My partner and I are selling our landscaping business after 18 years. The buyer is putting 30% down and we're carrying a promissory note for the rest. Our attorney mentioned something about 'executing the note' on closing day but I didn't fully follow. I'm looking for practical details from anyone who's had a seller note on the closing table. What actually happens? Does someone sign it at the table? Notarized? What if they don't sign right then? Any real-world experience would help.
seller financing
How promissory notes get executed on closing day for seller loans
A promissory note is typically signed at closing, along with the loan agreement and maybe a security agreement if it's secured. The note itself is usually just a signed document document. Notarization isnt always required, but some states or title companies want it. The key is that the note has to be fully executed—meaning all parties sign—before you hand over the keys.
I've done two seller carrybacks in my career. Both times the buyer signed the note at the closing table in front of the title officer. Lenders often require a notarized note, even if it's not strictly required by law. My advice: insist on notarization. It avoids any dispute later.
OP, what did your attorney say about recording? A promissory note itself isn't usually recorded, but if there's a deed of trust or mortgage securing the loan, that gets recorded. Some people worry about the buyer denying they signed, but a properly executed note with a witness or notary helps.
Muddytrails, just make sure you don't leave the closing without a signed note in your hand. I've heard of deals where the note was supposed to be signed later and then the buyer stalled for weeks. Get it done at closing or don't close.
The note should be signed by both the buyer as borrower and you as lender. If it's an LLC buyer, make sure the person signing has the authority to sign, like an operating agreement or a resolution. That's where a lot of seller notes get shaky. We had one where the buyer's manager signed personally but the LLC was the borrower—messy.
Can I ask if you're using an escrow or title company? They usually coordinate all the documents. The note is part of the closing package. On closing day, all docs are signed and notarized, money moves, then you get your funds and your note. Just make sure you review the note before closing, not at the table.
i'd also add: make sure the note has a clear payment schedule, due date, interest rate, and default terms. I've seen notes get signed with vague terms just to get the deal done, and then there's a dispute over when payments start. Also, consider a personal guarantee if the buyer's entity is new.
Honestly, I think notarization is overkill for some deals. But if you're dealing with a buyer you don't know well, it's cheap insurance. And yes, bring a witness if possible. Some title companies will provide one.
OP, have you considered wheether the note will be secured? A promissory note is just a promise to pay. If the buyer defaults, you might have to sue. A deed of trust would give you the right to foreclose and take back the business assets. That's a separate document but often signed at closing too. Don't overlook it.
All goood points. I'd just emphasize: get your attorney to review the note well before closing, and make sure the execution requirements are met. Each state has differentt rules for promissory notes. What works in one state might not be valid in another. And if the buyer signs electronically, check that it's allowed for a promissory note in your state.