A real note buyer has a legal name you can look up, closes through a neutral third party and pays you at the moment the note transfers. The warning signs run the other way: money asked for before closing, documents asked for before you are paid, and pressure to sign before you have checked anything.
A bad deal from a real company and fraud by someone who never means to pay are separate problems. A hard bargain is legal. A buyer may offer a low price, charge fees and write an agreement that favors them, and your protection is to read what you sign and to test a low offer against a second one. A scam sets out to take a fee, your documents or your personal details and return nothing. The protection against that is verification, which is the subject of this page and is easier once you know what an ordinary note sale looks like from first quote to funding.
Documents and money should move together
Your original note is the asset. Whoever holds it, properly signed over, is in a strong position to claim the payments, so the order in which things change hands matters more than any other detail of the sale.
When a note sale closes as it should, a neutral party holds your signed documents and the buyer’s money at the same time and releases each to the other together. That party is a title company, an escrow company or a closing attorney. Be very careful with a request to do any of the following before the funds are confirmed to be in that party’s hands:
- Mail the original note to the buyer directly.
- Sign an assignment, which is the recorded document that transfers your mortgage or deed of trust to a new holder.
- Sign an endorsement or an allonge, which is the signature that transfers the note itself.
- Tell your payer to start sending payments somewhere new.
Fees before closing
The pattern is an old one. You hear that the offer is approved and that an application fee, a processing fee, an appraisal deposit or an insurance payment is needed before the file can move. After you pay, another cost appears or the buyer stops answering.
Real note sales do carry fees and costs, such as title work, recording and sometimes a property valuation. These can be settled at closing and listed on a written statement, so if anyone asks you to send money ahead of that, ask what it is for, who receives it and why it cannot come out of the proceeds.
Early signs, before any offer
A letter or call from a stranger who knows about your note is no proof of fraud. Recorded mortgages and deeds of trust are public, and buyers search them. It does mean the sender chose you, so read it as an advertisement.
Ask for the full legal entity name and the state where it is registered. A website with a trade name, a web form and a mobile number gives you nobody to hold to anything. Be wary too of a firm price offered before a single question has been asked, since nobody can price a note without the balance, the rate, the payments left, the payer’s record and the property. Keep your Social Security number and bank details back until closing, when the closing agent needs them, because a quote requires neither.
The quote that shrinks
A buyer quotes a strong price, you stop talking to others, and shortly before closing the price is cut for a vague reason such as “underwriting”, “the market” or “our investor”. This is sometimes a tactic and sometimes an honest revision, which makes it hard to judge from where you sit.
Honest revisions come with a fact attached. A title search may turn up an unpaid lien, or the property may be valued lower than expected, and the buyer can show how that changed the math. Ask early what could change the price and get the answer in writing. Nobody can promise that a quote will never move, and a buyer who says theirs cannot is one to be wary of.
Deadlines and secrecy
A note worth a price today is worth about the same next week. Deadlines measured in hours, offers that lapse if you speak to anyone else, and requests to leave your attorney or your family out of it all serve the buyer, whereas a buyer confident in the number is comfortable with you checking it.
How to verify a buyer or a broker
| What to check | How to do it |
|---|---|
| The company exists | Search the legal name in the business register of the state it gave you. It should be in good standing and match the name on the paperwork. |
| Who funds the purchase | A direct buyer uses its own money and a broker arranges a sale to someone else. Either is acceptable, provided you know which you have and who the end buyer is before closing. |
| Who closes the sale | Find the title company’s or attorney’s phone number from a source other than the buyer, then call to confirm they hold your file. |
| What the agreement says | Read the price, what can change it, who pays which costs and how you can withdraw. Take unclear clauses to an attorney. |
| Where the wire goes | Give bank details only to the closing agent and confirm them by phone, because fake emails that change wire instructions at the last moment are a known fraud. |
| Licensing | Rules for buying and brokering notes differ by state and by type of loan. Ask the company which apply to it, and check with your state regulator or an attorney if the answer is unclear. |
The second row matters to your price as well as your safety, because a note buyer and a note broker are paid in different ways.
None of this takes long, and it applies to us as much as to anyone. If you send us your note details, ask for our legal entity name, ask who would fund the purchase and ask which closing agent would hold the documents, all before you sign anything. Have the longer list of questions to ask a note buyer beside you on that first call, whoever it is with.
If you have already sent something
Stop where you are: sign nothing further and send no more documents or money. If you have signed an assignment or mailed the original note, speak to an attorney promptly, because your options depend on your state and on what has been recorded. Your state attorney general’s office or consumer protection agency can tell you how to report suspected fraud. Keep every letter, email and payment receipt in the meantime, because whoever takes the report will ask for them.
Related questions
Should I pay a fee to get an offer on my note?
Be very cautious. A quote should cost you nothing. Real sale costs, such as title work and recording, are normally settled at closing and listed on a written statement. If someone asks for money before that, ask what it is for and why it cannot come out of the proceeds.
Is it safe to mail my original note to a buyer?
Not before the buyer's money is in place. The original note is the asset you are selling. In a sound closing, a neutral title company, escrow company or closing attorney holds your signed documents and the buyer's funds together, and releases each side at the same moment.
How did a note buyer get my name and address?
Mortgages and deeds of trust are recorded with the county, and those records are public. Buyers and brokers search them to find people who hold notes. A letter is not proof of anything good or bad about the sender, so verify the company before you reply with details.