Note Valuation
How Much Is My Real Estate Note Worth?
The value of a note depends on far more than the remaining balance. Here's exactly what a professional buyer looks at – and why a discount almost always applies.
Valuation Factors
What Actually Determines A Note's Value
Remaining Principal Balance
The unpaid balance is the starting point – but it's only the starting point.
Interest Rate
Higher-rate notes are typically worth more relative to balance than low-rate notes.
Payment History
A clean, documented record of on-time payments significantly increases value.
Property Value
We verify the current market value of the collateral securing the note.
Loan-to-Value Ratio
The lower the LTV, the safer the note – and the stronger the offer.
Remaining Term
The number of remaining payments directly impacts the value.
Property Type
Owner-occupied homes typically appraise better than land or specialty property.
Borrower Creditworthiness
A payor with strong credit reduces risk and improves pricing.
Seasoning History
How long the note has been performing matters – more seasoning, more confidence.
Why Discounts Exist
Why Notes Almost Always Sell At A Discount
When you sell a note, you're trading future payments – sometimes 20 or 30 years of them – for cash today. Money received today is worth more than money received years from now because of three forces:
Time value of money
A dollar today can be invested and earn returns over decades.
Risk
Borrowers can default, properties can decline in value, and payments can stop.
Opportunity cost
Capital tied up in a single note can't be deployed elsewhere.
The "discount" isn't a penalty – it's the math that allows a note to convert into immediate cash.
Quick Reference
Higher Value Notes Typically Have…
- Interest rate above 7%
- 12+ months of seasoning
- Owner-occupied collateral
- Loan-to-value below 70%
- Documented payment history
- Strong borrower credit
- Reasonable remaining term
Examples
Example Note Valuations
These illustrate different outcomes depending on the underlying terms and property type.
Single Family Home
- Original balance
- $120,000
- Current balance
- $100,000
- Interest rate
- 7.5%
- Remaining term
- 22 years
- Property type
- Single-family residence
- Estimated range
- $51,000 – $72,000
Commercial Building
- Original balance
- $275,000
- Current balance
- $250,000
- Interest rate
- 8.25%
- Remaining term
- 27 years
- Property type
- Multi-Tenant Warehouse
- Estimated range
- $132,000 – $160,000
Mobile Home in a Park
- Original balance
- $40,000
- Current balance
- $32,000
- Interest rate
- 9%
- Remaining term
- 10 years
- Property type
- Manufactured Home
- Estimated range
- $22,500 – $24,000
Examples shown are illustrative only and do not constitute actual offers. Every note is evaluated individually.
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Share your note details below. Andrew will personally calculate a written estimate based on the same factors institutional note buyers use – at no cost and with no obligation.
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