What Is My Note Worth?

Your note is worth what its remaining payments are worth to a buyer today. That figure sits below the balance whenever the buyer wants a higher return than the note pays, and how far below depends on the payer, the property, the terms and the paperwork.

If you hold a note, the number you know best is the balance the payer still owes. A buyer starts from the payments and works towards a price. This guide follows the same route: how the price is reached, what moves it up or down, which parts you can still change, and how to check an offer when one arrives.

The total, the balance and the price

Three figures describe the same note, and they get mixed up because each of them is sometimes called what the note is “worth”.

Number	What it is	On the example note
Total of the payments	Every remaining payment added up, interest included	$191,520
Balance owed	The principal the payer would need to pay you off today	About $129,400
Price	What a buyer will pay now for the right to collect those payments	$115,000

Illustrative example. A note paying $1,140 a month with 168 payments left at 6% interest, priced by a buyer who wants an 8% yield. Your own figures will be different from these.

The total of the payments is the largest of the three and the least useful, because most of it arrives years from now. The balance is what the payer owes you. The price is what someone will pay you for the note today, and it is the figure this guide means when it talks about value.

Why the price sits below the balance

The gap between the balance and the price is called the discount. On the example note it is $14,400, which is 11.1% of the balance.

A discount has plain causes. Money that arrives later is worth less than money in hand. The buyer also takes over a risk that you carry now, which is that the payer stops paying and someone has to deal with the property. The discount pays for those things, so it is neither a fee nor a penalty.

Your note pays you its own interest rate, 6% in the example. A buyer content with 6% on their money could pay you the full balance. Buyers of private notes ask for more than that, because one payer and one property is a concentrated bet. The return a buyer needs is called the yield, and the more yield they need, the less they can pay.

How a buyer turns your note into a price

Buyers reach different answers by the same method.

List the payments. Amount, number remaining, and any balloon, which is a large final payment due before the loan would otherwise be paid off.
Judge the risk. The payer, the property, the lien position and the documents all feed in.
Set a yield. A safer note gets a lower yield and a riskier one gets a higher yield.
Work back to today. The buyer calculates what lump sum, paid now, would earn that yield from your payments. That lump sum is the price.

The price is therefore an output, and the yield is the decision behind it. To understand any offer, ask what yield was used, then check the figure against the way buyers calculate a price.

What moves the price, at a glance

Each row below points in a direction, and none of them is a formula. The sections after the table take the rows a few at a time.

Factor	Raises the price	Lowers the price
Payment history	A long record of on-time payments you can prove	A new note, late payments, or no records
Payer’s credit	Bills paid on time elsewhere	Recent collections, judgments or bankruptcy
Equity	A property worth well more than the balance	A balance close to the property’s value
Lien position	First lien	Second lien, or unpaid taxes ahead of you
Property	An owner-occupied house in good repair	Vacant land, unusual or run-down property
Interest rate	A rate close to what buyers want to earn	A low rate, or none
Remaining term	Fewer years to wait	Many years, or a balloon the payer may not meet
Paperwork	Original note, recorded lien, clean title	Missing originals, errors, unrecorded documents

The payer: history first, credit second

A note is a promise from one person, and the best evidence that it will be kept is that it has been kept so far.

Buyers call that evidence seasoning: the number of payments the payer has already made on the note. Years of on-time payments show something no credit report can, while three payments show very little yet. What counts is the payment history you can prove, so bank deposits or a servicing company’s record carry more weight than your memory.

Credit comes next. Seller financing appeals to people a bank has turned down, and buyers of notes know it. A weak score does not stop a sale, but it pushes the yield up unless a large down payment or a long clean record offsets it.

The property: equity, lien position and type

If the payer stops, the property is what stands behind the money, so a buyer wants to know how much equity there is, who gets paid first, and how easily the property could be sold.

How much equity is there?

Equity is the property’s value less everything owed against it. The more there is, the more the payer loses by walking away, and the more room a buyer has if they ever need to take the property and sell it. Buyers measure their own cushion with investment-to-value, or ITV: the price they pay for the note divided by the property’s value.

