A partial starts with a quote and ends, years later, with the note back in your name. In between, a buyer checks the file, you sign an agreement and are paid at closing, and the buyer collects the payments they bought.
Everything up to the lump sum belongs to the run-up to closing. The rest plays out over years, with very little for you to do. Each step is set out below in order, with what you do, what the buyer does, and what you should be holding before you move on to the next.
What you are agreeing to
In a partial you sell a set number of your future payments for a lump sum and keep the rest of the note. For the payer the only change is the address their payment goes to. The rate, the payment and the payoff date stay as they are. Who a partial suits, and why, is the subject of the partial purchases guide. This page keeps to the order of events.
The timeline on one note
To see where the money falls, follow one note through the whole process. It pays $1,140 a month, 168 payments remain, about $129,400 is still owed, and the holder sells the next 60 payments.
| When | What happens | Money to you |
|---|---|---|
| Before closing | Quote, file check, agreement signed | $0 |
| Closing | Note assigned to the buyer | $56,200 |
| Payments 1 to 60 | Buyer receives $1,140 a month | $0 |
| After payment 60 | Note reassigned to you with about $94,950 owed | $0 |
| Payments 61 to 168 | You receive $1,140 a month | $123,120 |
Illustrative example. The price assumes a buyer who wants an 8% yield on a note that carries 6% interest, and a payer who makes every payment on schedule. Your own note will produce different figures.
Getting to a number: steps 1 to 3
Step 1. You send the note details
A balance on its own tells a buyer very little. To price the note they need the monthly payment, the interest rate, the number of payments left, the date of the first payment, the type of property and its rough value, and how the payer has paid so far. A copy of the note and a payment record are enough to start, and at this stage you have signed nothing and owe nothing.
Those two items are also what we need when you ask us to price the note. Tell us the amount you are trying to raise as well, and we will ask buyers to price a partial of that size alongside the whole note.
Step 2. Buyers price it
Buyers price by yield. They start from the return they want on their money and work backwards from the payments on offer to the amount they can pay today and still earn it. That amount is less than the payments add up to, and the difference is the discount.
What comes back should show a price for the whole note and, where a buyer is willing to split it, one or more partial structures, each with its yield and discount written down. A note with a short or uneven payment record, or with few payments left, may draw full-sale offers only. An offer that arrives as a bare number can be sent back with a request for the working.
Step 3. You choose the size
The size is the number of payments you sell. More payments means more cash today and less note coming back, and each added payment raises less than the one before. That makes the amount you need the useful place to start when you decide how many payments to sell.
Checking and signing: steps 4 to 6
Step 4. The buyer checks the file
Due diligence is the buyer confirming that the note is what the quote assumed. They read the note and the recorded mortgage or deed of trust, order a title report to confirm your lien position (where your claim ranks against any other claims on the property), get a property valuation, and verify the payment history. Some will also contact the payer to confirm the balance and terms.
If the file matches what you told them, the price should stand. Where something differs, such as a missed payment that was never mentioned or a lower property value, expect a new price and ask to see what changed in the calculation. You can gather most of what a buyer checks before funding before anyone asks for it.
Step 5. You sign the partial agreement
The agreement names the payments sold and the price. It then deals with the events that can change the plan: the payer pays off early, the payer stops paying, and the partial reaches its end. Read those clauses before the rest, with what to look for in a partial purchase agreement open beside the draft.
Step 6. Closing and funding
At closing the note is assigned to the buyer. An assignment is the recorded document that transfers the lien, and it comes with an endorsement of the note itself. When a title or escrow company runs the closing, the documents and the money change hands together, which protects both sides. You receive your lump sum, and the payer receives a letter telling them where to send payments from now on.
After closing: steps 7 and 8
Step 7. The partial runs
The payer keeps paying as before, and the payments go to the buyer. A servicing company may sit in the middle: a firm that collects payments, keeps the ledger and sends statements. During a straight partial the note pays you nothing. Your own tasks are few. Keep your copy of the agreement, keep your contact details current with the buyer and the servicer, and ask for the payment record once a year so you know the count.
Step 8. Reassignment
Once the buyer has received the payments they bought, the note is assigned back to you and the payer is told to pay you again. The reassignment is recorded, the original documents are returned, and the servicing record moves with them. Nobody is in a hurry by then, so getting your note back after a partial is a matter of checking that each of those was done.
Where a partial slows down
When a partial stalls between quote and closing, the first place to look is the file:
- The original signed note cannot be found. Raise it at step 1, when there is time to deal with it, and not at step 6.
- The payment record is thin. Bank statements or a servicer ledger prove the history in a way a handwritten list does not.
- The title report turns up a surprise, such as an unpaid property tax bill or an older lien that was never released. It has to be cleared before a buyer will fund.
- The valuation comes in below your estimate. Less equity in the property means more risk for the buyer, and the price follows.
That list is also why we do not promise a closing date. Complete documents at the start are the part of the timetable you control.
What to pull out of the drawer first
Step 1 needs the note and whatever record of payments you have. If you also hold the recorded mortgage or deed of trust and the closing statement from the sale that created the note, put them in the same folder, because step 4 will ask for them. Check that the note you are holding is the signed original and not a copy. A missing original is the slowest item on this page to put right, so it is the one to find out about before anything else.
Related questions
Does the payer have to agree to a partial?
A partial leaves the payer's terms as they are, and the payer is simply told where to send payments. Whether consent is needed is decided by your own note, so read it for any clause on transfer and ask an attorney if you find one.
Can I stop after I get the quote?
Yes. Asking for a quote commits you to nothing and costs nothing. You are bound only when you sign the partial agreement, and you should read that agreement fully before you do.
Who holds the original note while the partial runs?
The buyer, or a custodian acting for the buyer, normally holds the original documents. The agreement should say where they are kept and that they are returned to you when the partial ends.