Professional note brokers connect buyers and sellers of commercial paper. They can use online platforms to find investors or establish relationships with private individuals or institutions looking for deals involving notes.
Beware of cash flow course promoters who tout their graduates as “note buyers”; there is no such designation recognized by real note buyers.
Structuring Deals
Note brokers are intermediaries between a seller of commercial paper (such as accounts receivable) and investors who want to buy it. A note broker could, for example, help a small business owner like John raise cash quickly by selling his accounts receivable to investors who can provide a stable and profitable investment opportunity.
Obtaining leads on potential buyers or sellers of notes is a critical part of note brokering. Professionals in this business can source private investors, institutional sellers (such as banks), and use online platforms to connect with prospective clients.
However, it is important to keep in mind that many of these leads may not turn into deals. As a result, it’s important to set realistic goals and not over-expect your note brokering business. Many seminars and other online resources claim to have a list of note buyers you can contact. This list is often compiled of people who took a seminar and are not true note buyers.
Finding Buyers or Sellers
The primary benefit of becoming a professional note broker is the ability to earn profits through commissions on successful transactions between buyers and sellers of real estate notes or contracts-for-sale. Many professional note brokers also utilize networking events to build strong relationships with private investors and institutions that could lead to future transactions involving notes.
Several on-line note exchanges or networks claim they can help note brokers find investors to purchase their clients’ notes. In reality these web sites are often simply daisy chains of note brokers. A new note broker calls one of the investors on a list promoted by the on-line exchange, that investor then calls another on the list, and so on.
It is much better to work directly with a major note buyer that can take care of all aspects of a transaction including performing the credit check on the person paying on the note, arranging for an appraisal of the property securing the note, and ensuring the taxes and insurance are up to date. Often times these larger note buyers will even pay the referring note broker a finder’s fee at closing!
Closing Transactions
Professional note brokers work with buyers and sellers of notes to close transactions. This involves ensuring compliance with regulations and handling documentation related to transactions that involve notes. It also includes providing ongoing support to clients as needed.
It is a good idea for note brokers to maintain strong networking relationships with private investors and institutions in order to increase the chances of finding suitable buyers or sellers of notes. This may require attending seminars or other networking events in order to meet potential clients face-to-face. Note brokers should also be aware of unethical companies that advertise as note buyers but do not actually have the funds to buy a note at the advertised price.
The responsibilities of a professional note broker are complex but can be very lucrative for those with the right skills and knowledge of the market. These include identifying potential opportunities, finding buyers or sellers, structuring deals and closing transactions. Other important responsibilities include ensuring compliance with regulations and managing post-closing responsibilities.
Post-Closing Responsibilities
Note brokers can also provide ongoing support for their clients after a transaction is closed. They may assist buyers in navigating any issues that arise during the loan’s term or help sellers with finding financing options if they are struggling to meet their obligations under their current contract.
It is important to understand the real estate market for notes so you can assess potential deals based on risk and return. You also need to understand how different investment strategies should be structured when evaluating potential investments.
You should also consider obtaining a professional note broker license to ensure you’re following industry best practices. Finally, it’s essential to be proactive by identifying title issues early in the process and making timely disclosures when there are adverse facts that would affect a reasonable party’s decision to enter into a transaction. This will reduce the possibility of closing delays or even termination of the deal. In addition, it will keep you in good standing with your state’s licensing and regulatory body.
