Note Buyer
An individual or company that purchases mortgage notes and other privately held debt instruments for cash, becoming the new holder entitled to the payments.
A note buyer is the party that purchases a mortgage note from the current holder, paying a lump sum of cash today in exchange for the right to collect the remaining payments. When you sell an owner-financed note, the note buyer is who you are dealing with — they become the new payee and step into your shoes as the holder of the promissory note and its security instrument.
What a note buyer actually does
A note buyer evaluates a note's risk and cash flow, makes an offer at a discount to the unpaid principal balance, completes due diligence, and closes the purchase through a title or escrow company. After closing, the borrower's payments are redirected to the buyer (usually through a licensed note servicer), and the assignment of mortgage is recorded to document the transfer of ownership.
There are two broad types of note buyer:
- Principal buyers purchase notes with their own capital for their portfolio. Mortgage Note Capital is a principal buyer — we use our own funds, so there is no middleman markup between you and the source of cash.
- Note brokers do not buy with their own money; they shop your note to a network of funding sources and earn a fee on the transaction. (See note broker.)
How a note buyer decides what to pay
The offer reflects the note buyer's required yield — the annual return they need to compensate for time, risk, and the cost of money, typically in the 8%–12% range for performing residential paper. The buyer weighs the interest rate, remaining term, payment history (seasoning), the investment-to-value ratio, the borrower's profile, and the foreclosure speed in the note's state. A clean first-lien note on free-and-clear property with strong seasoning earns the highest offer; a junior lien, a non-performing note, or a note with title problems is priced more conservatively.
Why work directly with a buyer
Selling directly to the principal buyer usually means a cleaner process and a better net price, because you are not paying a broker's spread. A reputable note buyer will give you a free written quote, explain exactly how the number was derived, and let you choose between selling the whole note or just a partial. The most important questions to ask any note buyer are whether they buy with their own funds, who their references are, and whether the quoted price is firm subject to standard due diligence.