Are Note Finders just another broker?

28 Replies

Short intro, My name is Jerome and I'm a young new Notefinder without much experience. However, I have alot of knowledge of the Cashflow business/industry and I have closed 4 deals in this business which I believe balances out my lack of experience.

Now, I have seen and been through alot of ads, telephone calls, and emails that calls for their note to be sold, but once I say who I'am and what I do. I get told that they do not work with brokers and our business ends there.
Here's what I say, and this is what I''am, to people wanting to liquidate or sell their notes.

" I'am not a broker, I'am a Private Party CashFlow Specialist who focuses on monthly payments secured by real estate.So I work with people like yourself who are receiving payments on a mortgage and match them up with investors interested in purchasing them."

Note Finders and Brokers do share a familiar job description, but the key things that separate those two descriptions are that a Note Finder/CashFlow Specialist represents only himself and not his buyers, working independently not acting as agents, consultants, or assisting the structuring notes of any kind to our note buyers. Our job is to only act as matchmaker between noteholder and note buyer.

However, most disregard that defining detail and classify us as a broker. My first question is why do people dislike working with brokers anyway? Are their fees just too high?

Secondly , Am I the only NoteFinder here? Are there other NoteFinders, brokers and others that understand this matter and can give a comment? I do need help progressing in my chosen career path of working with notes until I can actually start investing in notes and properties myself.

Hi Jerome, IMO, defining yourself as something else to avoid the mortgage borkerage requirements just does not fly. If you facilitate a note transaction and receive any compensation, you're a note broker! This sounds like something out of a note buying seminar. The only way I know of to be in the "cash flow business" is to use your own money to acquire a note and then sell it yourself. I don't think taking an option of a note will fly in some states due to the definition of a Mortgage Broker. Either you are dealing in mortgages or not. If it walks like a duck and quacks like a's a duck!

And, calling yourself something that is "off the wall" and not common in the industry probably does more harm to your cause. A "cash flow specialist" sounds like a technician that works for an asset management corporation, like specializing in the float of deposits and overnight transactions. Good luck, Bill

Well, I'm still new, and I hear what you are saying. I'll change my title to a Note Finder, which I looked up to be a more common industry title.

Now, here is where I disagree about your classification of my job. True, what I do is similar to that of a note broker, I handle notes between a note buyer and seller to receive compensation, but let me explain why this "straight arrow" definition doesn't really stand.
Many people are used to the connotation of “broker� (as one who represents another) as it applies to real estate broker, mortgage broker, insurance broker, or perhaps even stock broker. But those occupations all require training classes, licensing, and employment agreements with established institutions in order to get started.

Now, maybe it’s just because many don’t understand that the word “broker� has several common definitions. It would seem so; given that so many instinctively dive into the Note Finder position with the notion of “acting as an agent� for another, or “representing clients�. But why would they even think about doing so, without having gone through the complicated procedures of learning all about the art and science (and in many cases, legal requirements) of “representing others�… i.e. “acting as an agent for others?�) I don’t know, but as a note finder, I'am not bound by the same rules and regulations as agents or note brokers

The term “broker� has created a false impression on many sides of the table with new note finders, state regulators, and even in the courtroom. The law of agency doctrine puts another layer of legal obligations (i.e. “duty of care�) on those who act on behalf of another. This is particularly so if we are acting on behalf of another, for a fee. Such “third-party� ‘client’ representation attaches with it, various requirements for disclosure of material facts; indirectly limits the amount and type of compensation we receive; imposes minimum standards of trust and competence in both our due diligence and negotiating skills – and frequently, creates liability for any advice we might offer to the “client�. In many states, licensing issues even come into play, if you intend to represent clients, for a fee.

A finder is described as one who finds, interests, introduces, and brings parties together for a transaction – The principals themselves subsequently negotiate and consummate. In other words, a finder is a middleman who is not involved in the negotiating of any of the terms of the transaction between the buyer and the seller. Acting only as an introducing party allows me more latitude to act in our own best interests. Essentially, as a finder, we are passing along information that we gathered ourselves – this information, along with our access to buyers, is our stock in trade.

