A single offer gives you nothing to measure against, because a fair price is what several informed buyers would pay for the same note. You can test the one you hold by asking what yield it is priced at, and by putting the note in front of at least one other buyer.
Why one number tells you so little
Every note offer is built the same way. The buyer decides what annual return they need, the yield, and then works backwards to the price that produces it. The higher the yield they want, the less they pay.
Different buyers want different yields for the same note. One has cheaper money. One likes your property type and another avoids it, or one is short of notes this month. None of that shows in the offer letter, which is why two buyers can give different prices for identical facts. A single offer shows you one buyer’s appetite on one day.
Find the yield inside the offer
Ask the buyer directly what yield the offer is priced at. A buyer who is comfortable with the number has no reason to hide it, and a refusal to answer belongs in your assessment alongside the price.
You can also measure the discount yourself. The discount is the gap between what you are owed and what you are paid. As an example with round figures, an offer of $85,000 on a balance of $100,000 is a discount of $15,000, which is 15% of the balance.
Example figures chosen to show the arithmetic. They say nothing about what a fair discount is on your note.
Whether a given percentage is reasonable depends on the note. A payer who has been late, a property that is hard to sell or a lien that sits behind another all push the yield up and the price down. A large discount on a clean, well-secured note is harder to explain, and may simply be a low opening bid. Knowing the yield lets you ask the buyer which of those it is.
Read what the offer includes
The headline price and the amount that reaches your account can differ. Get these points in writing.
- Who pays the costs. Title work, the property valuation, recording and legal fees. Ask whether they come out of your price.
- What the price is subject to. An offer made before due diligence, the buyer’s checks on title, value and documents, can change after it. Ask what findings would lower the price, and by how much.
- How long it stands. A deadline of a day or two leaves no time to compare, so ask for longer.
- Whether anyone in the middle is paid. If a broker is involved, ask what they earn and whether it is inside the number you were quoted.
Signs the offer is low
- The buyer will not explain how the price was calculated.
- You are pressed to sign before you have spoken to anyone else.
- The offer came before the buyer asked about the payer’s record or the property’s value. A price given without those facts is a guess, and it can be revised downward once the facts arrive.
- A full sale was the only thing offered, though you said you needed a smaller sum.
No single item on that list proves bad faith, but several together are a reason to slow down and learn how to spot a lowball note offer before you reply.
When the one offer is fine
If the buyer has told you the yield, shown you the costs and given you time to think, and the figure looks like a fair discount on a note with your payer and your property, the offer may be close to what the market would pay. A second quote will confirm that, and confirmation is worth having on a decision this size, whichever of the reasons in when selling a note makes sense brought you to sell.
Take the same facts to a second buyer
Competition is the plainest test, and it only works if the second buyer prices exactly what the first one did. Gather the balance, rate, payment, remaining term, payment history and property details you gave the first buyer, and send us those same note details. We take the note to other buyers and set whatever comes back beside the offer you already hold, with the yield and costs of each shown. If yours is still the best of them, take it.
Related questions
Will asking for a second quote cost me the first offer?
It should not. A buyer who wants your note expects you to compare. If an offer is withdrawn because you asked for a few days to check it, that tells you how the rest of the deal would have gone.
Can I negotiate a note offer?
Yes. Ask what yield the price is based on and what would raise it. A cleaner payment history, a recent valuation or a second bid in hand can all move the number.
Is the highest offer always the best one?
No. Compare what reaches you after costs, what conditions could reduce the price, and how sure the buyer is to fund. A slightly lower offer with fewer conditions can be the better deal.