A note buyer pays for your note with their own money and owns it afterwards. A note broker takes your note to buyers, collects their offers and is paid a fee when the sale closes, without ever owning it. Some firms, ours among them, do both, so ask which role applies on your deal.
The two roles in plain terms
A note buyer, sometimes called a note investor or a funder, is the party whose money ends up in your account. They decide the price, carry out the checks and take over the right to collect the payments, and their profit comes from the payments they receive over time.
A note broker is an intermediary who gathers your note details, presents them to one or more buyers and brings back what those buyers will pay. Ownership of the note passes straight from you to the buyer, and the broker’s income is a fee paid at closing.
| Note buyer | Note broker | |
|---|---|---|
| Whose money funds the purchase | Their own or their investors’ | The end buyer’s |
| Who owns the note afterwards | The buyer | The buyer the broker found |
| How they are paid | From the payments collected on the note | A fee or spread, paid at closing |
| Number of prices you see | One, theirs | Can be several, if the broker shops the note |
| Who makes the final decision to fund | The buyer | The end buyer |
What you get from each
Dealing with a direct buyer means one conversation, held with the party making the decision and with nobody in the middle. The limit is that you hear a single price, set by one company’s appetite and required return. Buyers differ in what they want: one may dislike land, another may avoid short payment histories. A note that does not suit the buyer you happened to call will draw a low offer or none.
A broker’s value is reach. One who knows which buyers want which notes can put yours in front of those likely to pay most for it and bring back offers you can compare. Against that, the broker’s fee comes out of the deal, and a broker with access to only one buyer adds a cost without adding a choice.
How a broker’s fee fits into your price
There are two common arrangements. In one, the buyer pays the broker a set fee on top of the price. In the other, the broker keeps the spread between what the buyer pays and what you receive. Either way the money comes out of the same transaction, so the question for you is whether the broker’s reach adds more to your price than the fee takes away. Comparing offers can do that, and you can only judge it if you know what the fee is, which makes a broker’s willingness to state it a fair test of the number in front of you. Our page on how a note broker earns a fee goes through both arrangements.
Why the label does not settle it
A website that says “we buy notes” may belong to a broker, and a buyer may broker the notes that fall outside what they hold themselves. The difference shows up in how far you can rely on a quote: from a broker it is an estimate of what a buyer might pay, and from a buyer it comes from the party who will fund.
Our own position is the mixed one: we buy some notes ourselves and broker the rest. When you ask us for a price, the offer states which of the two it is, and the worksheet that comes with it shows what we earn.
What to ask before you rely on a quote
- Will you fund this purchase yourself, or will you place it with another buyer?
- If another buyer is funding, how many have seen my note?
- What do you earn on this deal, and where does that show in the numbers?
- Whose name will be on the purchase agreement and the assignment?
- Can I see how the price was calculated?
Put these to anyone who quotes on your note, us included, and draw on the longer list of questions to ask a note buyer if the answers are thin. Where an answer uses a word you do not know, such as spread, assignment or funder, the note basics hub defines it, and the person quoting should be able to say it plainly as well.
The first question can turn up a third party. The money may come from an investor standing behind the buyer you are dealing with, a separate role drawn out in note broker, note buyer and note investor: the differences.
Write the answers down beside each quote. Two quotes that look independent can turn out to be the same buyer reached through two brokers, and that changes the count when you are deciding how many offers to get on your note.
Related questions
Is it better to sell to a buyer or through a broker?
It depends on the note and the broker. A direct buyer gives you one price with nobody in the middle. A broker who shops the note can bring several prices, less a fee. Compare what you would receive, not the labels.
Do I pay a note broker directly?
Under the common arrangements the fee is paid at closing out of the transaction, either by the buyer or as the difference between the buyer's price and yours. Ask to see it in writing before you agree to anything.
Can a company be both a buyer and a broker?
Yes. A firm can buy the notes that fit its own criteria and broker the rest. Ask which role applies on your deal and whose name will be on the purchase agreement.