Sell the note
Cash now, at the buyer's yield.
Note Value Calculator: What Is My Owner-Financed Note Worth?
If you carried back a note when you sold, a note buyer will pay you cash now for the payments you are owed, at a discount. Enter what is left on the note and the yield a buyer wants, and this estimates the price, the discount, the tax on selling it under Section 453B, and how that compares with keeping the payments. Everything runs in your browser.
Your note
Keep the note
Collect every payment, if the payer pays.
Year by year if you keep it
Selling another property?
For your next sale: get both options priced
A note you already hold cannot be converted, but on your next sale you can compare carrying a note with a structured sale that pays you on a schedule while the buyer pays in full at closing. Both priced, with the tax on each, from a person, not a drip campaign. You can also call 213-340-2018.
- Real payout quotes on your schedule, not the illustrative rate above
- Seller financing, structured and cash compared honestly; your CPA stays in charge
- Seller financing pays the operator nothing; see the disclosures
How a note buyer prices your note
A note buyer is buying a stream of payments. It discounts each remaining payment, including a balloon, at the yield it wants, and adds them up. If your note pays 6% and the buyer wants 10%, the price is less than the balance: that gap is the discount. A shorter remaining term, a balloon coming soon, a higher note rate, a large equity cushion and a long record of on-time payments all shrink it. Many buyers also offer a partial purchase: they buy the next several years of payments and the rest comes back to you afterward.
The tax on selling a note: Section 453B
When you sell or otherwise dispose of an installment note, the deferral ends for what is left in it. Your gain is the amount you receive minus your basis in the note, and your basis is the unpaid balance times (1 minus the gross profit percentage), Section 453B(a) and (b). Simple example. Balance $400,000, gross profit percentage 60%, so basis in the note is $160,000. A buyer pays $340,000 and you spend $1,500 to close: gain is $340,000 minus $1,500 minus $160,000 = $178,500, taxed this year. Keeping the note would have taxed $240,000 of gain (60% of $400,000) over the remaining years instead, plus interest as it arrived. The discount lowered your gain, but it also cost you $60,000 of principal. See selling a promissory note for the full rules, including pledging (Section 453A(d)) and gifts.
Keep or sell
Keeping usually wins on dollars if every payment arrives: you collect the full balance and the interest, and the tax stays spread out. Selling makes sense when you need the cash, doubt the payer, face a balloon you expect them to miss, or want out of servicing. If the payer is already late, read what happens if the buyer defaults first; a defaulted note sells for much less.
For your next sale
A note you already hold stays a note. If you sell another property, you can get the same installment tax treatment without carrying a note at all: in a structured installment sale, the buyer pays in full at closing and an assignment company pays you on the schedule you choose. It has to be set up in the purchase contract before closing. Compare both on the seller financing calculator.
What this calculator leaves out
Buyer fees and holdbacks, partial purchases, late payments, the payer's credit, state documentary taxes, related-party rules, Section 453A interest on large notes, and the time value of money in the keep column (dollars are nominal). Tax uses the 2026 tables carried forward. Not tax advice; have your CPA check your gross profit percentage and the character of the gain.
Note value FAQ
How much will a note buyer pay for my note?
A note buyer prices the payments left on your note at the yield it wants to earn. The price is the present value of every remaining payment, including any balloon, discounted at that yield. The higher the buyer's yield compared with your note rate, and the longer the remaining term, the bigger the discount. Buyers also look at the payer's credit and payment history, the down payment and equity, the property and your paperwork, so real offers vary.
How is selling a seller-financed note taxed?
Selling an installment note is a disposition under Section 453B. Your gain is what you receive for the note minus your basis in it. Your basis is the unpaid balance times one minus your gross profit percentage (Section 453B(b)), so the deferred gain still in the note is taxed in the year you sell. The gain keeps the character of the original sale, usually long-term capital gain, with any unreported unrecaptured Section 1250 gain first.
Is a discount a loss I can deduct?
The discount reduces your gain on the sale of the note. If the price is less than your basis in the note, the difference is generally a loss, with the same character as the original sale. Your CPA should check the character and any carryover rules on your facts.
Can I turn my existing note into a structured installment sale?
No. A structured installment sale has to be written into the purchase contract before the original sale closes. A note you already hold cannot be converted. The comparison on this page is for your next sale.
Should I sell my note or keep it?
Keeping the note usually leaves more dollars if every payment arrives, because you collect the full balance plus interest and the tax stays spread out. Selling trades those future dollars for cash now, at a discount, and moves the remaining deferred tax into this year. People sell when they need the cash, worry about the payer, or want out of servicing.
Keep going
- Selling a promissory note: discounts, note buyers and taxes.
- Seller financing guide.
- Owner financing calculator: amortization schedule and balloon.
- Form 6252 instructions: where your gross profit percentage comes from.