A note held by two or more people can be sold, and a buyer will expect every owner to agree and sign. Because buyers want the whole note with a clean chain of signatures, the real work is getting the co-owners to one decision before anyone asks for offers.
The owners might be a married couple who sold a house together, siblings who inherited a note from a parent, or partners who sold a business or a piece of land. The sale itself runs like any other note sale. The differences lie in who has to say yes and how the money is divided.
Who has to sign
A buyer takes ownership through two signatures: an endorsement on the note, and an assignment of the mortgage or deed of trust that is recorded in the county. As a general rule every person named as lender signs both. A buyer who accepted fewer signatures than names would risk a later claim that the sale was not that person’s to make, which is why you should expect to be asked for all of them.
Questions follow about anyone who is named but cannot sign in the ordinary way:
| Situation | What a buyer will want to see |
|---|---|
| A co-owner has died | Evidence of who now holds that share, which depends on how the note was titled and on state law |
| A co-owner cannot manage their own affairs | A power of attorney or court appointment that covers selling this asset |
| A co-owner is an LLC or a trust | Documents showing who is authorized to sign for it |
| Co-owners are divorcing | Both signatures, or a court order or settlement that says who owns the note |
| A co-owner cannot be found | A legal fix before the sale can go ahead |
Two of these have their own pages: a spouse has died and the note was in both names, and several heirs splitting a note.
How the note names you
Pull out the note and the recorded mortgage or deed of trust and read the line that names the lender, sometimes called the payee or the beneficiary. Everyone listed there is an owner as far as a buyer is concerned, whoever has been collecting the payments.
Look at the word between the names, “and” or “or”, and at any phrase describing how you hold the note, such as “joint tenants with right of survivorship” or “tenants in common”. Wording of this kind can affect whether owners must act together, whether shares are equal and what happens to a share when an owner dies. Its effect differs by state, so ask an attorney how yours reads, and do the same if the document says nothing about shares at all. A buyer’s title review will raise the question later in any case, and it costs less to answer before you ask for a price.
What co-owners can do
Sell the whole note together
This is the simplest outcome. The buyer pays one price and the closing agent divides it according to your written instructions.
Sell part of it together
A partial purchase is the sale of a set number of payments, after which the note returns to its owners. It can suit co-owners who both want some cash while neither wants to give the note up. Every owner still signs, and the note comes back to all of you in the same shares as before. Whether a partial is on offer depends on the note and on the buyer.
One owner buys the other out
If one of you wants cash and the other wants the income, the one staying can pay the one leaving and take over the note with no outside buyer involved. You will need a price you both accept, and a properly drafted and recorded transfer of the departing owner’s interest. An outside offer obtained first gives you both a neutral starting point for that price.
Depending on how the note is held, an owner may have the legal right to sell their own fraction. A buyer of half a note would share every decision about it with a stranger, so expect few takers and a price that reflects the inconvenience. Whether it is allowed at all is a question for an attorney.
Dividing the money
The co-owners decide who gets what, and the closing agent follows written instructions signed by all of you. Shares normally follow ownership. If the note or a separate agreement sets unequal shares, the instructions should match it.
As an example with round figures, suppose the note sells for $80,000 and the closing costs come to $2,000, leaving $78,000 to divide. Two equal owners receive $39,000 each. If the shares were 60% and 40%, the amounts would be $46,800 and $31,200.
Example only. The figures are invented to show the arithmetic and say nothing about what a note sells for or what closing costs.
Put these points in writing before closing:
- The percentage each owner receives.
- Who bears the closing costs, and in what proportion.
- Any adjustment between you, for example if one owner has been keeping all the payments or has paid the property taxes to protect the note.
Each owner then receives a separate wire or check, and the closing statement records how the sale is paid out to each of you. Each owner also has their own tax position on their share, so each should speak to their own CPA.
When the co-owners do not agree
Co-owners can disagree about whether to sell, what price is acceptable or how to divide the result. The first two can ease once real numbers are on the table. An owner who assumed the note would sell for its full balance and an owner who assumed it was worth very little are both working from a guess until they read the same written offers with the pricing shown.
Asking for a full-sale price and a partial at the same time helps too, because it gives a reluctant owner a middle option between selling everything and selling nothing.
If you still cannot agree, the remaining routes are legal ones that vary by state. An attorney can tell you which apply, and whether mediation is worth trying before court.
One contact, one file
Agree among yourselves on one person to handle the conversation, on the understanding that every owner sees every offer. Gather the note, the recorded security document and the payment record. When you send us the note details, say how many owners there are and exactly how the note names them, so the signature questions come up at the start and not during the buyer’s title review.
Related questions
Can one co-owner sell a note without the other?
Usually not the whole note. Buyers generally want every person named as lender to sign the endorsement and the assignment. Whether one owner can sell only their own share depends on how the note is held and on state law, and few buyers want a fraction of a note. Ask an attorney how it applies to you.
How are the proceeds split between co-owners?
According to written instructions that all of the owners sign. The closing agent follows those instructions and pays each owner separately. Shares normally follow ownership, so equal owners receive equal amounts unless a document says otherwise.
What if my co-owner will not agree to sell?
Start by getting written offers, including a partial, so you are both looking at the same numbers. A buyout of one owner by the other is another route. If you still cannot agree, the remaining options are legal ones that vary by state, so speak to an attorney.