High prices mean California sellers can end up carrying large notes, some of them in second position behind a bank loan. We take yours to competing buyers and show the pricing worksheet behind every offer.
Large balances make small pricing mistakes expensive for a California holder.
The same worksheet comes with every offer.
| Remaining balance | $129,400 |
|---|---|
| Payments left | 168 |
| Buyer’s target yield | 8.0% |
| Purchase price | $115,000 |
| Discount from balance | 11.1% |
| Our fee | shown on every offer |
| Sell the whole note | Sell 60 payments | Keep it | |
|---|---|---|---|
| Cash today | $115,000 | $56,200 | $0 |
| Payments still coming to you | None | 108 payments of $1,140 | 168 payments of $1,140 |
| Total you receive | $115,000 | $179,320 | $191,520 |
| What you give up | Every future payment | The next five years | A lump sum now |
Illustrative example. Totals add up the payments as scheduled; they assume the payer keeps paying and are not adjusted for the value of money over time.
The promissory noteThe mortgage or deed of trustA payment historyThe closing statement from the saleIn California seller financing goes by the name carryback, and prices explain why it is used. When a house in Los Angeles, the Bay Area, San Diego or Orange County sells for more than the buyer can borrow, the seller can lend the gap: the bank holds the first loan and the seller holds a second, smaller one behind it.
Other California notes are firsts. An owner in Sacramento, Fresno, Bakersfield or the Inland Empire sells a paid-off house or a small apartment building and finances the whole price. Further out, land is sold on terms: high desert lots in San Bernardino and Kern counties, and timbered parcels in Shasta, Siskiyou and Modoc.
Lien position is your place in line if the property is sold to pay its debts. The first lien is paid in full before the second receives anything, so whoever buys a second-lien note has to study the loan ahead of it as well as yours.
| Question | If you hold a first | If you hold a second |
|---|---|---|
| What the buyer reads | Your note, recorded deed of trust and payment record | The same, plus a current statement on the first loan |
| What equity has to cover | Your balance | The first loan’s balance and then yours |
| Who will bid | Any buyer of real estate notes | A smaller group, since some buyers do not purchase seconds |
Say which you hold when you send us the details of your California note, because it decides which buyers we can take it to.
California real estate loans are commonly secured by a deed of trust naming the borrower, you as beneficiary, and a trustee. If the borrower defaults, the trustee can generally sell the property under a power of sale without a lawsuit. That non-judicial trustee’s sale is the common route, and a court foreclosure exists and is used less.
California places a number of protections around borrowers, and they differ by property type and by who the lender is. They are detailed and have been amended over the years, so take your own deed of trust to a California attorney or title company and do not lean on a general description like this one.
The method is the same here as in any other state. A buyer picks the yield the risk calls for and pays today’s value of your remaining payments at that rate, which comes to less than the balance.
An older California note may sit behind more equity than it did at closing if the property has gained value since. That helps only when it is shown, and a recent valuation does more for the price than an assumption. In fire-prone areas a buyer also asks whether the property is insured and by whom, because the property is what stands behind the note.
Size matters too, because the gap between the balance and the price grows with the note. As an example with round numbers, a $300,000 balance sold for $270,000 gives up $30,000, 10% of the balance. Selling a block of payments and keeping the rest, a partial purchase, shrinks the amount that gap is taken on.
Gather the note, the recorded deed of trust and your payment record. For a second, add a recent statement on the first loan, since no buyer can price a second without it. If those statements do not come to you, ask your payer for a copy of the latest one.
Commonly by a deed of trust recorded in the county where the property sits. It names a trustee, often a title company, who can conduct a sale if the borrower defaults. That sale generally takes place outside the courts.
Yes, though fewer buyers purchase seconds and the price reflects the extra risk. A buyer needs the balance and payment status of the loan ahead of yours, plus a current idea of the property's value.
It can. A buyer wants to know the property is insured, because the property is what stands behind the note. If cover has been hard to obtain or has lapsed, tell us at the start so buyers can price with the facts.
Not necessarily. With a large balance, selling a set number of payments can raise the cash you need while you keep the rest of the note. Ask for a full sale and a partial to be priced side by side. A partial needs a dependable payer and enough payments left to split.