In dollars, yes. You sell fewer payments, and they are the near ones a buyer marks down least, so you give up far less. In rate, it depends on the buyer: some price a partial at the same yield as a full sale, some lower and a few higher.
One note, sold both ways
Our example note pays $1,140 a month, has 168 payments left and carries a balance of about $129,400. A buyer prices a full sale and a 60-payment partial at the same 8% yield. Yield is the yearly return the buyer needs on the money they pay you, and a higher yield means a lower price.
| Sell the whole note | Sell 60 payments | |
|---|---|---|
| Buyer’s yield | 8% | 8% |
| Scheduled payments you sell | $191,520 | $68,400 |
| Cash today | $115,000 | $56,200 |
| Dollars given up | $76,520 | $12,200 |
Illustrative example. “Dollars given up” is the scheduled payments sold minus the cash received. It is not adjusted for the value of money over time, and it assumes the payer keeps paying.
The rate in both columns is identical, yet selling everything gives up $76,520 of future payments while selling five years of them gives up $12,200.
Which discount are you asking about?
A note discount is the gap between what your payments add up to and what a buyer pays for them today, and the word gets used for two different measurements. One is the dollar amount, the money you forgo by taking cash now. The other is the rate that produces it, which is the buyer’s yield. In the table a partial shrinks the dollar amount while the rate stays where it was.
A full-sale discount can also be quoted against the balance owed: $115,000 for a $129,400 balance is a $14,400 discount, 11.1% of the balance. That measure fits a partial badly, because after a partial you have sold a block of payments and still own the rest of what the payer owes.
Why the near payments cost less to sell
A buyer marks each payment down for the time they wait to receive it. A payment due next month is marked down for one month. A payment due in year fourteen is marked down for fourteen years, so the buyer pays only a fraction of its face amount.
A full sale includes those distant payments at their heavily reduced price. A partial sells the early ones, which lose the least, and leaves you to collect the distant ones at their full amount by waiting for them. The buyer applied the same rate both times, so the whole saving comes from which payments you chose to sell.
When the yield differs between the two offers
A buyer who depends on one payer and one property for five years carries less uncertainty than a buyer who depends on them for fourteen, and some buyers reflect that with a lower yield on the partial. Others ask for more, because a partial means a longer agreement, a file to track for years and a note to hand back at the end. Since it can go in either direction, ask each buyer for the yield behind the full-sale figure and the yield behind the partial figure, and ask for the reason if the two differ. Hold us to the same test: if you send us your note details, ask for the yield on every figure that comes back. Both figures come out of the same partial pricing calculation, so a gap between the two yields is a choice the buyer made and can explain.
What the smaller figure leaves out
Giving up $12,200 in place of $76,520 comes with conditions. You receive $56,200 today where a full sale would have paid $115,000. The payments you kept arrive from year six to year fourteen. And those later payments only arrive if the payer is still paying: a full sale hands that risk to the buyer, while a partial leaves the back end of it with you, and that is the first of the risks of a partial note sale to weigh against the smaller figure.
Putting two offers on the same footing
For your own note, the comparison that works is a full-sale offer and a partial offer side by side, each showing its yield, the number of payments sold and the cash paid. How many payments to put in the partial is a separate choice, and the partial purchases guide takes it up along with the rest of the decision.
From those figures you can rebuild the bottom row of the table yourself: multiply the payments sold by the monthly amount, then subtract the cash. Do it for every offer you hold, and you are comparing dollars given up with dollars given up, whatever each buyer means by the word discount.
Related questions
Do buyers use a lower yield for a partial than for a full sale?
Some do, because a shorter commitment carries less uncertainty. Others use the same yield, and a few ask for more because a partial takes more paperwork. Ask each buyer for both figures.
Does a smaller discount mean a partial is always the better deal?
No. You receive less cash today, you wait years for the payments you kept, and the risk that the payer stops paying stays with you. A full sale passes that risk to the buyer.
How do I compare the discount on two partial offers?
Ask each buyer for the yield they used and the cash paid for the same number of payments. With the yield and the payment count side by side, the better price is easy to see.