Who Pays Costs When Buying Notes?

Wondering how costs are handled when buying mortgage notes?  You are not alone!  Here is a question we recently received from a note broker:

If the note buyer wants the seller to pay the closing costs, does the note buyer back the closing costs out and then send me the offer or do I back the closing costs out myself along with my fee and then present the offer to the seller? If I back out the costs, where would I get the cost of the closing to do this?

Great question!

There are generally two types of offers when it comes to buying notes:

1)    Wholesale – a gross offer with the note broker or seller paying costs; or

2)    Retail – a net offer with the note buyer/investor paying costs.

If the note buyer quotes a transaction wholesale and wants you, as the note broker, to pay closing costs then you need to subtract both your fee and the estimated costs from the note buyer’s quote before making your offer to the seller.

You could also just deduct your fee and have the note seller pay the costs. However many sellers are reluctant to pay any costs upfront so it is a selling point if you can eliminate the risk to them.

The amount of closing costs will vary by the state, size of the deal, and type of property. These costs usually include Read more

Real Deal #145 – Iowa Real Estate Contract

Welcome to Real Deals! It’s always easier to learn from real life so here we share information from actual owner financed transactions. While a note and mortgage or deed of trust are the most common real estate financing documents, sometimes seller financing utilizes a Real Estate Contract. Read more

What is Due Diligence?

Before a note investor will pay cash to a seller for future payments, they perform what is called “due diligence”.  This is really just a fancy word for research.  You can simplify the process by being prepared for these common note investor requirements. Read more