If you are holding a seller carry back note and would like to cash out, the most likely person you should be talking to is your payor – the person who bought your property. Is he in a position to pay off the note? Does he want to pay off the note? Can he pay off the note? If the answer is “Yes”, then the two of you can have a conversation about the amount that is acceptable and proceed accordingly. If the answer is “No”, then you can go to the open market and see what kind of price your note will attract.
Unfortunately – for those of us in the note buying business – some sellers will reverse this process. They will talk to a few note buyers, and, with their pricing in hand, will now approach the payor about him paying off the note. If the payor is able to do so, the seller knows what the “market value” of his note is and will simply attempt to get a pay off from his payor that is a little higher than his best offer. The seller then feels good that he has gotten a “fair” price for his note and that he has been honorable in giving his payor an opportunity to pay off the note early.
When this happens, it is a 50/50 proposition if the seller will tell the note buyer(s) what has occurred. Sometimes the seller will just drift away and the note buyer(s) will have no idea what happened. Sometimes the seller will be courteous and acknowledge that he has spoken to his payor, who has agreed to pay off the note.
Since most of us conduct our business as professionally and ethically as possible, we will typically ask the seller up front if he has spoken to his payor about possibly paying off the note early. Regardless, some sellers will choose to use the leverage of open market offers to negotiate with their payor. Fair or foul? This happens in business negotiations – witness professional athletes who are free agents – all the time, and someone always loses.
Winning and losing in business is part of the game, just as it is in sports. It’s just a lot more fun when the folks involved take an honorable, honest and up front approach.
