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What Are the Best Tips for Selling a Promissory Note?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 24 November 2016
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    Conjecture Corporation
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A promissory note is a type of negotiable instrument that carries a specific value. As the name implies, the note is a covenant or promise by a borrower to repay a lender within a certain period of time. Lenders will sometimes decide that selling a promissory note before it becomes due is a good idea. When choosing this course of action, it is important to make sure all documentation related to the note is available and in order. In addition, the holder of the note should evaluate current market conditions and determine if the note can be sold for a reasonable amount.

One of the first steps in selling a promissory note is to assemble all the documentation that has to do with the note itself. This can include any documents related to property pledged as collateral for the note, any related agreements between the lender and borrower, and even the contact information for the borrower. Making sure all the documents are up to date and in order will make it much easier to offer the note for sale and attract the attention of the buyer.

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Another factor with selling a promissory note is to promote the note as a good investment. Here, the goal is to interest potential buyers based on the high degree of probability that the borrower will honor the note within the terms of the promissory agreement. In addition, noting the current market value of any property held as collateral on the note can also provide incentive to potential buyers, especially if that current market value is more than the asking price for the note itself.

While an individual can go about the process of selling a promissory note without the help of a professional, this can often be a time consuming endeavor. By working through a broker or dealer who can make use of his or her contacts to locate potential buyers and negotiate the terms of the sale, there is a good chance of selling the note for a more equitable price. Even allowing for the fee paid to the broker as the intermediary, the seller stands to sell the note in a shorter period of time and realize more revenue from the sale.

One key consideration when selling a promissory note is to not expect to receive the current face value of the note. Determine a discounted rate that is within reason and is also likely to attract the attention of serious buyers. Finding the right discounted price requires some thought on the part of the seller, since it must be a figure that makes the sale worthwhile, even as it provides the buyer with the chance to realize some sort of return from the purchase. Often, a broker can help the seller evaluate all relevant factors, including the current condition of the marketplace, and come up with an asking price that is likely to make selling a promissory note a good move for everyone concerned.

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