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Unsecured promissory notes still have value even if they aren't backed by assets. For example, they can be sold to a collection agency or to other investors for cash.

How a Seller Note Works. A seller note is a form of debt financing structured as an interest-bearing loan. In this case, the seller pays a portion of the purchase price as a promissory note, which is effectively a binding IOU.

Typically, there are two parties to a promissory note: The promisor, also called the note's maker or issuer, promises to repay the amount borrowed. The promisee or payee is the person who gave the loan.

A deed of trust is a document used in real estate transactions. It represents an agreement between the borrower and a lender to have the property held in trust by a neutral and independent third party until the loan is paid off.

When a loan changes hands, the promissory note is endorsed (signed over) to the new owner of the loan. In some cases, the note is endorsed in blank, which makes it a bearer instrument under Article 3 of the Uniform Commercial Code. So, any party that possesses the note has the legal authority to enforce it.

Contract termination: If you fall behind on payments, the contract can be terminated and you will lose whatever equity was previously built. Payment loss: if the seller has a mortgage and defaults on their payments, you may lose the property even though your own payments to the seller are current.

The deed must be signed by the grantor or grantors if the property is owned by more than one person. The deed must be legally delivered to the grantee or to someone acting on the grantee's behalf. The deed must be accepted by the grantee.