Note brokering can be a rewarding and lucrative business. It involves finding buyers and sellers for mortgage notes and negotiating transactions to ensure success for both parties. It also involves structuring deals and closing transactions as well as managing post-closing responsibilities.
Seminar hucksters tout this as an easy way to make money while working from home. But it’s not nearly as simple as they make it sound.
Identifying Potential Clients
Identifying potential clients is one of the most difficult things for new note brokers to do. Some of the more common ways new note brokers find notes are through local community and regional banks, credit unions or other lending institutions.
Another way note brokers often find their clients is through on-line exchanges for commercial paper. The problem is that these on-line exchanges are almost always just marketing devices used by brokers to get their names out there.
To be successful, professional note brokers need to understand the markets they serve, be able to locate buyers and sellers, structure deals, close transactions, and manage post-closing responsibilities. They also need to have the requisite education, which may include taking college-level finance courses. Lastly, it’s important to stay up to date on industry trends and regulations. This will help ensure that the note broker can properly assess the value of a note and ensure that all required documentation is in place for closing.
Developing a Marketing Strategy
Note brokering involves helping others buy or sell commercial paper, i.e., real estate-secured deeds of trust and mortgages. A note broker typically charges a finder’s fee, a percentage of the loan amount or a flat fee for arranging the transaction between the buyer and seller.
Many seminar hucksters claim that one can make lots of money in this business while working from home or even in their pajamas while they watch the kids. The truth is that it takes hard work and you need to be available all day every day communicating with lenders, investors, attorneys, title companies, appraisers, bankers and others.
In addition to developing a marketing strategy, professional note brokers must also stay abreast of the latest industry trends and regulations. In some cases, this may involve seeking out buyers and sellers of notes in specific markets to help facilitate transactions. Another effective marketing strategy is utilizing online platforms that connect investors with note sellers.
Identifying Potential Deals
Professional note brokers often find deals by connecting with private investors who are interested in investing in notes. This can be done by utilizing online platforms or networking events. Regardless of how they identify potential clients, note brokers should be committed to building relationships that can lead to future transactions.
Another important aspect of note brokering is ensuring compliance with regulatory requirements and handling documentation related to transactions that involve notes. This can include obtaining and reviewing transfer documents, loan applications and appraisals. It is also important for note brokers to keep up with industry trends and regulations that could impact their business.
One thing that many novice note brokers fall for is so-called on-line exchanges that promise to connect them with investors who are looking to purchase their notes. The truth is that these sites are usually nothing more than marketing devices designed to lure unsuspecting new brokers into their expensive programs. Some of these seminar hucksters even compare the cost of their program to what it would take to open a McDonald’s franchise.
Managing Post Closing Responsibilities
Professional note brokers must be able to handle all documentation related to transactions that involve notes. This includes contract agreements between buyers and sellers as well as loan applications, appraisals and more. In addition, they must be able to ensure that all transactions are compliant with local and federal regulations.
They must also be able to help the note holder through each step of the process from initial acceptance and negotiation through closing and funding. This includes educating them on the current market and providing honest and straightforward feedback about the value of their note. In addition, they should be able to locate note investors that are willing to pay them a fair price for their note and will not charge them any up front fees.
One thing that most seminar hucksters overlook is the fact that in order to make a living as a note broker, you need to be available during the day to work with title companies, appraisers, attorneys, investors and bankers. It takes hard work and dedication to be successful in the world of note brokering.