Compare note offers on more than the headline price. Look at what is being bought, the net amount that reaches you, the yield the buyer used, the conditions attached and who is funding. Once those are filled in, the highest price can turn out to be the weaker offer.
Two offers on the same note can look far apart and be close, or look close and be far apart, and the cause is nearly always that they describe different things. The grid below is the tool for sorting that out. The sections after it explain how to fill in each row.
A grid to fill in
Copy this and complete one column for each offer. Any cell you cannot fill is a question to send back to the buyer.
| Offer 1 | Offer 2 | Keep the note | |
|---|---|---|---|
| Payments sold | None | ||
| Purchase price | $0 | ||
| Costs taken from proceeds | None | ||
| Net to you | $0 | ||
| Buyer’s yield | Not applicable | ||
| Payments you keep | All of them | ||
| Assumptions the price depends on | The payer keeps paying | ||
| Who funds | Not applicable |
The last column is there on purpose. Keeping the note is always open to you, and an offer has to beat it as well as beat the other offers.
With only one offer column filled, the grid can set that offer against keeping the note and nothing else. Send us the note details and whatever comes back goes in the second column.
First, make the offers describe the same thing
Before any numbers go into the grid, check what each offer assumes. One is the balance. If one buyer priced a balance from three months ago and another priced today’s, the prices will differ for a reason that has nothing to do with either buyer. Another is the date, since an offer normally states which payment is the first the buyer will receive, and payments due before it stay with you. The last is the set of payments covered: all that remain, a set number of them, or part of each one.
Where these do not match, ask the buyers to requote on a common basis, which is an ordinary thing to ask.
Price and net
The figure at the top of an offer is the purchase price, and what you receive may be lower. Some buyers pay for the title search, the valuation, the recording charges and the closing agent themselves. Others deduct some or all of those from your proceeds. A broker’s pay may sit inside the price or come off it.
Here is an example with round figures. One buyer offers $82,000 and deducts $1,500 of costs at closing, so $80,500 reaches you. A second offers $81,000 and pays the costs itself. The second offer is $1,000 lower on paper and $500 higher in your account.
So put the same question to every buyer: “If nothing changes during your checks, what amount will be wired to me?” Those answers go in the net row, and the net row is the one to rank by.
What yield tells you
Yield is the annual return the buyer earns on the money they pay you. In effect it is what the buyer charges you for having cash today, which is why it carries across from one structure to another when prices do not.
A lower yield means the buyer is paying more for each payment they receive. Between two full-sale offers on the same note, the one priced at the lower yield is always the higher price, and you could have seen that from the prices alone. Yield becomes useful when the offers are for different things.
Suppose one buyer offers to purchase every remaining payment and another offers a partial, buying only the next five years of payments. The partial will be a much smaller sum, and on cash alone it looks like the poorer offer. If both were priced at the same yield, though, the two buyers are charging you the same rate. The difference is how much of your note you hand over at that rate. The comparison then becomes a question about you: how much cash do you need now? If you want to see that in figures, there is an example of a partial and a full sale priced side by side on one note.
A buyer who will not state the yield has not stopped you finding it, because a financial calculator will produce it from the price and the payments bought. Their reluctance belongs in your notes on that buyer all the same.
How the conditions are written
Every offer is conditional until the buyer has finished checking the file. The wording of the conditions is where offers differ.
A carefully written condition names what will be checked and which result would change the price. It might say that the offer assumes the property is worth at least a stated amount, that the title shows no liens ahead of yours, and that the payment record matches your description. A loose one says “subject to buyer’s review” and stops there, which leaves the buyer free to revise the number for any reason at all. However firm the letter sounds, an offer on those terms is a starting bid.
Ask each buyer what assumptions about the property, the title and the payer the price rests on. Then ask how they would reprice if one of those proved different, and whether you would be shown the new pricing worksheet, meaning the page that sets out how the price was reached.
A high number resting on vague conditions has the most room to fall, and loose wording is one of the reasons a note offer drops before closing. An offer that sits far below the others with no explanation is a different problem, and it helps to know how to spot a lowball note offer before you spend time on it.
Who is behind the money
Ask whether the company quoting will pay for the note itself. If it is a broker, ask who the buyer is and whether that buyer has seen your note or only a summary of it. A price from a buyer who has studied the details is firmer than a figure a broker hopes to place with someone later.
When the grid is full and the offers still differ
Once the offers stand on the same basis, any gap left between them is real. Buyers have different costs of money, different limits on what they will hold, and different views of your payer and your property, which is why note offers differ from buyer to buyer on a note that has not changed.
You can tell a buyer that you hold a better offer and ask whether they can improve on theirs. They are equally free to decline.
Once you have chosen, the purchase agreement is the next stage of the sale, and its conditions should repeat what you wrote in the assumptions row. If they are looser than what the buyer told you, raise that before you sign.
Related questions
Is the highest offer on my note always the best one?
No. A higher price can come with costs deducted at closing, or with loose conditions that let the buyer lower it later. Compare the net amount you would receive and how firmly each offer is written.
Can I ask a note buyer to match another offer?
Yes. Telling a buyer you hold a better offer and asking whether they can improve is normal. Some will and some will not, depending on their own cost of money and how they see the risk.
How do I compare a partial offer with a full-sale offer?
Compare the yield first, since it shows what the buyer charges for cash in each case. Then compare the cash you need today with the payments you would keep. The two offers are answers to different needs.