Because each buyer priced your note with a different yield, from different facts, or as a different deal. Two figures on one note may not be the same offer at all, so find out what each buyer assumed before deciding which price is higher.
Why a note has no single price
Nobody posts a price for a private note. Each buyer builds one from the payments, their own view of the risk and the return they need, which is called the yield. A higher yield means a lower price on the same payments.
Different returns
A buyer using their own savings, one using borrowed money and one who plans to resell the note each have different costs to cover, and each sets a yield to match. On a long note a small difference in yield moves the price noticeably, because it applies to every payment for years.
Different views of the risk
One buyer may be comfortable with rural land and wary of mobile homes, and another the reverse. A buyer who already holds notes in your county may value the property with more confidence than one who has never bought there. The longer account of how buyers differ in funding and appetite is in why note offers differ from buyer to buyer.
Different facts
If one buyer heard that the payer has never been late and the other saw a record with three late payments, you will get two prices. This gap is the easiest to close, since all it takes is giving every buyer the same file.
What to ask each buyer
| Question | Why the answers can differ |
|---|---|
| What balance did you use, and as of what date? | One may have used your estimate and the other a figure rebuilt from the payment record. |
| What yield is this priced at? | Each buyer sets their own, and it is the largest single driver of the price. |
| Is this for all the payments or some of them? | A full sale and a partial cannot be compared on price alone. |
| Is this what I receive, or the price before costs? | Title work, recording and other closing costs may be taken out of one quote and left in the other. |
| What have you reviewed so far? | A quote from a phone call is an estimate. A quote after a document review is closer to final. |
| What property value did you assume? | Each buyer may hold a different opinion of what the property would sell for. |
When one quote is an opening bid
An early quote can be set high to get a signed agreement, with the price revised once the buyer’s review begins. A price change is fair when a fact changes, such as a balance that turns out lower or a problem on the title. A note offer that drops before closing for no reason anyone will name is a different matter, and an early number that nobody will explain should be treated as a guess.
Check too whether you are comparing a broker with a direct buyer. A broker’s quote may include what the broker earns, while a direct buyer charges no separate fee and takes their profit inside the yield. Either arrangement is fine as long as you know what each party makes and what reaches you.
Which offer to take
The highest figure is the best offer only if it is the amount you will be paid, on terms you accept, from a buyer who can fund. Weigh the net amount to you, how firm the price is and what the agreement lets the buyer change, and compare the offers on your note one line at a time before you look at the totals.
The gap itself is useful. A holder with one number has no way of knowing where it sits, while a holder with two can ask the lower bidder to explain the difference.
With both quotes in front of you
Write each buyer’s answers to the table in two columns. Where the columns differ you have the reason for the gap, and it will be the balance, the yield, the costs, the property value or the deal being priced, each of which has its place in what your note is worth. If the comparison leaves you unsure of both, ask us to price the same note and add a third column.
A buyer who will not give a yield leaves that row blank, and the quote should be weighed with that in mind.
Related questions
Should I tell one buyer what the other offered?
You can. A buyer who knows there is a competing offer may explain their price or improve it. Share the figure and the terms accurately, because the buyer will price against what you tell them.
Is the lower offer always the worse one?
No. A lower price that is firm, already net of costs and backed by a completed review can leave you with more than a higher estimate that is later revised. Compare what you will receive and how likely it is to change.
How far apart can two honest offers be?
It depends on the note. Buyers have less to disagree about on a straightforward note with a strong payer and clear paperwork, and more where the risk is open to argument. The questions to ask are the same either way.