Now, legally speaking, Many states have upheld a finder’s exception to licensing requirements related to real estate, mortgages and loans, business opportunities, and even securities transactions – in states where such issues have gone to court. California in particular, has a well-settled history of supporting the finder exception to licensing laws in all of these professional areas!

California courts have consistently held that such an intermediary, or middleman, is protected by the finder’s exception to the real estate licensing laws, an exception first established by California’s Supreme Court in 1923, in Shaffer v. Beinhorn (190 Cal. 569, 573-574; 213 P. 960 [1923]). In that case, the Court held that a person who contracted to introduce a seller to a prospective buyer acted as a finder; and that one who simply finds and introduces two parties to a real estate transaction need not be licensed as a real estate broker; and in such cases, finders are entitled to be paid the finder fee agreed upon by the Parties to the Agreement.

That is a proven and legal way to start in the "cash flow business" without money of your own. I'm a living example of that, since I have closed 4 deals. It's a small accomplishment but it is a note worthy experience to go off from.

Hi, sorry you felt like you had to spend that much time with that. "hearing what I said" and understanding what I said seems to be two different things. I never said a "broker" had to "represent" anyone, I said if a party FACILITATES a note transaction they will need a license.

A court rulings is not law and laws have changed since 1923. I don't really know when "note brokers" (not finders of a real estate transaction) were introduced, but I can tell you today there are laws regualting the finding of a note and introducing that note to any party to consumate (do) a transaction. In 2010 that's called facilitating a transaction. If you put as much energy in passing a simple state/national exam, as you do justifying what some note guru told you, you could make some real money, legally! You can spin it all you like to the judge. Good luck and hope you get set up properly. Bill

I think you are spending too much time and energy concerned about minute differences between brokers and finders. Your customers do not care about Fereral or State legislation, legal mumbo jumbo or whether they are customers or clients. To potential note sellers, you have no differentiation from a note broker. Further, they couldn't care less about terms and definitions; what is important is that you attempt to match a note buyer with a note seller, and you are not a direct buyer, but an intermediary.

The reason the more sophisticated note sellers do not want to engage an intermediary is that they can go direct to the source (direct buyers) themselves and avoid the middleman fee. Further, it seems like everyone and his brother has taken a course, seminar or workshop on how to become a note finder or cash flow specialist, and all these "experts" are chasing the same notes! I placed an ad on bigger pockets recently for a note I had for sale. Out of 26 responses 23 were from brokers, two were from individuals for their own account and one was from a direct buying institution. Most of the brokers asked us to fill out a standardized form (despite the fact that all the information was already provided to them), the form was exactly the same for each one! All claimed to work with exclusive buyers, but none were able to provide any testimonials or recomendations. The offers we received from these brokers were quite low.

The offer from the direct institutional buyer was somewhat higher than from the brokers, and the offer from one of the individuals was our full asking price (face value of the note) which we accepted and successfully closed.

So tell me again, why work with note brokers, or note finders?

And Don has the business side covered, a note broker/finder/facilitator really needs a line of credit or available funds to acquire notes in their name to profit in the long run. I've thousands of purchases and sales over the years, I have had profits on a few that any guru could brag about, but to make it an ongoing profitable buisness, you need to buy them and sell them later....or keep them! Hang in there! Bill

To Don Konipaol; Thank you for answering my question about why note brokers are hated, but one thing concerns me. I may have misunderstood, but those examples sound geared to mostly a Professional in Real Estate point of view. From a professional stand point it's true that Note Brokers aren't really needed.
On the contrary, Most noteholders or note sellers are not professional real estate investors or even real estate savvy to know, look, or to think about how to make a profit from selling a note. So there being an intermediary doesn't matter as long as they get their money.

My personal opinion on buying a note at it's face value is like taking a gamble. Possibly a loss of money for the note buyer when you take into accounts the risks ,such as defaults, involved in note purchasing unless they were looking to take the house at some point.
Which explains why the offers you received were lower than the asking price since most of all notes are bought discounted to protect the buyers assets as well. It's not always easy to meet seller's standards and buyer standards when selling a note when both parties are experienced and set with knowing what they want and how they want it.

