Brokering real estate notes means finding people who hold a loan secured by property, preparing that note so investors can price it, and putting it in front of buyers who want it. Most of the work happens before any buyer sees the file: screening which notes are worth shopping and which will waste everyone’s time.
This post is written for brokers and people learning the trade. If you hold a note and want to know what buyers look for, read our seller’s guide to real estate notes.
What a real estate note is, from the broker’s chair
A real estate note is a promise to repay a loan, backed by a lien on property. The lien is created by a mortgage, a deed of trust, or in some states a land contract. If the payer stops paying, the holder can eventually take the property back.
For a broker, every real estate note boils down to two questions a buyer will ask:
- How likely is it that the payments keep coming?
- If they stop, what can the holder recover from the property?
Everything you collect from the seller should help answer one of those two questions.
The notes buyers bid on, and the ones they pass on
Buyers vary, but most have a clear picture of the notes they like. Knowing it lets you screen in the first call instead of after a week of chasing documents.
| Feature | Easier to place | Harder to place |
|---|---|---|
| Lien position | First lien | Second lien behind a bank loan |
| Payment history | 12 months or more, on time | New note, or recent late payments |
| Down payment | 10% to 20% or more | Little or nothing down |
| Property | Single-family home, owner lives there | Raw land, mobile home without land, unusual buildings |
| Paperwork | Recorded, signed originals, closing statement | Unrecorded lien, missing original note |
A note in the right-hand column is not unsellable. It will draw fewer buyers and a higher yield, which means a bigger discount for the seller. Say so on the first call.
The intake: what to collect first
A good intake gets you to a rough price range in one conversation. Ask for:
- Original loan amount, interest rate, monthly payment and start date
- Current balance and number of payments left
- Any balloon payment and when it is due
- Sale price of the property and the down payment
- Property type, address and current condition
- How payments are made and whether a servicer is involved
- Whether there is any loan ahead of this one on the property
Then ask for copies of the note, the recorded mortgage or deed of trust, the closing statement and a payment record. Our guide on packaging a note for buyers covers the full file.
A worked example: two notes, two outcomes
Here is a typical example, with illustrative numbers. Say two holders call in the same week, each with a note balance of about $60,000.
| Note A | Note B | |
|---|---|---|
| Property | 3-bed house, payer lives in it | 5 acres of rural land |
| Estimated property value | $120,000 | $70,000 |
| Down payment | $25,000 | $3,000 |
| Payments made | 30, all on time | 4, one late |
| Rough investment-to-value | about 45% to 50% | about 70% to 75% |
Investment-to-value (ITV) is the price a buyer pays divided by the value of the property. A low ITV means the buyer has a big cushion if they ever have to take the property back. On Note A, even a modest purchase price leaves the buyer well covered. On Note B, the buyer would have little cushion, the payer has little to lose by walking away, and land can be slow to resell.
Note A will draw several bids at a moderate yield. Note B may draw one or two, at a noticeably higher yield, and some buyers will ask for more payment history first. A broker who sees this on the first call can set the right expectation with both holders. For more on ITV, read equity and investment-to-value explained.
Where real estate notes come from
Most notes a broker sees come from owner financing: a seller carried back part of the price when they sold a home or land. Others come from estates, where heirs inherit a note they did not create, and from small investors who sold properties on terms. Each group finds you differently. Our page on how note brokers find note holders covers the main channels, including public records and referral relationships with attorneys and title companies.
Working with buyers
You need more than one buyer. Different buyers have different appetites: some want first-lien houses only, some take land, some do partials, some like non-performing paper. A note one buyer passes on may fit another’s box exactly.
Keep a short profile for each buyer you work with: what they buy, what they avoid, how fast they close, and whether their first quote tends to hold. When a broker has a note that does not fit their own network, co-brokering with another broker is a common way to place it, as long as fees are clear and disclosed.
Protecting the seller’s quote
The most common complaint about note buyers is a strong first quote that drops just before closing. In most cases the drop comes from something the buyer found in due diligence: a lower property value, a late payment that was not mentioned, or a document problem.
The broker’s best defense is to find those things first. If you verify the payment history and get a sense of the property value before shopping the note, the quotes you collect are built on the same facts the buyer will check later. They are more likely to hold.
Bottom line
Brokering real estate notes is mostly screening and preparation. Know which notes buyers want, collect the terms, history, property facts and paperwork early, and tell sellers honestly where their note sits. Then put the file in front of more than one buyer. That is how a seller ends up with a fair number and a quote that holds to closing.
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