Should I Sell My Note or Keep It?

Keep the note if you do not need the cash and the payer is reliable, because holding it pays you the most in total. Sell if you need a lump sum, or if the risk and the work of collecting are costing you more than the discount would. If you need some cash but not all of it, sell part.

What you give up by selling

A buyer has to pay less than the remaining payments add up to, or they earn nothing for waiting. So keeping the note brings in the most dollars over time for as long as the payer keeps paying, a full sale brings in the fewest, and a partial sale lands between the two.

The price of selling is the discount on the note: the gap between the balance still owed and what the buyer pays. To take an example with round figures, a $90,000 balance sold for $81,000 carries a $9,000 discount, which is 10% of the balance. Your own figure could be smaller or larger, since it depends on your payer, your property and the terms of your note. Whatever it turns out to be, the decision rests on what that money buys you: cash in hand, and an end to the risk and the chores.

When keeping is the better call

Keeping makes sense when you have no specific use for a lump sum. Money moved into a savings account that earns less than your note’s interest rate is a better income swapped for a worse one. Keeping also makes sense when the payer has a long, clean record and the property is worth clearly more than what is owed, or when you rely on the monthly income and nothing else in your finances would replace it.

There is one more case, which is that the only offers you have seen are poor. A low price is a reason to get more offers or to wait, and no reason at all to accept.

When selling earns its discount

You need the cash for something worth more to you than the discount costs, such as paying off expensive debt, buying a property, covering care costs or settling an estate.
You are carrying risk you do not want. A note is one payer and one property, and if the payer loses a job or the property is damaged, the problem is yours until a sale moves it to the buyer.
The payer has started paying late. A note’s value tends to fall as the record gets worse, so waiting can cost you.
You are done being the bank. Chasing payments, tracking insurance and property taxes, and worrying about default is real work, and being tired of collecting payments is a legitimate reason to sell.
The note has to be divided between heirs or divorcing spouses, who can split cash far more easily than a stream of payments.

Selling part of it

The choice is seldom all or nothing. In a partial you sell a set number of upcoming payments for a lump sum, the buyer collects those, and the note then comes back to you with the remaining payments and balance. Put a partial and a full sale side by side and the partial raises less today while giving up far less of the note’s total. It fits when the cash you need is well below what the whole note would fetch. A note with only a short term left, or a payer with a patchy record, may not attract a partial offer.

Questions to answer before you ask for a price

What exactly would the money do? A named use with a number attached is a reason, and “it would be nice to have” is a much weaker one.
How much do you need? If it is less than a full sale would bring, look at a partial first.
How would a missed payment affect you? If you could absorb it, keeping is safer than it feels. If you could not, that risk has a price.
Does tax change the answer? A sale may be taxed differently from payments received over time, so put the question to a CPA.

With those answered, the last number you need is the discount in dollars on your own note. Get a price on your note and ask for it as a figure, with the yield the buyer priced at, so you can set it against your answers. If they point to selling, the stages of a note sale come next. If they point to keeping, you know what the note would fetch and can ask again in a year.