You have four routes out: sell the note for a lump sum, sell part of it, let the payer pay you off early, or keep the note and hand the collecting to a servicing company. The right one depends on whether you want to be free of the loan or only of the work.
Work out which problem you have
Selling with owner financing made you the lender. Wanting that to end can mean different things.
- The chores. Tracking payments, chasing late ones, checking the taxes and insurance, sending year-end statements.
- The risk. Worry that the payer will stop and you will have to take the property back.
- The wait. Your money is tied up for years and you would rather have it now.
Each has its own cheapest fix. A full sale solves all of them and costs the most, so look at the other routes first.
Ask the payer to pay you off
If the payer can refinance with a bank, you receive the full balance and give up nothing. Ask them, because a payer who has built equity and credit since buying may qualify without having thought to try.
A payer may instead offer to pay you off for less than the balance, which amounts to selling your note back to the borrower. Set that figure beside what an outside buyer would pay before you answer, since either can come out ahead.
Keep the note and hand off the work
A servicing company collects the payments, keeps the ledger, sends late notices and prepares year-end statements in return for a monthly fee. You still own the note and still carry the risk that the payer stops. If the chores are your only complaint and the payer is reliable, this route costs a fee where the others cost a discount, and you keep all of the interest. The arrangement is described in what a note servicing company does.
Sell some of the payments
A partial sells a set number of upcoming payments for a lump sum and leaves the rest with you. When those payments have been collected, the note comes back to you with the remaining balance still owed. It suits someone who wants a break and some cash now and would be glad of the income later, and it leaves you a lender again at the end. Whether a buyer will do one depends on the note, since a short remaining term or a shaky payment record can rule it out, and the partial purchases guide is the place to check yours against.
Sell the whole note
A buyer pays you once and takes over every remaining payment, which ends your part in the loan. The price is less than the balance owed, and that gap is the discount. It exists because the buyer needs a return on money that will come back slowly over years.
As a round-number example of the arithmetic only, a $90,000 balance sold for $81,000 is a $9,000 discount, 10% of the balance. What your own note would fetch depends on the payer’s record, the equity in the property and the lien position, meaning your place in line if the property has to be sold to repay the debt, so have the note priced before you weigh this route against the others. A fully worked note, with a partial set beside the full sale, is on partial vs full sale: the numbers side by side.
The routes side by side
| Route | Ends the chores | Ends the risk | Cash now | Main cost |
|---|---|---|---|---|
| Early payoff by the payer | Yes | Yes | All of it | None, unless you agree a reduction |
| Hire a servicer, keep the note | Yes | No | None | A monthly fee |
| Sell a partial | For a few years | Partly | Some | A discount on the payments sold |
| Sell the whole note | Yes | Yes | The sale price | A discount on the full balance |
What stays out of your hands
While the payer keeps to the terms, the property is theirs and the note runs its course, so a change of mind on your side does not undo the financing. A higher rate or a shorter term likewise needs the payer’s written agreement.
Price the cheap fixes first
Get a servicer’s fee quote and ask the payer about refinancing, since both are quick to find out. If the fee looks worth paying, your problem was being tired of collecting payments, which is smaller than wanting out of the loan. If the payer cannot refinance and the risk or the wait still bothers you, a partial or a full sale is what remains, and the choice between them turns on whether you want the income back later. Anything that could slow a sale, from a late payer to a missing document, has its own page in the situations guide.
Related questions
Can I force the payer to refinance?
No, unless the note has a balloon or another term that requires payoff by a set date. If the payer is keeping to the terms, you can ask and you can offer an incentive, but the decision is theirs.
Does the payer have to agree before I sell the note?
The payer's terms carry over unchanged, and a note can ordinarily be sold without their consent. Read yours in case it restricts transfers. During its checks the buyer will write to the payer to confirm what is owed.
Am I still responsible for anything after a full sale?
You make certain statements about the note in the sale agreement, such as the balance and that you own it, and you stand behind those. Read that section carefully. Beyond that, collecting and enforcing become the buyer's job.