How Much Is My Note Worth?

The most asked question by a note seller is ... How much is my note worth or is it true that I'll have to take a 30% discount? Most people know and understand that notes are sold at a discount. No matter how they ask the question, the answer is, I can't give you a quick answer. The selling price of the note is dependent on many things and their is no such thing as a blanket 30% discount. The discounts can range from a higher to lower %.

In order to give an accurate quote we have to take a look at the particulars, those being the value factors of the loan. An important explanation to consider is the "time value of money." If you can understand this factor you have a great advantage of understanding how this all works. If a seller understands the game rules then they do better at playing the game and are a lot better at getting better price.

9 Value Factors

Major factors in determining a notes value:

1. What's the term of the loan?
2. What's the interest rate?
3. What's the position of the loan (1st. 2nd, 3rd?)
4. Is there a balloon payment?
5. What is the payment amount?
6. Are there any clauses in the contract?
7. What's the properties value?
8. What is the loan to value and the first to second ratios?
9. What is the credit of the payor?

All these things factor the value at the same time but are interdependent on each other meaning that one can affect and can be affected by all the others. Risk and time are involved with all these factors and they are the two main concerns of a potential buyer or investor.

Understanding all these factors as a note seller will help you regardless of the value of your current note because if you ever write another, you will write it in such a way that the value will be significantly higher.