Jennifer thought she'd done everything right. She'd offered seller financing on her Arizona land deal — 10 acres outside Phoenix for $75,000. The buyer put down $15,000 (20%), and she was collecting $793/month at 10% interest on a 10-year note.
Two years later, she needed capital. The balance was about $52,254. She expected offers around $41,803 (80% of balance). The offers she got from other note buyers shocked her: $31,352 (60%), $26,127 (50%), and one outright decline.
She got $10,451–15,676 less than she expected.
Her five mistakes: used a land contract instead of deed of trust, self-serviced the loan, didn't pull a credit report (borrower was 580), minimal documentation, no title insurance. Each mistake cost thousands.
After buying over 250 land notes, I can tell you exactly what determines a note's value — and why we pay 80 to 90% of balance on some notes while other buyers offer 50% on others.
Should You Sell Your Note at Closing or Later?
Path A: Selling at Closing (Simultaneous Close)
Path B: Jennifer's DIY Note Sold 2 Years Later (Other Buyers' Offers)
Two years of collecting, chasing, and carrying default risk got her about the same money she could have had on day one. The lesson: if you're going to offer seller financing, plan your exit strategy BEFORE you originate the note.
Have a land note to sell?
We pay 80 to 90% of balance, performing or not, no seasoning. Written offer in 24 hours.
See What Your Note Is WorthGet a Free QuoteWhat 6 Factors Determine Land Note Value?
Factor 1: Down Payment (Most Important)
Down payment is the single best predictor of default. Default rates: 0–10% down = 20–35% default, 10–15% = 15–25%, 20–25% = 5–10%, 30%+ = under 5%.
Down Payment Impact: Same $60K Sale
Recommendation: Minimum 20% down, preferably 25–30%.
Factor 2: Credit Score + Down Payment Matrix
Credit score and down payment work together. Same $75K sale with 20% down: the $60K note with a 720 credit borrower gets you an 86% offer ($51,600), while a 610 credit borrower gets 80% ($48,000). That's a $3,600 difference.
I look beyond the score at the actual report. Medical debt is common and doesn't always indicate payment problems. Recommendation: Minimum 660 credit score for standard pricing.
Factor 3: Professional Loan Servicing vs. Self-Servicing
This single decision can move your price from the bottom of our range to the top. Self-serviced loans have no third-party documentation, payment disputes are common, and note buyers can't verify history. Professional servicing costs $15–30/month and provides complete records, third-party verification, and easy transfer.
Servicing ROI
Recommendation: Use professional servicer from day one. Structure it so the borrower pays the fee.
Factor 4: Documentation Type
We buy promissory notes only. We pass on land contracts. Two identical Tennessee properties with a $65K balance: the note and deed of trust gets 80 to 90% from us ($52,000–58,500). The land contract gets no offer from us at all.
Recommendation: Use promissory note + deed of trust (non-judicial states) or mortgage (judicial states). Avoid land contracts →
Factor 5: Interest Rate & Term Length
If your rate is too low, the note lands at the bottom of our range or gets priced case by case. An $80K note at 6% gets 80% at best ($64,000). Same note at 10% can get 86% ($68,800). That's $4,800 from interest rate alone.
Shorter terms also command higher prices. A 13-year remaining term lands at the low end (80–83%), while a 5-year remaining term can reach the top (88–90%).
Sweet spot: 9–12% interest, 5–10 year terms.
Factor 6: Property Quality, ITV, and State
Note buyers ask: if the borrower defaults, do I want this property back? Good collateral (legal access, utilities, buildable, good location) gets full pricing. Poor collateral (landlocked, remote, no demand) is a pass for us.
Maximum ITV: 65% (what we pay ÷ land value). Non-judicial states (TX, TN, GA) get higher offers than judicial states (FL, IL, OH) because foreclosure is faster and cheaper.
Want to maximize your note value from day one?
Get Pre-Approved Before You List →What Are the Land Note Pricing Tiers?
Tier 1: Strong (88–90% of balance)
- Sold at closing (simultaneous close) OR seasoned with perfect history
- 660+ credit, 25%+ down, professional servicing
- Note + deed of trust, 9–12% interest, 5–10 year term
- Good property in non-judicial state, ITV of 60% or lower
Tier 2: Average (84–87%) — Good payment history, 620–660 credit, 20% down, professional servicing, standard property.
Tier 3: Weaker (80–83%) — Self-serviced OR 600–620 credit OR some late payments OR weaker property.
Tier 4: Doesn't qualify (priced case by case, or we pass) — Under 20% down with no seller buyback, land contract, ITV over 65%, no access, multiple Tier 3 issues, documentation problems.
What Mistakes Cost Note Sellers Thousands?
- Self-servicing: Can cost up to $5,500 on a $55K note. Fix: $20/month servicer.
- Using land contract: We pass on land contracts; a $65K note and deed of trust would bring $52,000+. Fix: $500–1,000 attorney fee for proper structure.
- Low down payment: 20% vs 30% down costs $4,560 on a $60K sale. Under 20% down needs a seller buyback.
- Wrong interest rate: 6% vs 10% can cost $4,200 on a $70K note.
- No credit check: Costs $10,000+ if borrower turns out to be 580. Fix: $30 credit pull.
Why Does Selling at Closing Get You 84 to 92% of the Sale Price?
Through our simultaneous close program, I oversee the entire origination: right borrower, proper structure, professional servicing from day one, clean documentation. Lower risk = better pricing. I also build long-term relationships with repeat investors, creating efficiencies that benefit both sides.
The Real Comparison
The Bottom Line
Your land note's value is determined by six factors: down payment, credit score, professional servicing, documentation type, interest rate and term, and property quality. Get these right from day one and we pay 80 to 90% of balance. Get them wrong and other buyers offer 50–60%, or nobody buys it.
The difference on a typical $75,000 deal with a $60,000 note: $12,000–24,000.
Key Takeaways
- Selling at closing: 80–90% of balance, 84–92% of the sale price with 20% down
- We pay the same 80–90% on seasoned notes set up right; other buyers offer 50–70% on notes with problems
- Professional servicing pays for itself about 10 times over
- We don't buy land contracts; use a note with a deed of trust or mortgage
- Down payment is the #1 factor (20% minimum, 25%+ preferred)
- Plan your exit strategy BEFORE you originate
Frequently Asked Questions
What determines the value of a land note?
Six factors: down payment, credit score, professional servicing, documentation type, interest rate and term, and property quality, including ITV and state.
How much does Damen Capital pay for a land note?
We pay 80 to 90% of balance. Selling at closing with 20% down puts 84-92% of the sale price in your pocket.
Does professional loan servicing raise my note's price?
Yes. Professional servicing costs $15-30 per month and can move your price from the bottom of our range to the top. You can structure it so the borrower pays the fee.
Do you buy land contracts?
No. We buy promissory notes only and pass on land contracts. Use a promissory note with a deed of trust in non-judicial states, or a mortgage in judicial states.
What interest rate and term get the best note price?
The sweet spot is 9-12% interest and a 5-10 year term. Rates that are too low or terms that are long land at the bottom of our range.
Related Reading
- Note hypothecation vs selling your note: which pays more? →
- Collateral assignment of note and mortgage explained →
- Course Module 12: Three Seller Financing Mistakes That Cut Your Land Note Value →
- Course Module 5: How to Structure a Seller Financed Land Deal →
- Course Module 7: which vacant land qualifies for seller financing →
- Course Module 10: what happens when a land buyer stops paying →
- How to sell land with owner financing and cash out the note →