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  • Randy Rodenhouse

How To Broker Notes For Fast Cash - Part 1

What is note brokering


Brokering notes refers to the practice of facilitating the buying and selling of promissory notes or other debt instruments between interested parties. A promissory note is a legal document that outlines a borrower's promise to repay a specific amount of money to a lender within a defined timeframe.


In the context of brokering notes, a broker acts as an intermediary, connecting buyers and sellers of these debt instruments. The broker's role involves identifying potential note holders looking to sell their promissory notes and matching them with investors or buyers who are interested in acquiring these notes.


Brokering notes typically involves conducting due diligence on the promissory notes being offered for sale, including assessing the creditworthiness of the borrower and evaluating the terms and conditions of the note. A good broker helps negotiate the terms of the transaction and facilitates the exchange of funds and legal documentation between the parties involved.


The buyers of the notes (investors) can diversify their portfolios and earn passive interest income through purchasing these debt instruments. Sellers of promissory notes, on the other hand, can access liquidity by selling their notes and avoid waiting for their money.


It's worth noting that brokering notes may be subject to regulatory requirements and licensing depending on the jurisdiction. Therefore, it is important for brokers to comply with applicable laws and regulations governing the buying and selling of securities and debt instruments.


General steps of note brokering

  1. Identifying note holders: You locate individuals or entities that hold mortgage notes and are interested in selling them. These note holders could be private individuals, banks, lending institutions, or other investors.

  2. Assessing the mortgage notes: You evaluate the mortgage notes to determine their value and attractiveness to potential buyers. This involves reviewing the terms of the note, the creditworthiness of the borrower, the property's value, and any other relevant factors that could impact its marketability.

  3. Finding buyers: Once you have identified mortgage notes for sale, you search for potential buyers or investors who are interested in purchasing them. These buyers could include individuals, real estate investors, hedge funds, banks or other financial institutions.

  4. Negotiating terms: As a broker, you help negotiate the terms of the transaction, including the purchase price, any potential discounts, and other contractual details. Your goal is to facilitate an agreement that is acceptable to both the note holder and the buyer.

  5. Facilitating the transaction: Once the terms are agreed upon, you assist with the necessary paperwork and documentation to complete the sale. This may involve drafting or reviewing contracts, coordinating with attorneys or title companies, and ensuring a smooth transfer of the mortgage note from the seller to the buyer.

  6. Receiving compensation: As a broker, you earn a fee or commission for your services. This fee is typically a percentage of the total transaction amount and is paid by either the note holder or the buyer, depending on the specific arrangement.

How to find notes to broker


Finding mortgage notes to broker involves various strategies and approaches. Here are some methods you can use to locate potential mortgage note holders.

  1. Networking within the real estate industry: Build connections with professionals in the real estate industry, such as real estate agents, mortgage brokers, loan officers, and real estate attorneys. They may come across individuals or institutions holding mortgage notes that are available for sale.

  2. Direct outreach to financial institutions: Contact local banks, credit unions, and lending institutions to inquire about any mortgage notes they may have on their books that they are willing to sell. Establish relationships with their asset managers or loan officers who handle distressed assets or non-performing loans.

  3. Online platforms and marketplaces: Explore online platforms and marketplaces specifically designed for buying and selling mortgage notes. These platforms connect note holders with potential buyers, and you can participate as a broker. Examples of such platforms include Paperstac and NotesDirect.

  4. Public records and court filings: Search public records, such as county courthouse records, to identify mortgage note holders who may be interested in selling their notes. For seller finance notes you want to look for notes that are owned by individuals or small LLCs and not major banking institutions like Wells Fargo or Bank of America. You could also look for foreclosure filings, lis pendens notices, notice of default or any other relevant records that indicate potential distressed note situations and reach out to the note owner.

  5. Advertising and marketing: Create a website or online presence that showcases your services as a mortgage note broker. Utilize search engine optimization (SEO) techniques to make it easier for potential note holders to find you. Consider running targeted online advertisements like Facebook Marketplace or placing ads in local real estate publications to attract interested parties. Direct marketing (i.e. postcards and letters) to the owner of the note is one of the best ways to find a note to broker.

  6. Attending industry events and conferences: Attend real estate conferences, seminars, and industry events where you can network with professionals and potential note holders. Engage in conversations, exchange business cards, and express your interest in brokering mortgage notes.

  7. Referrals and word-of-mouth: Let your network know that you specialize in brokering mortgage notes. Inform friends, family, and colleagues about your services, and ask for referrals. Talk to attorneys, CPAs, real estate agents, mortgage brokers and other professionals about what you do. Personal recommendations can be a valuable source of leads.

NEXT BLOG POST - PART 2 will discuss why people sell their note, how much can you make note brokering and who are some of the note buyers/brokers who you sell note to.


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