Yes, you can sell a note that is less than a year old. Fewer buyers will bid on it, and the price will be lower than the same note would fetch after a longer run of on-time payments, because the payer has not yet shown a track record.
Why buyers care how old a note is
Buyers use the word seasoning for the number of payments a payer has already made on time. A note with a long, clean record is seasoned, and one that closed a few months ago is unseasoned, or “green”.
Seasoning is evidence. A buyer pays today for payments that have not happened yet, and what this payer has already done on this note is the best predictor available. With only a handful of payments on record, the buyer has to lean on everything else in the file. No rule says a note must reach a certain age before it can be sold. Each buyer decides for themselves how many payments they want to see before a note can be sold to them.
Sell now, wait, or sell part
| Choice | What you get | What it costs you |
|---|---|---|
| Sell now | Cash soon, and the note is off your hands | A smaller pool of buyers and a deeper discount |
| Wait, then sell | More buyers and a stronger price, if the payer pays on time | Time, and the risk that a late payment sets you back |
| Sell a partial now | Some cash today while the note keeps seasoning | You give up the payments you sold |
Waiting tends to narrow the gap between the balance owed and what a buyer pays, though only if the added months are clean ones, since a late payment in month five does more harm than having no month five at all. To find out what waiting is worth on your note in particular, ask for a price on the note as it stands and ask the buyer what minimum seasoning they look for. The answer tells you how many more clean months would change the offer.
The last row is the one people overlook. A partial is the sale of a set number of upcoming payments, with the rest kept. If you later sell the remainder, it will be an older note with a longer record behind it. A buyer who would pass on the whole of a young note may pass on part of it too, so ask the question and expect the down payment and the payer’s credit to decide the answer.
What stands in for the missing history
A young note can still be a strong one. The first thing a buyer looks for is the down payment, because a payer who put real money into the property has something to lose by walking away (see how the down payment affects your note’s value). Next comes the payer’s credit report, which does the job the payment record cannot do yet. Then equity: a property worth clearly more than what is owed protects the buyer if something goes wrong.
Paperwork carries extra weight on a new note. A properly drafted note, a recorded mortgage or deed of trust and a title policy from the original sale tell the buyer it was set up with care. So do payments that can be proved, since three payments on a servicer’s statement count for more than six handed over in cash.
The reverse holds as well. A new note with a small down payment, no credit check on the payer and payments nobody can document is hard to place at any age.
If you have not written the note yet
Perhaps you are about to sell a property with owner financing and already expect to sell the note soon afterwards. The terms you write now decide what it will be worth then. A meaningful down payment, a market rate of interest, a credit check on the payer and a servicing company collecting from the first payment all make a young note easier to sell. Have an attorney draft the documents, because seller-financing rules vary by state.
Build the record while you decide
Whichever row of the table you choose, have payments made by check or bank transfer from now on and keep every statement, because bank and servicer records are what proves payment history on a note. The steps in selling a note are the same at month four as at month forty, so nothing you do now has to be redone later.
Then put a date on the decision. If a buyer has told you the seasoning they want, count the clean months still to go and ask yourself whether you can wait that long for the money. If you cannot, the partial row of the table is the next one to have priced.
Related questions
Can I sell a note the day after closing?
Some buyers will price a brand-new note if the down payment, the payer's credit and the paperwork are strong. Others want to see payments made first, and each sets a minimum of their own, so ask before you send the file.
Will waiting six more months raise my price?
It can, provided every payment in those months arrives on time and can be documented. Nobody can promise the size of the change, and a late payment during the wait can cost more than the wait gained.
Do payments made in cash count as seasoning?
Only if they can be proved. A buyer gives little weight to payments with no bank record or servicer statement behind them, so move to checks or transfers as early as you can.