What goes into an FMV report for a promissory note
A walk-through of the components that make a promissory-note valuation defensible — from note terms to borrower performance and collateral position.
A defensible fair market value report for a promissory note starts with the note itself: principal, rate, amortization, maturity, and any modifications. Without a clean view of the terms, every downstream calculation is suspect.
Borrower performance is the next layer. A current payment history — including any forbearance, late charges, or partial payments — establishes whether the contractual cash flows are being realized in practice.
Collateral and security position matter when the note is secured. The valuation should reflect lien priority, current collateral value, and the realistic recovery path if the borrower defaults.
Finally, the report ties together approach, assumptions, and sources. A discounted cash flow under a risk-adjusted discount rate is the workhorse; for non-performing notes, scenario weighting across cure, modification, and recovery outcomes is typically appropriate.