A note can be turned into cash for an emergency, but a note sale takes time, and nobody can honestly promise you a date before seeing your file. Work out the exact amount you need, get your documents together today, and sell only as many payments as that amount requires.
Your note is worth the same today as it was last month. The emergency has changed your need for cash and left the note as it was, which is worth holding on to, because the main risk in selling under pressure is accepting less than the note is worth from the first person who offers.
First, be realistic about timing
Selling a note involves steps that a buyer will not skip. They review the note and the recorded mortgage or deed of trust, verify the payment record, order a title report and get a value for the property, and only then do they fund.
How long that takes depends on how complete your paperwork is and how quickly the title company and valuer respond. We will not quote you a number of days, and you should be cautious of any buyer who does so before reviewing a single document.
So sort the costs by when they fall due. A bill due this week is probably beyond the note’s reach, and the bridges further down this page are the place to look, with the note repaying the bridge later. Costs arriving over the coming months, such as treatment, care, travel, time off work or support for a relative, are ones a note sale can be timed to meet. For more on what affects timing, see how soon a note can sell when you need cash quickly.
Work out the real number
In a crisis the instinct is to raise as much as possible. Everything you sell is sold for less than the payer owes on it, so selling more than you need means paying that cost on money that will sit in the bank.
Take half an hour and write down:
- The bills you have in hand, with their amounts.
- The costs you expect over the next several months.
- Any income you will lose, if you or a family member will be off work.
- What insurance, savings or family will cover.
The first three lines added together, less the fourth, is the amount to raise. With medical bills, check before you treat the first figure as final, because a billing office can tell you what insurance has yet to pay, correct errors and say whether a payment plan is available.
Sell the smallest piece that covers it
You do not have to sell the whole note. Using a partial to cover a specific cash need means a buyer pays a lump sum for a fixed run of the coming payments. When those have been collected, the note is assigned back to you and the payer pays you again.
The fewer payments you sell, the smaller the lump sum and the sooner the income returns, so the amount you worked out above decides the size. An emergency passes, and when it has, a note that comes back to you is income you will be glad to have. If the situation later turns out to cost more than you planned, the rest of the note is still yours, and selling a second partial later is something to ask the buyer about before you sign the first.
A partial is not open to every note. Buyers offer one when the payer’s record makes the next few years of payments dependable. A full sale is the better choice when the payer is already unreliable, which has its own entry among the situations that lead to a note sale, or when the amount needed is close to what the whole note would bring.
What you can do today to avoid delay
Waiting for documents is the part of a note sale’s timetable that is in your hands. These are the ones to find now.
- The original signed note.
- The recorded mortgage, deed of trust or contract. The county recorder can supply a copy.
- The payment record: a ledger, bank statements showing the deposits, or a servicer’s history.
- The settlement statement from when you sold the property.
- Proof that taxes and insurance on the property are current, if you have it.
If something is missing, say so at the start, when you send us the note details with the amount you need and the date you need it by. A gap known on day one can be worked around, while one discovered late holds up the closing.
If the emergency is your own health
A sale needs your signature. If there is a chance you will not be able to sign, speak to an attorney about a power of attorney, which is a document that lets someone you trust sign on your behalf. Arrange it early, because a buyer and a title company will need to see it, and tell whoever holds it where the note documents are kept.
Bridges that may be cheaper or quicker
Check these before, or alongside, a note sale.
- A payment plan with the hospital or provider.
- Savings you had set aside for something that can wait.
- A short loan from family, repaid when the note sale funds.
- Credit you already have access to, used briefly and cleared from the sale proceeds.
Each has its own cost and risk. Used together with a sale, they mean the note does not have to cover everything, or cover it by Friday.
Protect yourself while you are under pressure
A seller with a deadline has less room to walk away from a bad offer, and a buyer can see that. The red flags that mark a bad note buyer matter more when you are rushed, and these are the ones to hold on to.
- Get more than one price. Even with limited time, a second offer is how you find out whether the first was fair.
- Ask to see how the price was worked out. That means the balance, the return the buyer wants and how the two produce the price. A buyer who will not show them is asking you to trust a number you cannot check.
- Do not pay anything up front. Be very careful with any buyer who asks you for a fee before closing.
- Watch for a price that drops late. A quote can be set high and then cut just before closing, when you have no time to go elsewhere. Ask at the start what could change the offer.
A note on tax and benefits
A lump sum can affect your tax for the year, and for some people it can affect eligibility for assistance programs that look at income or assets. The rules are specific to each program and each state. If either might apply to you or to the family member you are helping, ask a CPA or a benefits adviser before you close.
Today, this week, and after
Today: write down the amount, using the list above, and start pulling the documents. This week: call the billing office or the creditor about the dates, and ask for a price on a sale of the size you worked out. After the offers arrive: put them next to the bridges and choose the cheapest way to cover each cost by its due date. The hour of arithmetic on the first day is what makes that last choice possible, so do it before anything else.
Related questions
Can someone else sell my note for me if I am in the hospital?
Only with legal authority to sign for you, such as a power of attorney. A buyer and the title company will want to see the document. Speak to an attorney about putting one in place as early as you can.
Is a partial slower to close than a full sale?
Not necessarily. The buyer's checks on the note, the title and the property are much the same in both. A partial adds an agreement covering what happens during and after the partial, which you should read with care.
What if I sell part of my note and then need more money?
The remaining payments still belong to you. Depending on the payer's record by then, a second partial or a sale of the rest may be possible, priced on the note as it stands at that time.