Who gets paid first?

Lien position is the order in which claims against a property are paid. A first lien is paid before any other mortgage, and a second lien is paid only from what is left. Few facts about a note change a buyer’s risk as much, and lien position and note value explains why.

What kind of property is it?

A buyer wants collateral that is easy to value and easy to sell. A house the payer lives in fits that better than raw land, a mobile home on a rented lot, or a special-purpose commercial building, and condition counts as well. Notes on all of these do sell, at prices that reflect the extra caution.

The terms and the paperwork

The terms you agreed on the day you sold the property are fixed now, and they shape the price in ways that surprise people.

Start with the interest rate. The closer your note’s rate is to the yield a buyer wants, the smaller the discount, so a note written at a low rate or at no interest sells well under its balance even when the payer is flawless. How the interest rate affects value shows the mechanics.

The remaining term works through time alone. A payment due next year is discounted for one year and a payment due in fourteen is discounted for fourteen, which is why long notes carry bigger discounts before any question of risk comes up.

A balloon cuts both ways. It shortens the wait, which helps. It also depends on the payer being able to refinance or sell when it comes due, and buyers weigh that risk against the shorter wait.

The paperwork behind the terms

A buyer is purchasing a set of documents: the promissory note, the recorded mortgage or deed of trust that ties it to the property, and the record of what has been paid. If the original note is missing, the lien was never recorded, or the names do not match, the buyer prices in the cost and doubt of fixing it. Some problems can be cured before a sale and some need an attorney or a title company. Every one of them is better found by you than by the buyer in the last week before closing.

Why two buyers give two different numbers

Send the same note to several buyers and the prices will not match. Each buyer feeds different inputs into the same method, and those inputs are why offers differ from buyer to buyer.

Each buyer has their own cost of money and their own target yield.
Each has property types and states they like, and ones they avoid.
Each reads the same payment history with a different level of caution.
Some are buying for themselves, and others are quoting with a margin for a resale you do not see.

One offer alone therefore tells you very little, since you cannot judge whether a number is high or low until another sits beside it.

A guide like this one can tell you which way each factor pushes, but a price takes the real balance, the real payment record and buyers who are ready to bid. When you send us your note details, we take the note to competing buyers. Where it has enough payments left to divide, we price a partial beside the full sale. Each offer arrives with its worksheet, which sets out the balance, the yield, the discount and our own fee. The quote costs nothing and commits you to nothing, and if the figures favor keeping the note, that is what we will tell you.

What you can change before you sell

The payer’s credit, the rate on the note and the kind of property behind it are settled, and dressing them up only delays the moment a buyer finds out. How well the note is documented, and how much of it you sell, are still up to you, and the work of raising the value of your note before you sell starts with the records.

Gather proof of every payment received.
Find the original note and the recorded mortgage or deed of trust.
Confirm that property taxes and insurance are current.
If the note is new, consider waiting until more payments are on record.

The price depends on how much you sell

A full sale is one way to turn a note into cash. A partial is another: you sell a set number of payments, take a lump sum, and get the note back afterwards.

On the example note, selling the next 60 payments raises $56,200 today, and the note returns to you with 108 payments left and about $94,950 owed. The buyer is paying only for near payments, which are discounted least, so you give up less of the note’s value for each dollar raised.

Illustrative example. A partial leaves you with the later payments, which still depend on the payer continuing to pay.

A partial is worth pricing when you need a specific sum that is well below the full price. It needs a note with enough payments left to divide, so a note close to its final payment is a poor fit. And if you need no cash at all, keeping the note pays the most in total, which on the example is the $191,520 in the first table against $115,000 from a full sale.

How to read an offer once you have one

An offer with no working behind it is a number you cannot test, so ask every buyer for the same details.

The balance they used, and the date it was calculated.
The yield they priced at.
The discount in dollars and as a share of the balance.
What any broker in the deal earns, and where it sits in the figures.

Then ask what would change the number before closing. A buyer’s review of the title, the property value and the payment record can move a quote, and one who tells you in advance what they will check is easier to hold to their word.