Sell Your Mortgage Note: What It's Worth and Who Buys It

Who Buys Mortgage Notes?

When you sold a property with owner financing or made a private loan, you became the lender. That position — the right to the borrower's remaining payments — is an asset, and there is an established market of buyers for it:

• Individual note investors. The most common buyers of a single private or seller-financed note. Many buy one note at a time for the monthly income.
• Note funds. Pooled investment vehicles that buy notes in volume, sometimes one at a time and sometimes in small packages.
• Institutional buyers. Banks and large funds mostly buy pools of loans, and rarely a single private note.
• Note marketplaces and exchanges. Platforms where sellers list notes and investors bid on them.
• Brokers. Middlemen who find a buyer for your note and are paid for the introduction, either by you or out of the price.

How to vet a note buyer

• No upfront fees. A buyer should not charge you to look at your note or to make an offer.
• Proof of funds. Ask how they will pay and how quickly.
• A written offer. Get the price, the due diligence conditions and the closing timeline in writing.
• Watch for the retrade. Some buyers offer high to win the deal, then cut the price during due diligence. Ask up front what could change the number.
• References and track record. Ask how long they have been buying notes and whether you can speak to past sellers.

How a Note Sale Works

1. Review. The buyer looks at the note's terms, the payment history and the property.
2. Offer. You receive a written offer, sometimes with a choice between selling the whole note and selling part of it.
3. Due diligence. The buyer verifies the documents, checks title and the property's value, and confirms the borrower's payment record.
4. Closing. You endorse the note or sign an allonge, sign an assignment of the mortgage or deed of trust, and the buyer wires the funds. The assignment is recorded with the county, and the borrower is told where to send payments — often to a loan servicer.

What Drives the Price of a Mortgage Note?

A buyer works backward from the payments the borrower still owes and the return they need. Anything that makes those payments more certain raises the price, and anything that adds risk lowers it:

• Payment history and seasoning. A note with years of on-time payments is worth more than a new one.
• The interest rate against the buyer's target return. The further the note's rate sits below the return buyers need, the bigger the discount.
• Borrower equity. A large down payment and a property worth well more than the balance protect the buyer if the borrower stops paying.
• Borrower credit and stability. Steady income and good credit make future payments more likely.
• Remaining term. Fewer payments left, or a balloon payment coming due, changes both the risk and the price.
• Lien position. A first lien is worth more than a second.
• Documents. The original signed note, a recorded mortgage or deed of trust, a title insurance policy and closing statements all add value. Missing paperwork subtracts it.
• How the loan was made. Buyers check whether the loan followed the federal and state rules for seller financing that applied when it was made, such as the Dodd-Frank Act's rules on seller-financed home loans.
• Property type and state. Single-family homes are the easiest to price. Land, mobile homes and commercial property draw fewer buyers, and foreclosure timelines vary a lot by state.
• Whether the borrower is paying. A note that is behind can still sell, to buyers who specialize in working out late loans, but at a steeper discount.

Nobody can price a note responsibly without these details, so be wary of anyone who quotes a firm number before seeing them.

Selling All of Your Note, or Part of It

A full sale turns the note into one lump sum. The buyer takes over every remaining payment, and you are done.

A partial sale sells a set number of the upcoming payments — the next several years, for example — and the payments after that come back to you. You get less cash today than a full sale, but you keep the back end of the note.

Get a Free Review of Your Note

Tell us about the note. Please don't include the borrower's name, address or Social Security number — they aren't needed for a first look.

What Happens After You Submit

Robert Hytha reviews your note personally and replies by email within 2 business days with your realistic options, including what kind of buyer fits a note like yours and what they will ask for. There is no fee and no obligation, and your details are not shared with anyone without your OK.

Selling a portfolio of loans instead? See institutional note sales.