I understand that there are also many incompetent Note Finders out just giving questionnaires to people who have the words note for sale without giving any thought whatsoever to what information was given. As well as them not knowing how they were doing the transaction to make sure the note seller gets the highest amount at all time. In this case, as a new notefinder, I know I'am not one and I strive to not be put into that category. I may not have a rapport yet to back up this style of business for real professionals to take me seriously yet, but I'm and few others are still solid business to work with.

Now for the reasons why to work with a note finderer is because, A large majority of noteholders, at least the ones I come into contact with daily through mailings and cold-calling, either do not know that they could sell their note in the first place or are people ,either professional or not, looking sell their note but are looking to sell their note for a cash now purpose. Now we see working with an experienced Note Finder or Note Broker, helps with enlightening people to the fact they can sell their note and helps fulfill that need of immediate cash now. Even sophisticated note sellers can use Note Finders as a safety selling net when they see that their note isn't getting sold at the price asked, they have the highest offer to settle for provided by the Note Finder.

To Financexaminer;

I thank you for your time in trying to educate me in what works and what doesn't, and I'm sure your experience in this business is great and plentiful. It may be true that my foundation of knowledge was built from a "note guru" but that knowledge has been greatly expanded and has been updated based on my outside personal research of this.
Well, in the state of maryland you do not need a license to "facilitate" notes,so licensing isn't an issue for me. I could however as you say ,put effort in taking a test rather than boasting a guru, but that's not a viable option for most people and for me. For some reason , things are not as simple or as dry cut as you seem to make it in this business.

hey there jerome..welcome to me, your definition of what you do sounds like some guru pitch out of a book you just read...not sayin that's the case at all, but if that was the recited speech i was told on the phone, it would not lend much credibility in my mind...for what it's worth..


I would say that most people do not want to deal with a middleman, which is what you are under any title. It is to easy to go directly to the source these days, and save yourself some time and money. I know personally, I need to talk to the one that is going to be, approving the file I don't have the time or the patience to deal with anyone else.

Well, I thank everyone for their time and patience with me in defining this.

It's true that I was a little misguided in terms of title, that happens time to time to newbies.
However, I now know what I'am and how I look in the eyes of professionals. Also from the different and vast majority of explanations regarding brokers, it looks like most of my work will be coming from the general public that are holding notes found from courthouse research, not professionals.

Again, I thank you for your answers. I'll try my best not to be the broker everyone hates to work.

Originally posted by Jerome Harrod II:

Now, I have seen and been through alot of ads, telephone calls, and emails that calls for their note to be sold, but once I say who I'am and what I do. I get told that they do not work with brokers and our business ends there.

Originally posted by Jerome Harrod II:
... Most noteholders or note sellers are not professional real estate investors or even real estate savvy to know, look, or to think about how to make a profit from selling a note. So there being an intermediary doesn't matter as long as they get their money.


Seems to be some kind of contradiction in those two quoted pieces. Hey, does that make me a "Contradiction Finder"? :wink"

To Steve:
I see you've been reading my posts well, thank you for the input but allow me to explain how what you pointed out aren't contradictory. The situations in which the text are being used are different.

In your first point, Those who were advertising a note had the sign "No Broker calls" around their ad and those were the people who has knowledge of the industry like a professional would. In my naiveness, I called anyway under the influence that I wasn't a broker, and now thanks to the Don and Financexaminer comments, I see that I'am actually a type of broker. In that area that was just me making an unprofessional mistake in business and I do regret that immensely. I can see how that would make my statement contradictory.

The second point is another situation saying that most note-holders don't care about the middleman when they have a great lack of real-estate experience.
Most real estate professionals know of the option of selling notes and how they work. Now, For example, courthouse research, this is something anyone could do and follow to prove this.
In courthouse researching in private mortgages, after gathering information of about 50 note-holders in a county, and finally getting connected with the note-holder. You'll see that 9 times out of 10 that the note-holder will be totally unaware of this option and you'll will have to explain this industry to them a little to proceed in business. As you see most note-holders are unaware about this option to sell a note, thus proving that most note-holders aren't real estate professionals

Hopefully this explained that there weren't any unrealized contradictions, that was just me with lack of necessary experience. This is where the my needs of a mentor comes in. To no longer, make these mistakes.

