What to Expect When Working With a Promissory Note Buyer
If you’re holding a seller-financed real estate note and wondering who actually buys these things – and whether you can trust them – you’re in the right place. This guide walks through what promissory note buyers look for, how they determine what your note is worth, and what the process feels like from your first conversation to cash at closing.
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What Is A Promissory Note?
Generally speaking, a promissory note is a written promise to pay. In non-legal terms, it’s an IOU. One party promises to pay another party under specific terms.
Most people are familiar with home loans or automobile loans where there’s an agreement requiring the buyer to make a certain payment each month until the loan is paid in full. Promissory notes may include interest, late charges, balloon payments, or other negotiated loan terms.
Porch Swing Funding is a promissory note buyer who specializes in purchasing seller-financed real estate notes. Real estate notes are created when a seller sells real estate to a buyer. Rather than the buyer going to a bank or other financial institution for a loan, the seller agrees to accept a portion of the purchase price over time. At this point, the seller no longer owns rights to the property. Instead, they own “paper” which can be sold like any other asset.
Why Would Someone Buy A Real Estate Note?
By themselves, promissory notes are enforceable contracts. But real estate promissory note buyers also benefit from the value of the property connected with the loan.
A document called a Mortgage or a Deed of Trust is recorded at the County Recorder’s office. It states that in the event of a default on the promissory note, the noteholder has the right to collect the unpaid balance plus reimbursement for certain fees through foreclosure.
Assuming the real estate securing a promissory note has a high enough value to pay the outstanding loan balance, anyone holding the promissory note has a backup plan in the event of default.
Promissory Note Buyers always check the estimated value of the property securing the loan, and verify that the paperwork and title would allow them to foreclose if necessary.
Who Purchases Contract For Deeds and Land Contracts?
Most, but not all, Promissory Note Buyers also purchase seller-financed real estate loans such as:
- Contract for Deeds
- Real Estate Installment Contracts
- Land Contracts
- Bond for Deeds
While all of the above are types of real estate seller-financing, they differ slightly because the buyer doesn’t receive title to the property until the balance is paid in full.
Where Can I Find Promissory Note Buyers?
Promissory Note Buyers market to noteholders by sending letters or postcards, print ads, and online ads.
They also maintain relationships with CPAs, Title Companies, Attorneys (especially Estate and Divorce), Bankruptcy Trustees, and Loan Servicing Companies.
What Types of Promissory Note Buyers Are There?
Note buyers generally fall into two categories, and understanding the difference helps you know what to expect.
Direct buyers purchase notes using their own capital and hold them in their own portfolio. Their buying criteria can be specific — certain property types, loan balances, or geographic areas — so not every note is a fit for every direct buyer.
Note buying companies that work with a network of investors can offer something broader. When a note doesn’t fit their own portfolio criteria, they can match it with a third-party investor who is a better fit. This flexibility means more note sellers get helped, including those with notes that a single direct buyer might pass on.
Porch Swing Funding does both. We purchase some notes directly for our own portfolio and work with a trusted network of investors for others. Either way, we are your single point of contact throughout the process — you are never handed off to a stranger or left to figure out who is actually buying your note.
| Direct Buyer Only | PSF Approach | |
|---|---|---|
| Buys with own capital | Yes | Yes |
| Works with investor network | No | Yes |
| Range of notes served | Narrow | Broad |
| Your point of contact | Direct buyer | Porch Swing Funding throughout |
Do Promissory Note Buyers Charge A Fee?
While there really is no fee when selling a note, they are purchased at a discount. Real estate notes are bought in what is referred to as the Secondary Market. Fluctuations in market price are driven by interest rates, inventory, the housing market, unemployment, and the economy.
Beyond the factors above, seller-financed notes are also priced based on equity, borrower credit, payment history, the type of collateral, and the note’s terms.
When a price is established it takes into account all the factors above, plus the financial benefits to the Seller, who will receive a large lump sum at closing, whereas the buyer must wait for payments to arrive over time.
What Does A Promissory Note Buyer Need From Me?
When contacting a note buyer you should be prepared to email or share copies of these documents:
- Signed Promissory Note
- Recorded Deed of Trust or Mortgage
- Final Settlement or Closing Statement
If you have a contract for deed, installment contract or similar, you will provide a copy of the contract rather than items 1 and 2 above.
In addition, you’ll be asked to provide:
- Current Loan Balance
- Date of Last Payment Received
- Date of Next Payment Due
What Happens If I Decide To Sell?
Selling a note with Porch Swing Funding follows three straightforward steps:
- Sign an agreement to sell. Once we agree on a price, you sign a simple purchase commitment. This locks in the terms while we move into due diligence.
- Due diligence. We verify the documents, confirm the property value, and review the title. This typically takes 2–3 weeks. We handle the process and keep you updated throughout – you are not left guessing where things stand.
- Closing and funding. We coordinate closing with a title company. Once the paperwork is signed, funds are wired directly to you. Nothing changes for your borrower except where they send payments.
Want to know how long the full process takes? See our guide: How Long Does It Take To Sell a Mortgage Note.
Summary
Promissory note buyers give note holders an alternative to collecting payments for years. Price is shaped by far more than just the interest rate – equity, borrower credit, payment history, and loan terms all factor in. Keeping your paperwork secure and your payment records organized protects the value of your note.
Porch Swing Funding has been buying seller-financed notes nationwide since 2017. We work personally with every seller and handle everything from first call to funding. If you are ready to find out what your note is worth, request a free quote here.
