Packaging a note means putting its terms, its documents, its payment record and its known problems into one clear submission. Buyers price what they can verify and mark down what they have to guess.
At first the package is the only version of the note a buyer sees. A thin or disorganized one earns a cautious price or no reply, while a complete one earns a firmer price that has a better chance of surviving the buyer’s checks. The sections below follow the order in which a buyer reads. They are written for brokers and serve equally for a holder preparing their own note, with terms used as the note basics guide defines them.
Why the package sets the price
A buyer sets the yield they need on their money from how risky the note looks, and every unanswered question counts as risk. A package that is silent on property taxes leaves the buyer to assume they may be unpaid. One with no payment record leaves the buyer to assume a patchy one.
Each assumption adds a little to the yield the buyer asks for, and a higher yield means a lower price. Good packaging removes the guesses. It cannot make a weak note strong, but it stops a strong note being priced as a weak one.
The summary sheet
This is one page at the front that lets a buyer decide in a couple of minutes whether the note fits what they buy.
| Item | What to give |
|---|---|
| Monthly payment | Principal and interest only. If taxes and insurance are collected with it, show them separately |
| Interest rate | As written in the note |
| Payments left | Counted from the next payment due |
| Balance still owed | Principal only, as of a stated date |
| Balloon | Amount and due date, or “none” |
| Lien position | First, second, or other |
Lien position is where the note stands in line if the property is sold to pay debts, with a first lien paid first. The same page should also carry the original sale price and down payment, the date of the first payment, the property type and address, the holder’s estimate of value with its source, and one line on how the payer has paid.
Put a date beside every figure, since a balance without one is only a guess. Add a line saying what the holder wants as well: a full sale, a sale of some of the payments (a partial), or a specific amount of cash. A buyer who knows the holder needs a set sum can price a partial sized to it, if the note suits one, next to the full sale.
The documents
Send clear copies, each as its own file with a plain name, and keep the originals until closing.
- The promissory note, every page, with any later changes to it.
- The recorded mortgage, deed of trust or land contract, showing the recorder’s stamp.
- The closing statement from the sale that created the note.
- The title insurance policy from that sale, if one was issued.
- Any assignments or endorsements, if the note has changed hands before.
- Proof of hazard insurance on the property, ideally naming the holder.
- Proof that property taxes are current.
Where a document is missing, say so on the summary sheet so the buyer does not discover the gap alone. A lost original note, for example, can be dealt with in some cases, but it changes the buyer’s process.
A holder preparing their own note can work from the shorter list of documents you need to sell a note. If parts of it are missing, send us what you have and we will tell you which gaps a buyer will care about.
The payment history
A buyer is purchasing future payments, and the best evidence of future payments is past ones, so this section carries more weight than its length suggests.
The strongest history comes from a third party. A loan servicer’s ledger shows each payment, the date it arrived and the balance after it. The holder’s bank statements showing the deposits, or copies of the payer’s checks, come next, and a handwritten ledger with nothing behind it comes last. Where no formal record was ever kept, there are still ways to prove the payment history on a note from deposits and checks.
Present the record as a simple list of due date, date received and amount, and show any late payments as they happened. A buyer who verifies the history before funding, through bank records or by speaking to the payer, will find a late payment that the package hid, and the discovery costs the broker the buyer’s trust as well as the price.
The property
The property stands behind the note if the payer stops, so give the buyer enough to form a view without a site visit.
- The full address and the type of property: house, mobile home with land, vacant lot, commercial building.
- Whether the payer lives there, rents it out or uses it for business.
- Recent photographs, if the holder has them.
- The value, and how it was arrived at. A recent appraisal, a tax assessment and an owner’s opinion are different things and should be labelled.
- Anything known about its condition.
The buyer will order their own valuation before funding, and the aim is that their figure surprises nobody.
The payer
Buyers want to know who is making the payments. Share what the holder knows and is entitled to share: the payer’s name, how long they have owned the property, how much they put down, and whether they have ever asked for a change to the terms.
Take care with this section. A payer’s financial details are private and access to credit reports is restricted by law, so do not obtain or pass on a credit report without proper authority, and leave that step to the buyer’s own process. Send personal information only to buyers who need it to price the note, by a secure method.
The known issues
Close the package with a short, honest list of anything a buyer might trip over. The payer was late twice last winter, say, or there is a small second lien, or the holder’s spouse has died and the estate is not yet settled, or the legal description in the deed has a typing error.
Writing this list feels like talking the price down, yet it protects the price. A buyer who is told about a problem prices it once. A buyer who finds it during the checks they run before funding prices it and then wonders what else was left out.
Mistakes that weaken a package
- Giving the original loan amount where the current balance belongs.
- Including taxes and insurance in the payment figure without saying so.
- Photographs of documents taken at an angle, with pages missing.
- Describing the payer as “always on time” with nothing to support it.
- Quoting a property value with no source.
- Sending the same package to every buyer, including those who do not buy that kind of note.
Reading the replies
An interested buyer replies with a price that is subject to their checks. Compare replies on the same basis: the price, the yield behind it, who pays which costs and what the price assumes about the property and the payer. A reply that comes back as a string of questions is telling you what the package left out, and those gaps are worth filling before the note goes to the next buyer.
Update the summary sheet each time that happens and change its date. A package that has been corrected twice is still one package, whereas two versions in circulation with different balances make a buyer doubt both.
Related questions
Should I send original documents to a buyer?
No. Send clear copies for pricing. The original note is delivered at closing, usually through a title or escrow company, when the money is ready to change hands.
What if I have no formal payment history?
Rebuild one from bank statements, deposit records or copies of checks, and list each payment with its date and amount. A buyer may also confirm the record with the payer. A reconstructed history is weaker than a servicer's ledger but far better than none.
Do I need an appraisal before sending a note to buyers?
Not in order to ask for a price. Give your best estimate of value and say where it comes from. The buyer orders their own valuation before funding, so one you pay for in advance may only duplicate the cost.