A promissory note is an agreement to make regular payments to an entity for a specified period of time. Usually there is an interest rate factored into the note payments, and in most cases a promissory note is secured by real estate or some other hard asset. In other words, if the person being paid under the terms of the promissory note fails to receive the stipulated payment within a stipulated time period, then the real estate or other hard asset becomes the property of that person. People receiving monthly payments on a promissory note often wish to sell their note for a lump-sum cash payment rather than continue to receive small monthly payments. If you are in that positio,n there are a few things you need to know.
Locate one or more promissory note buyers. Note buyers can be found online or through your local yellow pages. Your banker or most real estate agents will also know several note buyers. It is a good idea to contact more than one note buyer, as the price a note buyer will pay for a promissory note can vary greatly and you want to get the best price possible.
Provide the note buyer(s) with the documents they request. They will want to see a copy of the mortgage or the deed of trust, a copy of the promissory note that you wish to sell to them, the closing or settlement statement if the promissory note is secured by real estate, and they will want the name and Social Security number of the person making payments on the note so they can confirm that person's credit rating.
Provide all requested documents in a timely fashion; no deal will be made until all requested documents are provided.
Expect the note buyer to require a discount off the face value of the note. The note buyer you are attempting to sell your note to must make a profit off of this transaction and the way they make their profit is to pay you less than you would receive in payments if you kept the note.
Negotiate when appropriate. Negotiation should include new information that was not already used when the buyer structured the offer you have received. If no new information is available then negotiation is unlikely to result in a higher payment. Be prepared to reject an offer if you do not feel it is sufficient.
Evaluate any competing offers you receive, and decide if you wish to accept one. Sign the purchase and sales agreement, which is the final commitment to sell your note at a specific price.
It may be a good idea to run any contracts by a lawyer knowledgeable in real estate before signing any documents. Make sure that any payments you are to receive are net payments and not gross payments. A net payment is the actual amount you will receive after all fees and other costs have been paid for.
Ask the person buying your note if they are the actual buyer or if they are simply shopping your deal around to other buyers.
Things You'll Need
Copy of the mortgage or deed of trust
Copy of the promissory note
Copy of any settlement documents
The note holder's name and Social Security number