Selling one partial does not use up your note. A second block of payments can be sold later, either after the note has come back to you or while the first partial is still running. The second route is harder and depends on what your first agreement allows.
Once the note has come back
This is the plain case. The first buyer has collected the payments they bought, the note has been assigned back, and you hold a shorter version of the note you started with. You are free to keep it, sell another block to any buyer that writes partials, or sell all of it.
Take the note used across this site, which pays $1,140 a month and has 168 payments left with about $129,400 owed. Sell the next 60 payments and it returns with 108 payments left and about $94,950 owed.
Illustrative example. The figures assume a 6% note, a buyer pricing to an 8% yield, and every payment made on schedule.
A buyer looking at the returned note reads a different file from the one the first buyer saw. There is more seasoning, which is the length of the payment record, and five further years of on-time payments is strong evidence about the payer. Less is owed against the property, so if the property has held its value the payer has more equity, the part of its value they would lose by walking away. Against that, a shorter note has fewer payments left to sell, so the most a second partial can raise is lower than it was the first time.
The price itself cannot be known in advance. A second partial is priced at the yield buyers want on the day you sell it, and that may be higher or lower than the yield on your first sale.
While the first partial is still running
Suppose you sold 60 payments two years ago and now need more cash. The buyer still has 36 payments to collect and, where the note was assigned to them for the partial, holds it until then. What you own is the right to everything after their block.
Extending with the same buyer
The simpler route is to ask the first buyer to purchase more payments. A 60-payment partial becomes an 84-payment partial, you receive a second lump sum, and the date the note returns moves back. The buyer already knows the file, so there is less to check. The weakness is that you have little to compare their price against, so ask to see the yield they used.
Bringing in a different buyer
A new buyer would be purchasing payments that sit behind someone else’s, on a note that someone else holds and controls if the payer defaults. That position is harder to document and harder to enforce, and a buyer who dislikes either will decline. Your first agreement may also restrict the sale, or give the first buyer the right to match any offer. Read it before you spend time looking for a second buyer, and have an attorney confirm what it permits.
The two routes compared
| After the first partial has ended | While the first partial is running | |
|---|---|---|
| Who holds the note | You do. It has been assigned back. | The first buyer, if it was assigned to them |
| Who you can sell to | Any buyer that offers partials | The first buyer, or a buyer the first one accepts |
| What you are selling | The next block of payments on a note you own outright | More payments from the part you kept, sitting behind the first buyer’s block |
| Paperwork | A new partial, start to finish | An amendment to the first agreement, or a new agreement that fits around it |
How a later block is priced
Buyers price by yield, and the further away a payment is, the less they pay for it today. On the example note, at the same yield, the first 36 payments raise $36,400, payments 37 to 60 add $19,800 and payments 61 to 84 add $16,900.
It follows that a block of payments is cheapest to sell when it is close. Payments 61 to 84 are five years away today. In five years they will be the next payments due, and at an unchanged yield a buyer would pay more for them then than now. If you are unsure you will need the extra cash, that argues for selling the smaller partial today.
One larger partial or two smaller ones
| One larger partial now | A smaller partial now, another later if needed |
|---|---|
| All the cash arrives today | You only sell later payments if a real need appears |
| One set of closing costs and one round of checks | Two sets of costs and two rounds of checks |
| Priced at today’s yield, which you can see | The second deal is priced at a future yield nobody knows |
| Distant payments are sold at their lowest value | Later payments are sold when they are nearer and worth more |
| Does not depend on the payer’s future record | A payer who slips in the meantime lowers the second price, or ends the option |
A certain need points to one sale. A need that is only possible points to selling less now and keeping the option open, so decide how many payments to sell with the first need alone in mind. To see both sizes priced on your own note, send us the note details and mention that a second sale is on your mind.
When a second partial is the wrong answer
A second partial solves a second one-time need. As a habit it works badly, because each sale carries its own costs and pushes your income further away. If you find yourself selling block after block, price the alternative of selling the rest of the note in one transaction.
Clauses to settle in the first agreement
If more cash later is a real possibility, raise it before you sign the first partial and get these points in writing:
- Whether you may sell or assign the part you kept, and whether that needs the buyer’s consent.
- Whether the buyer has a right of first refusal, meaning the right to match another buyer’s offer before you accept it.
- Whether the buyer will quote on additional payments, and how that price would be worked out.
- How your retained interest is documented, so that a later buyer can see clearly what you own.
If a partial is already in place, the answers are in the agreement you signed, so find it and read those clauses before you approach anyone. They sit among the terms to look for in a partial purchase agreement, alongside the wording on how the note is assigned back, and that wording fixes the date from which a later buyer could deal with you alone.
Related questions
Does my first buyer have to agree to a second partial?
After the note has come back to you, no. While the first partial is running, in practice yes wherever the first buyer holds the note. Your agreement may also require consent or give them the right to match another offer.
Will a second partial be priced the same as the first?
Not necessarily. It is priced at the yield buyers want at the time, on the note as it then stands. A longer payment record and lower balance help. A change in buyers' target yields can help or hurt.
Is there a limit to how many partials I can sell on one note?
There is no set number. The practical limit is the payments left and each buyer's minimum deal size. Every sale also carries its own costs, so repeated small partials can cost more than one planned sale.