If you bought a piece of property that you have a note on it and you sell that property to someone else, can you take a note on it from them?

Question

If you bought a piece of property that you have a note on it and you sell that property to someone else, can you take a note on it from them?

Answer

Well, I'm going to start out by saying that the answer seems to be "yes," but I need to add to that to make sure I understood the question correctly, and to make my "yes" answer more specific.

First, I assume that you bought a piece of real property and financed part (or all?) of the purchase price by giving the seller a promissory note secured by a deed of trust. This is the usual way of financing real estate purchases in California, by the way. Next, I assume you are re-selling the aforesaid piece of real property to someone else. When you do that, there's no reason why you cannot accept the new buyer's note and deed of trust as part or full payment. HOWEVER, when you sell the real property to the new buyer and therefore are parting with ownership of it, you will probably have to pay off the remaining balance you owe on the promissory note you gave to the original seller. That's because the note almost certainly has a "due on sale" clause in it. Some seller/lenders will waive the "due on sale" clause; I advise you to read your note carefully, understand its terms, and if necessary, try to negotiate to get the clause waived.