A note broker takes a note holder’s note to buyers, collects their offers and manages the sale through to funding. The purchase money belongs to the buyer. The broker’s part is getting the note priced properly and sold cleanly.
Put that way it sounds like a small role. It covers a large share of the work in a note sale all the same, because a holder has no easy way to reach buyers and a buyer has little time to teach each holder how pricing works. What follows is the job in the order it happens.
Learning the note
The first conversation is a fact-find. A broker needs the numbers that define the note: the original amount, the interest rate, the monthly payment, the date of the first payment, how many payments are left and what is still owed. Around those sit the facts a buyer will weigh, such as what the property is and roughly what it is worth, how much the payer put down, whether payments have arrived on time, and whether anything else is owed against the property.
A careful broker also asks why the holder wants to sell and how much cash they need, because the answer changes what should be priced. Someone who needs a fixed sum may do better selling some of the payments and keeping the rest.
Documents come next. At a minimum that means the note itself, the recorded mortgage or deed of trust, the closing statement from the original sale and whatever record exists of the payments received.
Finding the problems before a buyer does
A buyer checks the file before funding, and anything found at that point can lower the offer or end the deal. Much of a broker’s value lies in finding the same things at the start, while there is still time to fix them or price them in. The ones that turn up in files include:
- A lien that was never recorded, or was recorded with an error in the legal description.
- A payment record that lives in the holder’s memory and nowhere else.
- Property taxes or insurance the payer has let slip.
- An older loan on the property that was supposed to be paid off and was not.
- A note held in the name of someone who has died, or of a trust or company with nobody clearly authorized to sign.
- A lost original note.
A note with one of these problems can still be sold, though each changes which buyers will look at it and what they will pay. Raised at the start, a problem is priced once and the offer survives the buyer’s checks. Kept quiet, it produces a strong first number followed by a lower one.
If you would like that first look taken at your own note, send us the note details and we will tell you what we see in the file and what a buyer is likely to ask about.
Putting the note in front of buyers
A buyer sorting through submissions has to decide quickly whether a note fits what they buy, and then price it without guessing. So the broker packages the note for buyers: a one-page summary of the terms, the property, the payer’s record and the known issues, with the documents attached. Gaps cost money here, since a buyer who has to assume something assumes the worse case and prices for it.
Then comes the part a holder cannot easily do alone. Buyers specialize. One wants first liens on houses in a few states, another buys land notes, and a third will take a payer with weak credit if there is plenty of equity in the property. A broker who knows who wants what sends the note to the buyers likely to pay most for it, and to more than one of them wherever more than one buys that kind of note.
What comes back may differ in structure as well as in price. A full sale turns the whole note into cash at a price below the balance owed. A partial sells only a set number of payments for a smaller sum, and the remaining payments return to the holder afterwards. A partial needs a payer with a steady record and enough payments left to divide, so some notes will not have one on the table. Where there is one, the holder should see it beside the full-sale price, as in partial vs full note sale: the numbers side by side.
Explaining what came back
An offer is a number with conditions attached. The broker lays the offers out so they can be compared: the price, the yield the buyer priced to, what the price assumes about the property and the payer, who pays which closing costs, and what could still change it.
The broker’s own pay belongs in that comparison too. On our offers it sits on the pricing worksheet next to the balance, the yield and the discount. Elsewhere it may be a fee from the buyer or a spread between two prices, and how a broker is paid decides how much of it you are shown without asking.
After that the decision is the holder’s, and a broker who presses for a signature is serving the fee ahead of the client.
Carrying the file to closing
Once the holder accepts an offer, the buyer begins due diligence, meaning the checks made before funding. They confirm the title, value the property, verify the payment history and may contact the payer to confirm the balance. The broker keeps the pieces moving by chasing documents, answering the buyer’s questions and telling the holder what each request means.
If something turns up that changes the price, the broker should explain exactly what was found and why it matters, and check whether another buyer would see it differently. The closing itself is commonly run by a title or escrow company, which handles the signed transfer documents and the money.
Where the job stops
| A broker does | A broker does not |
|---|---|
| Collect and organize the facts about a note | Decide what the note is worth. Buyers do that with their own money |
| Take the note to buyers | Fund the purchase, unless they also buy for their own account |
| Explain how an offer was reached | Give legal or tax advice |
| Manage the file to closing | Change the payer’s terms |
| Tell the holder what they earn | Collect a fee before a sale closes, in a fair arrangement |
Some firms do both jobs. We buy some notes ourselves and broker the rest to other buyers, and when a firm works that way you are entitled to know which is happening on your note.
Signs of a careful broker
- They ask for documents before they quote, or they say clearly that the quote is an estimate until they have seen them.
- They can explain the discount using your own numbers.
- They can tell you which buyers saw the note and what each one said.
- They tell you what they earn without being pressed.
- They raise the option of selling part of the note, or of keeping it.
- They do not ask you to sign anything that stops you talking to other people before you have seen a price.
What to have ready before the first call
If you hold a note, you can shorten the first stage yourself. Find the note, the recorded mortgage or deed of trust, the closing statement and whatever shows the payments you have received, then write down the balance with today’s date beside it. A broker who starts with those can move straight to looking for problems.
Read the documents as you gather them. If a word in the note or the closing statement stops you, look it up in the note basics guide before the call, so that the first conversation can be about your note and not about vocabulary.
Related questions
Does a note broker buy my note?
Not as a broker. A broker arranges the sale and a buyer pays for the note. Some firms, including ours, buy some notes and broker others, and you are entitled to ask which is happening on yours.
How many buyers should a broker show my note to?
As many as buy notes like yours, which may be several or only a few. No fixed number applies. Ask the broker who saw it and what each one said.
Can I talk to buyers myself while a broker is working on my note?
That depends on what you have signed. Read any agreement for an exclusivity clause before you sign it. If the same buyer receives your note from two directions it can cause confusion, so tell your broker who you have already approached.