Hi Jerome,

Just wanted to say welcome. Nothing wrong with being a note finder or broker or cash flow specialist or whatever you want to call it.

I'm new to note investing myself. I'm sure I have tons to learn as well..

Jerome, you may not remember, but we talked about this several months ago and I told you basically the same thing.

So, big guy, it's good to hear that you have done 4 deals and made some money I assume. As I mentioned above, you need to find some money to acquire these deals yourself. If you find a note that balloons in 28 months, you might look at trying to buy it in your name. You'll likely have 26% to even 40 something % as your yield. If you are paying 12%, that's still making money.

You might also look at selling part of a note and retaining part of it and buy it for the amount sold.

In these instances, you are a principal. Instead of thinking outside the box about what to call yourself or how to circumvent any law, find ways to do your deals for yourself. You'll find you're speaking from a position that will be more receptive. You can be in this business and deal with Nancy Note Holder, but to dump them you need to be in the circles of investors and buyers, you can't do it just dealing with the general public.

Good luck, Bill

Hey buddy welcome to the competitive BP where everyone is a professional in the investing game. Your doing a great job keep it up.I was once in your shoes and being a "Finder" took me to the point where i now invest in small notes and make a little better life for my family.My goal is Investing in commercial properties.Dont let the "BigDogs"discourage you. Everyone started some were.I have read all the comments and i am surprised my self in what i have read.we are all looking to achieve the same thing why not help each other. Knowledge is key.There are alot of professionls who will work with you. I do it on daily basis. lawyers,title agents,cpa's,realestate agents,brokers,and yes even investors flipping their properties with the assistace of a "Finder" who helps sell the note with other investors.This is a very competitive field you are in but there is a good living in it for us all.visit my page and we can net work and build networth together.

To all Note Finders,

After carefull research on whether note finders need to be mortgage brokers you must look at the legal definition of each state's legal definition of a mortgage broker. My states defination for a mortgage broker is the following:

21(a): "Mortgage broker" means an entity that obtains, attempts to obtain, or assists in obtaining a mortgage loan for a borrower from a mortgage lender in return for consideration or in anticipation of consideration.

Since note finding does not relate to obtaining a mortgage loan for a borrower from a mortgage lender...then I do not need to be a mortgage broker in my state.

But your entire blog discussion did not examine another very interesting law that relates to referral fees related to real estate related transactions. Referral fees can be paid to residents in only the following states:

Arizona, California, Florida, Georiga, Illinois, Indiana, Michigan, Minnesota, Montana, New Hampshire, Oklahoma, Oregon, and Virigina.

If you are doing any note business and earning a referal fee from an investor in any state not mentioned above, you are breaking a completely different set of state laws.

Updated over 7 years ago

To All Note Finders, In addition to checking your state laws as to wheather or not you are a mortgage broker or you can or cannot leaglly receive referal fees, you may need a real estate license to be a note finder. California requires you to be a lice

John, as I pointed out in your other post, I disagree with your statement "If you are doing any note business and earning a referal fee from an investor in any state not mentioned above, you are breaking a completely different set of state laws." Note 'finders' can operate like property 'finders' in that they get a contract, then assign the contract. It's been a long time (7 years?... it's been that long??) since I dealt with Charter Financial and Boston Note, but I think this is how their contracts work. The 'finder' assigns the contract to the principal who executes the transaction. The principal would spell out exactly what they wanted to make sure the transaction would execute. That was the main value of the 'finder', to get all the information together for the principal to correctly quote the note. The note 'finder' can assign the contract just like the wholesaler can assign their contract... and the banks can assign their courthouse "winning" bids to HUD.

I would argue that the world has changed quite a bit in recent history, but unless states start adjusting contract assignments I think property 'wholesaling' and note 'finding', when done properly, will continue to benefit the clientele Jerome targets.

I am starting off in the "Note Finding" business. I have a lot to learn. I have a question for the note investors who do not deal with Note Finders or Brokers or an intermediary. If an individual spent their time and effort to "find" a performing note with a face value of $500,000 and the note holder was not aware of selling the note but they are willing to sell the note for $50,000 because of the situation they are in and need cash ASAP, would you not be willing to accept the lead from the Note Finder, Note Broker, or intermediary? This might seem like an unrealistic deal, but what I am implying is that if an individual found a note in good standing and it is a good investment for you, would you not be willing to provide a finder's fee?

