Prior to purchasing a seller financed note, the investor might ask for a payer estoppel. This simple one page letter or document is sent to the person making payments on the note, mortgage, deed of trust, or real estate contract.
The estoppel explains the investor is contemplating the purchase of the note, reassuring the payer that all terms and conditions will remain the same. It then summarizes the information on the note including current balance, interest rate, terms of repayment, and contact information for the payer.
In addition to confirming information, it also provides the payer an opportunity to validate or dispute the details provided by the seller. This can be particularly important when there is no third party outside servicing company collecting payments and keeping track of the balance.
The estoppel, also known as the vendee verification, is usually sent to the payer by certified mail or some other method of delivery confirmation. Most investors mail once the title and property value have been reviewed and the transaction is near closing. It might also be performed with a payer interview or verbal debt verification.