Ask who is funding the purchase, how the price was worked out, what could change it before closing, what comes out of your check, and whether a partial is available. Ask for the answers in writing, and judge the buyer by how specific they are.
You do not need to understand note pricing to ask good questions, only to notice whether each answer names a figure, a document or a person.
Who is on the other side
Start by asking whether the company is buying the note with its own money or placing it with another buyer. Both are legitimate. A direct buyer funds the purchase, while a broker takes your note to buyers and is paid from the deal, and knowing whether you are dealing with a note buyer or a note broker tells you who makes the final decision.
Then ask for the legal name of the company that will sign the purchase agreement, which you can look up with the state where it is registered, and for the name, direct phone number and email of the person who will handle your file until closing.
How the price was built
- What yield did you price at?
- What balance, interest rate and number of remaining payments did you use?
- What is the discount in dollars?
- Can I see all of that on one page?
The yield on a note drives the offer more than any other input, and a buyer who will not state it is asking you to accept a number you cannot check. The balance, rate and payment count matter because a price built on figures that differ from your records is a price for some other note. The discount question asks for the gap between the balance owed and the price offered. To take round figures as an example, an offer of $88,000 on a $100,000 balance is a $12,000 discount, or 12% of the balance. The one page you are asking for is a note pricing worksheet, with the inputs and the result side by side.
What could change the offer before closing
An early quote rests on what you told the buyer, and the final price on what the buyer finds when they check, so press hardest here.
- Is this a quote or a firm offer, and what is it conditional on? Ask for the conditions in writing.
- What will you verify, and which findings would lower the price? Expect the payer’s credit, the property’s value, the title and the payment history to be on the list.
- If the price changes, will you show me what changed and by how much? A fair reduction can be traced to a specific finding, and a note offer that drops before closing with no finding behind it is a tactic.
- Can I withdraw, and until when? Read the purchase agreement for this before you sign it.
What reaches your account
The quoted price and the amount wired to you can differ, so ask whether they are the same and, if they are not, for the difference line by line. Ask who pays for the title work, the valuation, recording and any legal or closing fees, because the fees and costs when you sell a note are divided differently from one buyer to the next.
Ask what the buyer, or any broker involved, earns on the deal, and expect the answer to appear in the numbers. We expect to be asked the same, and when you ask us to price your note the worksheet with each offer shows what we earn. Ask too whether you pay anything up front, and treat any request for money before closing with care.
Whether the sale could be structured differently
A partial sells a set number of payments and returns the note to you afterwards, and some buyers do not write them at all. If this one does, ask what they would pay for two or three different blocks of payments, which shows you how the price moves with the size of the block. Ask also what happens if the payer pays off early or stops paying while the partial is running, and ask to see it worked through with numbers.
Reading the answers
| A good sign | A warning sign |
|---|---|
| Figures given in writing | Numbers only by phone |
| The yield and the discount stated without being pressed | “That is just what the market pays” |
| Conditions listed before you commit | “We will sort that out at closing” |
| Time given to compare and think | A deadline that expires today |
Send the list in one email
Put the questions to each buyer in a single email and keep the replies, because written answers can be laid next to each other. Keep them until closing. The purchase agreement is the stage of a note sale where what you were told has to match what you sign, so read it with the replies open beside it and query anything that differs.
Related questions
Is it rude to ask a note buyer what they earn?
No. It is your asset and a normal business question. A buyer or broker who is comfortable with their margin will show it. Reluctance to answer tells you something too.
Should I get the answers in writing?
Yes. An email is enough. Written answers can be compared between buyers and checked against the purchase agreement before you sign.
What if a buyer will not tell me the yield?
You can still compare their price with others, but you cannot check how it was built. Treat it as a reason to get at least one more offer from someone who will show the math.