Your payer has fallen behind or stopped, and you are weighing what to do. We take the note to buyers who work with defaulted paper and show the math behind each offer.
Where holders lose money once payments stop.
The same worksheet comes with every offer.
| Remaining balance | $129,400 |
|---|---|
| Payments left | 168 |
| Buyer’s target yield | 8.0% |
| Purchase price | $115,000 |
| Discount from balance | 11.1% |
| Our fee | shown on every offer |
| Sell the whole note | Sell 60 payments | Keep it | |
|---|---|---|---|
| Cash today | $115,000 | $56,200 | $0 |
| Payments still coming to you | None | 108 payments of $1,140 | 168 payments of $1,140 |
| Total you receive | $115,000 | $179,320 | $191,520 |
| What you give up | Every future payment | The next five years | A lump sum now |
Illustrative example. Totals add up the payments as scheduled; they assume the payer keeps paying and are not adjusted for the value of money over time.
Note and recorded security instrumentPayment history showing the defaultLetters or notices sentTax and insurance statusA note is non-performing when the payer has stopped paying or has fallen well behind. One late payment does not put a note in this category, but a string of missed payments does, and where the line falls for a non-performing note is not the same for every buyer.
The term describes the status of the payments, which is separate from the collateral and lien position that define the other types of notes you can sell. A first-lien mortgage, a land contract or a second can each be performing one year and non-performing the next. If the payer catches up and stays caught up, the note is called re-performing.
A performing note is priced on its payments. A buyer adds up what is due, discounts it at the return they need, and arrives at a price.
When payments stop, the schedule can no longer be trusted and that method fails. The buyer turns to the collateral and asks different questions.
The price is what is left after those costs and risks, plus a return for the buyer’s time and work. That is why the discount is deeper than on a performing note, and why a large balance on a property worth little does not produce a large price.
Selling is one of three routes, and an honest comparison includes the other two.
The first is to work it out with the payer. If they have hit a temporary problem, a written repayment plan may restore the note.
The second is to enforce the note: foreclose, or cancel a land contract where the law allows, and take the property back. You may end up with more than a sale would bring. You also carry the legal costs, the delay, and the taxes and insurance in the meantime.
The third is to sell: a known amount now, with the work and the uncertainty passed to someone equipped for it. You can only weigh that route with a number in front of you, so send us the details of the note and set what comes back beside a foreclosure attorney’s estimate of what enforcing it yourself would cost.
Which is best depends on the equity in the property, your own finances and how much of this you want to manage. We compare the two main routes in should I sell the note or foreclose.
Delay has a cost of its own. Unpaid taxes build up, insurance lapses and an empty property declines, so a default that is a few months old leaves a buyer more to work with than one that has run for years.
Be careful what you accept from the payer in the meantime. Taking a part payment, or agreeing new terms informally, can affect your rights, so speak to an attorney before you change anything.
If the payer has filed for bankruptcy, collection is generally paused by the court. The note can often still be sold, though to a smaller group of buyers, and they will need to know about the filing from the outset.
Write down the date of the last payment, the amount now overdue, and what you know about the property and who is in it. Add whether the property taxes and the insurance are paid up, and keep copies of any letters you have sent the payer about the default. A buyer prices what can be shown, and on a note that has stopped paying, a dated record of what happened is most of what there is to show.
There is no single line. One late payment is not usually enough, and several missed payments in a row usually is. Buyers set their own definitions, so we describe the payment record exactly as it is.
Mostly not. A buyer of a note that has stopped paying looks first at the property: its value, its condition and the cost of recovering it. The balance sets a ceiling, and the collateral sets the price.
It can bring more, and it can also cost more and take longer than you expect. The answer turns on the equity, the state and your own finances. Compare a written offer for the note against a realistic estimate from a foreclosure attorney.
Often yes, though fewer buyers will bid and the court process affects what they pay. Tell us at the start, and speak to an attorney about what you may and may not do while the case is open.