Note Broker, Direct Note Buyer or Online Marketplace: Which Should You Use?

A direct note buyer gives you one offer from its own money. An online note marketplace lets you list the note and handle the bids yourself. A note broker takes the note to several buyers and works the sale for you. The right choice depends on how many offers you want, how much of the work you want to do, and how you will compare what each one pays at closing.

None of the three is the honest one and the others crooked. Each is a different way of reaching the same group of people: investors and companies with money to put into private notes. What changes is who does the work, how many of those people see your note, and how the middleman is paid.

The three, in plain terms

Direct note buyer

A direct buyer purchases your note with its own money, or money it manages, and then collects the payments. It quotes, checks your documents and funds the purchase itself. The appeal is one point of contact. The limit is one opinion of your note. A buyer that already holds plenty of notes in your state, or does not like land, or only buys first liens on houses, will price your note around its own preferences.

Online note marketplace

A note marketplace is a website where holders list notes and registered buyers bid on them. It gives you reach: many buyers can see the listing. It also hands you the jobs a broker or buyer would otherwise do. You describe the note, upload the documents, answer buyers’ questions, judge which bidders can actually close, and negotiate the terms. Marketplaces usually charge a listing fee, a transaction fee or both, so read the fee terms before you post.

Note broker

A note broker gathers the facts of your note, presents it to buyers, brings back their offers and manages the sale through closing. A good broker earns its place by reaching more buyers than you would find alone and by keeping the file moving. Some brokers also buy notes themselves, which means they can act as either party depending on the note.

Side by side

Compare the cash you keep, not the headline

The only number that settles the question is the cash you receive at closing, after every charge, for the same set of payments. A high bid on a marketplace with fees and closing costs coming out of your side can net less than a lower-looking quote with nothing deducted. A quote that drops after due diligence, sometimes called a re-trade, is worth less than a slightly smaller one that holds.

Illustrative example. Round numbers, not a quote.

Take a note with $100,000 owed, 7% interest and 240 monthly payments of about $775 left.

• Direct buyer: offers $78,000. You pay nothing else, and the price is yours to accept or refuse.
• Marketplace: the best bid is $81,000. The listing and transaction charges and the closing costs you agreed to carry come to $1,800, so you net $79,200, after doing the listing and negotiating yourself.
• Broker: three buyers bid, and the best net price to you is $80,300. The broker’s fee is already inside that figure.

On these numbers the broker route nets the most, but with a different note or a different week the marketplace or the direct buyer could come out ahead. The method is what carries over: reduce every offer to the net cash for the same payments, then ask how firm each one is.

How each one gets paid

A direct buyer is paid by the note itself. It pays less than the balance and earns its return as the payments come in. A marketplace is paid by its listing and transaction charges. A broker is paid a fee, and brokers differ in how they present it.

Here is how ours works. Our fee is paid on the buyer side and is built into the offer price. You see one net price, the figure you would receive, and alongside it the balance used, the buyer’s yield and the discount. That lets you put our number straight next to any other offer, because you are comparing the cash you would keep with the cash you would keep.

When each one makes sense

A direct buyer

• You already have competing quotes and one buyer is clearly strongest.
• The note is a type that buyer specializes in.
• You value a single point of contact more than squeezing out the last dollar.

A marketplace

• You have sold notes before and can price one yourself.
• You are comfortable reading a buyer’s proof of funds and negotiating a purchase agreement.
• You have time to answer questions and manage the closing.

A broker

• This is the first, or only, note you have sold.
• You want several bids without running the process yourself.
• You want to see a partial purchase, selling only some of the payments, next to the full-sale offers.
• The note has a wrinkle, such as late payments, thin equity or missing paperwork, that some buyers avoid and others will price.

Questions to ask any of them

1. Who will fund the purchase, and how do I know they can?
2. How many buyers will see my note?
3. What is the net amount I receive at closing, and what costs, if any, come out of my side?
4. What could change the price between the offer and closing?
5. Is the sale with or without recourse to me if the payer stops paying later?
6. Can I sell part of the payments instead of the whole note?

The answers to the fourth question matter as much as the price. Every buyer checks the file before funding, and what a buyer checks before funding tells you where offers tend to move. A buyer or broker who tells you up front what would change the number is easier to plan around than one who does not.

Where Note Brokering fits

We work both ways. Some notes we buy with our own or partner capital, and the rest go to competing buyers. Either way you get a net price, the math behind it and, where the note suits one, a partial purchase beside the full sale. Our note purchases are without recourse to you: if the payer stops paying after the sale, you owe nothing, though you still stand behind the usual statements that the documents are genuine and the balance and payment history are as you described.

A quote costs nothing and commits you to nothing, and if the numbers show you are better off keeping the note, that is a fine outcome. For a broader view of how offers vary, see how many offers to get and how to compare offers on your note. For the general difference between the two roles, read note buyers and note brokers: who you are dealing with. When you are ready for a number, send us the note to price.

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