You sold a property and carried part of the price as a note, in first position or behind the buyer's bank loan. We take it to competing buyers and show the worksheet behind every offer.
Terms that helped sell the property can work against the note.
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.
The promissory note you carriedRecorded mortgage or deed of trustClosing statement from your saleBank records of payments receivedA seller carryback note is created when you sell a property and finance part of the price yourself. The buyer pays some cash at closing and signs a note for the rest, and a mortgage or deed of trust secures that note with the property. Which other loans sit on that property decides most of what the note will sell for.
If you financed everything above the down payment, no bank was involved and your note is the only loan on the property, in first position. If a bank financed most of the price and you carried the gap, the bank’s loan is first and yours is second, so in a foreclosure the bank is repaid before you receive anything. The closing statement from your sale shows whether another lender funded part of the purchase.
Among the types of note buyers see, a first-position carryback on a house is close to the standard case, priced on the interest rate, the payments left, the payer’s record and the equity in the property. Where carrybacks differ is in how the terms were chosen: to get a property sold, with no thought of a later sale of the note.
The rate is the first place that shows. A buyer of the note needs a certain return on the money they put in. The further your rate sits below that return, the wider the gap between the balance owed and the price paid. The rate cannot be changed now, but you can recognize it as the cause when an offer comes in low and ask the buyer what return they priced to.
A balloon is the second. This is a large final payment due on a set date. A buyer will ask whether the payer can realistically refinance or pay it when it falls due, and a balloon that is close can raise or lower the price depending on the answer.
The buyer of a second has to consider the loan in front of it, including what happens if the payer stops paying the bank. That extra layer of risk is why fewer buyers bid on second-lien notes, and why those who do pay less against the balance than they would for a first.
A property sold on easy terms can fetch more than it would have for cash. A note buyer orders their own valuation, and if it comes in below your sale price, the offer falls with it. As an example, a note with $160,000 owed looks different against a house valued at $200,000 than against one valued at $170,000: the first leaves $40,000 of value above the debt and the second leaves $10,000. Give the sale history up front when you send us the note details, so the valuation holds no surprise.
If the rate on your note makes a full sale expensive, ask whether selling only the nearer payments would work, since that limits how much of the note is sold below its balance. A partial rests on the payment record, so the third item on this list matters most if that is the route you take.
Look at the closing statement from your sale. If a bank or other lender funded part of the buyer's purchase, their loan is normally first and yours is second. A title search confirms it.
Sometimes. Fewer buyers purchase seconds, and they price in the loan ahead of yours. We will tell you early whether your note is likely to draw offers.
No, but it increases the discount, because the buyer still needs their target yield. A partial sale of the nearer payments can reduce how much of the note is affected.
It depends on whether the payer can pay or refinance it. A balloon shortens the wait for the buyer, which helps. A balloon the payer clearly cannot meet is a risk the buyer will price.