In a note sale, the title company searches the public record to confirm who owns the property and which liens sit on it. It often also serves as the neutral closing agent, holding the documents and the money until buyer and seller have each done what they agreed.
Why a note sale involves a title search
No property changes hands when you sell a note. The buyer is paying for the right to collect the payments, together with the lien that secures them, a lien being a legal claim against a property that backs a debt. A lien that turns out weaker than described makes the note worth less.
Before funding, then, the buyer wants independent confirmation that your lien was recorded properly, that it ranks where you say it does among the claims on the property, and that nothing recorded since has damaged it.
What the search covers
- Ownership. Whether the payer still holds title to the property or has transferred it.
- Your recorded instrument. Whether the mortgage, deed of trust or land contract was recorded with the right names and legal description.
- Lien position. Whether your lien is first in line or behind another, which decides who is paid first if the property is sold after a default.
- Other claims. Unpaid property taxes, judgments, later mortgages, contractor liens and anything else recorded against the property or the payer.
- The chain of assignments. Where the note has been sold or inherited before, whether each transfer was documented and recorded.
The findings arrive as a written report, in vocabulary the note basics hub defines, and reports vary in depth. A buyer may order a limited search, sometimes called an ownership and encumbrance report, or may want a full title commitment with a lender’s title insurance policy or an endorsement to an existing one. That choice is the buyer’s, made on the size of the note and their own requirements.
Holding the money and the documents
A note sale can close through a title company, an escrow company or an attorney’s office, and local practice decides which. Whoever takes the role works through roughly these steps:
- Receives the buyer’s funds and holds them.
- Receives your signed documents, including the original note, the endorsement or allonge, and the assignment of mortgage or deed of trust.
- Checks that everything the purchase agreement requires has been delivered.
- Sends the assignment to the county for recording.
- Pays out your proceeds, less any costs the agreement puts on your side.
The arrangement means neither side has to trust the other with the money or the original documents. The closing agent acts on the written instructions both of you sign.
Where the title company’s job stops
Price is outside its role, so it will have no view on whether an offer is fair. The way to test an offer is to set a second one beside it, and you can send us the note for a price to compare. The payer’s credit and payment history belong to the buyer’s own review, and the value of the property is a matter for an appraiser or a real estate broker. Legal advice is also outside what a title company gives, which is why a seller with questions about the agreement needs their own attorney.
When the search finds a problem
Some findings can be fixed with a corrective document and a recording fee: an error in a name or legal description, or an old lien that was paid but never released. Other defects take longer to sort out.
A few findings change the deal. An unknown lien ahead of yours, or a transfer of the property you had not heard about, alters the risk, and the buyer may revise the offer or withdraw. Title is one of the legitimate reasons an offer can move between quote and closing, so if a price is cut at this stage, ask to see the title report and have the change explained against it.
Who pays for the title work
The purchase agreement decides. A buyer may order and pay for the search as part of their own review, but nothing requires that, so ask before you sign and look for the cost on the offer worksheet, alongside the other fees and costs that can come out of a note sale.
What to have ready before the search is ordered
The search is one stage in closing a note sale, and it goes more smoothly when it starts from the right papers. Find your recorded mortgage, deed of trust or land contract, along with any earlier assignments, and check that the names and the legal description match what you believe you hold.
Give the buyer copies of those documents at the start so the search is ordered against the correct property and the correct recorded instrument. A wrong name or a missing assignment that you spot yourself can be corrected before anyone is waiting on it.
Related questions
Do I need title insurance to sell my note?
Not always. Some buyers rely on a limited search and others want a title policy or an endorsement. The buyer sets the requirement, so ask what they will order and who pays for it.
Can a title problem stop a note sale?
It can delay one, and occasionally end it. Recording errors and unreleased old liens can usually be corrected. An unknown lien ahead of yours changes the buyer's risk and may change the offer.
Does the title company work for the buyer or for me?
Neither. As closing agent it follows the written instructions both sides agree to. It will not advise you on price or on your legal position.