A mortgage broker helps a borrower get a new loan from a lender. A real estate agent helps someone buy or sell a property. A note broker helps the holder of an existing private note sell it to an investor. All three work around real estate debt, but at different points in its life, under different rules and for different clients.
The names get mixed up because the three can appear in the same story. One house can involve all of them: an agent lists it, the seller agrees to finance part of the price, and years later a mortgage broker helps the buyer refinance or a note broker helps the seller cash out the note. Knowing which one does what tells you who to call.
Side by side
| Real estate agent | Mortgage broker | Note broker | |
|---|---|---|---|
| What they arrange | The sale or purchase of a property | A new loan from a lender to a borrower | The sale of an existing note from its holder to a buyer |
| Usual client | Home buyer or seller | Borrower | Note holder, sometimes the note buyer |
| What changes hands | The property | Loan money, against a new lien | The right to collect an existing loan |
| How they are usually paid | A commission on the sale price | A fee or compensation from the borrower or the lender | A fee or spread at closing |
| Main licensing | State real estate license | State loan originator license, registered through NMLS | No single license. It depends on the state and what the broker does |
The real estate agent
An agent represents a buyer or a seller in the sale of a property. They price it, market it, negotiate and carry the contract to closing. Every state licenses agents and brokers through its real estate commission or a similar agency.
An agent can be the person who suggests seller financing to get a sale done, and may help negotiate the price, down payment and rate. Their job ends at closing. Writing the loan itself can be a separate regulated activity, and in a sale of a home the buyer will live in, federal and state rules on who may originate the loan can apply, as our overview of seller financing rules sets out. An agent’s license does not by itself cover that.
The mortgage broker
A mortgage broker takes a borrower’s application and shops it to lenders, then helps the loan close. Mortgage brokers are loan originators under federal law. The SAFE Act requires them to be licensed by their state and registered in the Nationwide Multistate Licensing System, known as NMLS, and Regulation Z sets rules on how loan originators may be paid. Lending new money yourself is a different business again, compared with note buying in notes vs hard money lending.
The mortgage broker’s client is the person borrowing money. They do not buy or sell existing loans for the people who hold them. Where a mortgage broker meets a private note is at the end of its life. When the borrower on a seller-financed note refinances with a bank, often arranged through a mortgage broker, the new loan pays the note off in full and the holder releases the lien. That last step is set out in what to do when a note is paid off.
The note broker
A note broker works for the holder of a note that already exists, such as a seller who carried financing, an heir or an investor. The broker gathers the note, the security instrument and the payment history, presents the note to buyers and brings back offers. Ownership passes straight from the holder to the buyer. The note broker definition page goes into the role in more detail. To learn the work in more depth, see our Note Brokering and Investing Academy.
There is no national note broker license. Whether a license is needed depends on the state, on what secures the note and on what the broker does and how they are paid. Some states treat arranging the sale of a real estate note as an activity that calls for a real estate or mortgage license. Read whether you need a license to broker notes and talk to an attorney in your state before you take a fee.
Some firms broker notes and also buy them. A note buyer funds with its own money, while a broker places the note with someone else. The difference matters when you rely on a quote, and it is laid out in a note buyer and a note broker.
Same house, three moments
Illustrative example. Round numbers, not a quote or a forecast.
A seller lists a house for $300,000 with a real estate agent. The buyer has $60,000 down but cannot get a bank loan yet, so the seller carries a $240,000 note. The agent is paid a commission on the sale at closing.
Five years later the balance is about $220,000. Two different things can now happen.
- The buyer’s credit has recovered and a mortgage broker finds them a bank loan. The bank pays the seller the full $220,000 payoff, and the seller’s note is gone. The mortgage broker’s pay comes from the borrower’s side of that loan, not from the seller.
- The buyer keeps paying, but the seller wants cash now. A note broker takes the note to buyers. If the note rate is below the return buyers need, offers come in under the balance, perhaps around $195,000 in this example, and the seller can choose to sell all of it, sell part of the payments or keep it.
The holder controls the second path but not the first. A refinance pays more, since it pays the full balance, but only the borrower can start one, and only if they qualify. A note sale can happen whenever the holder wants, at a discount.
How each one is paid
Agents usually earn a commission set as a share of the sale price, agreed in the listing or buyer agreement. Mortgage brokers are paid by the borrower, by the lender, or both within the limits of the loan originator compensation rules, and the amounts appear on the loan disclosures. Note brokers are paid either a set fee by the buyer or the spread between what the buyer pays and what the seller receives. Both arrangements are described in how note brokers are paid.
Whoever you deal with, ask how they are paid, by whom, and whether the number you are quoted is what you will receive.
Which one do you need?
If you are buying or selling a property, you want an agent. If you or your borrower need a new loan, you want a mortgage broker or a lender. If you already hold a note and want to know what it is worth or turn it into cash, you want a note broker or a note buyer. We broker notes and buy some ourselves. You can ask for a free quote on your note, and keeping it afterwards is a perfectly good outcome. Our fee is paid on the buyer side and built into the offer, so the price you see is the net amount you would receive.
Related questions
Is a note broker the same as a mortgage broker?
No. A mortgage broker helps a borrower get a new loan from a lender. A note broker helps the holder of an existing note sell it to a buyer. The mortgage broker's client is the borrower, and the note broker's client is the note holder.
Does a note broker need a mortgage license?
There is no single answer. It depends on the state, what secures the note, what the broker does and how they are paid. Some states require a real estate or mortgage license for some note activity. Check your state's rules and talk to an attorney.
Can my real estate agent sell my note?
An agent's license covers selling property, and an agent may help set up seller financing. Selling an existing note is a different transaction. Some agents also broker notes, so ask what they do and how they are paid.
Is a refinance better than selling my note?
A refinance pays the full balance, but only your borrower can start one and only if they qualify. Selling the note is your choice and can happen at any time, at a price below the balance.