney has read the agreement. If that is only a little more than the payments you would have received within a few months anyway, the sale has bought you very little.
What to ask each buyer
Give the amount you want to raise and let the buyer tell you the smallest structure it will write. Then ask for the minimum in dollars, the costs that come off the price, and the yield used. With the last two in hand you can follow how the partial was priced and compare one buyer’s answer with the next on equal terms.
Related questions
Do note buyers publish their minimum partial size?
Some state a minimum and others leave it unsaid. The floor can also shift with the quality of the note and the file. The reliable way to find out is to ask several buyers about your specific note.
Is there a maximum size for a partial?
The upper limit is the note itself. Some buyers will not buy a partial that runs nearly to the end of the term, since it is almost a full sale. If you need that much, ask for a full-sale price and compare the two.
Does a small note balance rule out a partial?
Not by itself, but it narrows the room. A small balance tends to come with small payments, so reaching a buyer's floor takes more of them. On some small notes a full sale or keeping the note is the more practical choice.