To all my outhouse lawyer friends, you're looking in the wrong place as a mortgage broker will be seen as originating mortgages, as under the SAFE Act, which also includes the sale of notes. You need to ask a real attorney to look at state banking laws, facilitating the sale of mortgages and the exception to being a bank is being a mortgage broker. But, maybe you'd rather be a bank, maybe a credit union. :)
If you are buying with YOUR money for YOUR portfolio, you don't need a license, but "note finders" aren't doing that..... Good luck

John Bagwell:

To All Note Finders, In addition to checking your state laws as to wheather or not you are a mortgage broker or you can or cannot leaglly receive referal fees, you may need a real estate license to be a note finder. California requires you to be a lice

Are you saying that California describes Note Finders as blood sucking parasites? That's harsh, even for California.

That might be close Michael B., LOL

As mentioned up there, links to a chain are not welcome in the note business, newbies with a lack of knowledge starting out, asking or demanding guru profits really much up deals.

Act as a principal in your name and you can arrange to sell part of a note, netting you the difference to keep in your portfolio.

In reality, there will not be any black helicopters hovering over your house. Note deals are not real estate transactions and all you need are good documents, agreements and a notary and then file again, you can do that yourself unless there is some unique state law addressing the transaction process.

Where your compliance really comes into play is when someone has a loss arising from your dealings. That's how you get investigated, hauled to court and bothered with fines, penalties of perhaps some hotel time.

For those that have actually done and seen documents, you'll see that an astute buyer will hold you responsible for representations, payment histories, accounting, underwriting and collateral issues presented. Being a finder or a no money broker, you probably can't back up such guarantees and most likely you only pass on the information given to you and don't verify much if anything.

Even if you are only a straw man, you facilitated the deal, so you have liability. A mortgage could blow up months down the road and you can be dragged into repurchasing a note or defend an issue. It's at this point when you get it put to you, not only can you not perform, but someone may say the "F" word, fraud. Now, add to that that when you did the deal you were not properly licensed, you have a problem.

Then there is the competition, real brokers you tick off for one reason or another and they simply file a complaint against you with the state. Now, you have a problem.

There are several laws you need to investigate, not just a mortgage brokers license, banking laws govern the sale and servicing of notes, SEC res can apply, money laundering laws, ALTA and TIL may apply, the SAFE Act and others, state financing laws, so just looking up mortgage broker origination laws don't cover the big picture.

Often, banking operations will be defined and are regulated at the state and federal level, they apply to the operations conducted, such as purchasing, assigning, servicing, assignment of servicing, the modification, etc. of any loan secured by real or personal property, the exemptions are stated as well and on exemption to these laws may be for a mortgage broker, this is where the requirement to be a mortgage broker comes from, not from the mortgage broker originator laws.

Lastly, note brokers and gurus could care less if you are qualified or hold the proper license, it's no skin off their nose, s if they can make you a birddog and find notes for them, they benefit without liability from your actions. While they blind you with promises of great earnings and success, newbies really want to believe what the are told.

You better go see an attorney familiar with finance and business laws, not so much RE, before you start.

To simply avoid the debate of license and go back to why buyers and sellers have a hard time with note brokers, finders, etc....

When the retail mortgage market began to shrink and then when to hell in a handbag, many out of work mortgage brokers, real estate agents and others in general looked to the brokering of pools of loans and REO as a new business.

The industry was flooded with 1,000's of brokers who had never bought or sold a note before in their life. They didn't know much about legitimate broker practices on pools of loans regardless of performance. Those brokers went into the market to find buyers and sellers of various experience.

New buyers and sellers went on roller coaster ride. Phone call after phone call, NCND and MFA after the next. Then a pool would come in, it would be a 24 hour fire drill to bid, buy, close, and fund. Many times all while using some title company or attorney so the buyer and the seller never got to meet each other.

OR...the other good ones were the "Compiler" source. Who is next to someone who is next to the other person, who is a compiler. That didn't actually work for the asset owner, mind you.

