A finder’s fee on a note is a payment made to someone for introducing a note holder who wants to sell to a buyer or broker who then completes the deal. The finder supplies the lead and leaves the pricing, the negotiating and the closing to others. The fee is paid only if the sale closes.
How it works in practice
Suppose an accountant has a client who holds a seller-financed note and wants cash. The accountant knows a note buyer and makes the introduction. The buyer talks to the client, prices the note, does the checks and closes, and afterward pays the accountant a fee for the referral.
The same thing happens between people in the note business. Someone who finds note holders but has no buyers, or does not want to work the deal, passes the lead to a firm that does and is paid if it closes. Referral fee is another name for the same payment, and the learning center uses the two interchangeably.
Finder’s fee compared with a broker’s fee
| Finder | Broker | |
|---|---|---|
| Role | Makes the introduction | Works the deal to closing |
| Talks price with the seller | No | Yes |
| Gathers documents, deals with the buyer’s checks | No | Yes |
| How pay is set | A flat sum or a share agreed with the buyer or broker | A spread or a set fee, the two ways a note broker earns a fee |
| When paid | Once the sale has closed, on the timing the agreement sets | Out of the closing |
What a person does in the deal decides which column they belong in, whatever they call themselves. A “finder” who starts quoting prices and collecting paperwork is acting as a broker. When a finder stays involved and shares the work and the fee with another broker, the arrangement is closer to co-brokering a note deal.
Who pays it, and where the money comes from
The finder is paid by whoever agreed to the fee, which means the buyer or the lead broker. The note holder writes no check, yet the fee still bears on the seller’s price. A buyer has a ceiling on what a note is worth to them, set by the return they need, and every cost of acquiring the note sits under that ceiling, the finder’s fee included. Money paid to a finder is money that is not available for the seller. A note holder who wants a figure with no finder in the chain can send the note details to us directly and set the two side by side.
How the amount is set
There is no standard figure, and we do not publish one. The amount is whatever the finder and the payer agree, expressed either as a flat sum per closed deal or as a share of the fee the buyer or broker earns.
What a finder’s agreement should cover
A verbal promise of a referral fee is hard to prove once a deal has closed and memories differ. If you are the finder, get it in writing before you hand over the lead, and see that the agreement says:
- What counts as a lead you referred, and how it is logged.
- The fee, or the formula for it.
- That it is paid only on a closed sale, and how soon after funding.
- How long your claim to the lead lasts if the deal closes later.
- What happens if the seller takes a partial, selling only some payments, and comes back later to sell more.
The legal caution
Being paid for a referral in a transaction tied to real estate or lending is regulated in some states. A state may require a license to receive that kind of payment, limit who can pay it, or require that it be disclosed. Professionals such as attorneys, accountants and real estate agents may also be bound by their own rules on referral fees. The answer differs by state and by the kind of note, as it does on whether you need a license to broker notes at all, so ask an attorney before you agree to pay or accept one.
If you are the note holder
Ask the person who brought you the offer whether they are being paid for it, and by whom. You are entitled to know, and an honest answer costs them nothing. Then ask the buyer for the price before and after that fee, so you can see what the introduction cost you. A referral fee does not make an offer a poor one, and it belongs on paper beside the other costs when you compare.
Related questions
Who pays the finder's fee on a note sale?
Whoever agreed to it, which means the buyer or the lead broker. The note holder writes no check, but the fee comes from the money available for the deal, so it bears on the seller's price.
Is a finder's fee the same as a referral fee?
In the note business the two terms are used for the same thing: payment for an introduction, without working the deal. A person who also negotiates and handles documents is acting as a broker.
Is it legal to accept a finder's fee on a note?
That depends on the state, the kind of note and who you are. Some states regulate referral payments in real estate and lending transactions, and some professions have their own rules. Ask an attorney before you agree to one.