So the real answer to the question, why does the note industry look bad upon brokers? Because they have usually had terrible business practices and didn't know their elbow from their behind.

Whether that stems from incompetence, lack of education or malicious intent, take your pic, all those guys were at the party.

So fast forward to 2013, those broker jokers are still in the market. No idea what they are doing, no idea what it actually takes to trade a loan.

Because many folks can't be trusted, where you send a pool to a broker for one of their clients, next thing you know 500 people have it. I traced one of my pools one time literally around the entire United States in about 5 days. I talked to 43 brokers, of which each time I was about to get on the phone, the other party was suppose to be the "Real Seller", that happened about literally 11 phone calls. Each time attempted to get price information, bid information and other normal important information about the pool, I was either lied to or the party didn't know. I actually made it all the way back to the broker I sent my pool to. I sent my pool to him as he had interest in 2 (two) assets and seemed like a nice upfront guy. During my trace calls, when he came to the phone, he proceed to tell me he was the "mandate" and had discretion over the assets and sale. I asked him if he recognized my voice (I used an alias on the calls) and then revealed who I was and tee'd off on everyone on the phone. Took all their names and emails and made sure never to do any sort of business around or about them.

The other big issue I see with brokers, they don't even know what data to collect. I see so many data tapes or note offers with less then adequate data to perform any sort of analysis. For instance, selling a NPN without last payment date or foreclosure information. Or selling a PN without payment performance. Stuff, a normal person could figure out needs to be included. But the brokers are too busy trying to sell the whole pool for 3.0% and become some fortune 500 company over night. (Good luck with that)

It is difficult to understand who is a good broker and who is not in this industry if you are not experienced. Even large institutional broker/dealers suck at broker loan pools, because they don't do it everyday.

I am not sure changing your title makes you any different. It is not title but competency in this space that will reap the rewards. Good brokers who want to master their craft, like in any profession are hard to come by, folks who just want to throw stuff at the wall and see if it sticks, well there are a ton of those folks. I will and do work with good brokers everyday. That said, it is always by my rules as I tend to be a bit more experienced in the game than them.

I think OP's original questions related to [note sellers] feelings about working with note or mortgage brokers. His other question inquired as to other "note finders" at BP.

My 10 cents is that on the surface, note sellers would prefer to have a direct relationship with the person who writes the check to purchase it. People can generally smell money. If you claim to provide a service for people and the principal doesn't smell enough money on your clothing, breath, whatever, the role of the middleman comes into hard scrutiny.

The second part of this is that, not unlike real estate, it would seem like almost anything goes with paper at the one-deal, one-time level. No ongoing relationship is established for a deal flow and reputation is about non-existence from a referral or goodwill basis.

Now this is where it gets tricky. The SAFE Act pretty well covers any such transaction which would be considered "note finder" services, yet licensing neither teaches nor assures that the licensee has a clue about the note trading business, at least from what I see in my material. So, an experienced note finder may provide a valuable service yet be working under the radar, or to the contrary, could be licensed and clueless.

If I were to make my living as a non-principal note finder, I'd want to make it my goal of doing everything to fall into the category of the experienced, well-funded, licensed market makers and operate in full view rather than finding it necessary to remain in the shadow world and spend much effort on the semantics of my job title in the hope of staying under the radar.

@Jerome Harrod II, it sounds like you'll see some interesting deals so please continue posting here.

To me there are 2 main points we need to understand for clarification.

First, the "note business" is really three different but related businesses.
1- Private notes (such as carry back owner financed mortgages) being sold to either individuals or note buying institutions.
2- Mortgage "pools" institutional loans being sold as full pools, mini pools or one off by institutional finance companies of equity funds
3- Private mortgage/hard money loans being originated and sold to individual investors.

Each of these is a different market and has different rolls for the intermediary.

Second, mortgage can be divided as either covered by the Safe Act or exempt from the Safe Act. If covered, the trading of the note in the secondary market is also covered by the Safe Act. If not covered, than the trading in the secondary market may or may not be covered by state laws/regs.

I think we need to define what business we are talking about to determine the market acceptability of certain roles as well as the legal framework for that particular transaction.

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