Note finders can be your best source of deals. Give the handout below to people who could find notes for you, and customize it for your business and the types of notes you buy. It includes a note information form and a simple referral agreement.
How the referral program works
Thank you for your interest in our program, which pays referral fees for finding private mortgages and other notes. You don’t need to know anything about mortgages or finance to take part. All you need is the willingness to work.
Below are techniques that will get you started. Once you use them, people will call you about notes. Ask them the questions exactly as written on the Note Information Form, write down the answers and send the form to us. We’ll take it from there and let you know whether we’ll buy the note and what we’ll pay you. Normally we pay you 2% of what we pay for the note, so if we buy a note for $20,000, you get $400.
Most calls will be about real estate notes: mortgages or trust deeds that people are receiving payments on. Sometimes you’ll hear from lottery winners or annuity holders.
What we can buy
- Mortgages or trust deeds where the caller is receiving the payments.
- Lottery winnings.
- Insurance annuities.
What we cannot buy
- Mortgages or trust deeds where the property buyer put no money down.
- Promissory or signature notes not secured by real estate.
- Notes secured only by equipment, cars, mobile homes and the like, with no real estate.
Our Referral Agreement simply says we’ll pay you for every note you find that we buy. In return, when you bring us a note, you agree not to take that note to any other buyer. There is no cost or obligation, and you can stop at any time.
Ways to find notes
Finding notes takes an investment of time, money or both. If you have money but not much time, you can place ads in lots of newspapers and do well over the long term. If you have more time than money and you’re willing to work, you can still succeed. There are over 100 ways to find notes. Here are some of the better ones.
Newspaper ads
Place your own ads in the classified section of as many papers as you can. Here’s one that works well:
CASH, QUICK, for your mortgage. No fees. Call [Your Phone].
It’s inexpensive and it makes the phone ring. The drawback is that you’ll have to explain to many callers that they can’t sell the mortgage they’re paying on, but that may be better than paying for a bigger ad (many of them would call anyway). Or try:
If you sold your property and are RECEIVING payments on a mortgage, I will buy that mortgage for CASH! Call [Your Phone].
Use “trust deed” or “contract” if that’s the term in your area, and mention that you buy annuities and lottery winnings too.
Put your ads where people will see them. If you can afford it, try display ads in the sports or comics section. If not, use the big papers sparingly (Sundays only) and focus on small and medium-sized papers. Try out-of-town papers too, especially if you see lots of competition locally. Don’t forget the free all-classified “shoppers.” Their ads are cheap and can work, but you have to run them for months.
The secret is patience. You won’t get many calls, simply because few people own notes. The more papers you run in, week after week, the more calls you’ll get. Rural, small and medium-sized papers can be ideal: they’re cheap and have no competition. Use this rule of thumb before you pause an ad for 6 months and try again:
| Paper | Drop the ad if no notes after |
|---|---|
| Larger daily | 2 months |
| Small-town daily | 6 months |
| Weekly | 1 year |
If you just hit those averages, you’re doing fine. When people call, ask the questions on the Note Information Form and send it to us. If they ask something you can’t answer, tell them someone will get back to them.
Networking
If you’re going to be an active note finder, people need to know about you. Results take time, and “out of sight, out of mind” applies, so keep reminding people you’re looking for notes. Focus on people who are in a position to send notes your way: real estate agents and brokers, title company staff, bank trust and loan officers, and attorneys with a real estate practice.
Look for ads placed by real estate agencies promoting their top producers. Call them, say you’re looking for owner-financed notes and ask them to call you about any they know of, now or later. You can even offer a modest referral fee, say $100 for every note they bring you that’s purchased; if you’re earning $500 or more on the deal, that’s a smart payment. Note that in some cases real estate agents are prohibited from receiving such fees, but that’s their decision, not yours.
Follow up with a short letter and your card. A card with “CASH FOR NOTES” across the top makes the point. Keep in touch with a letter every couple of months and it will begin to pay off.
Drop in on open houses. Look around a little, then steer the conversation to your real purpose: you buy notes. Leave several cards to pass around the office, and follow up with a call or a personal thank-you letter.
Don’t stop at agents. Attorneys, accountants, title officers and bankers often have notes cross their desks. Let the ones you know personally hear that you’re interested in notes, and send a low-key, professional letter to others you find in legal directories.
Bulletin boards
You can put up small signs on community bulletin boards saying you buy notes. The big advantage: it’s free, so you can start this afternoon with no investment. Handwrite your ad with a black felt-tip pen, using the same wording as the newspaper ad, and have copies made on index cards at a print shop. Handwritten notices feel much less threatening than printed ones. Staple them up (faster and cheaper than thumbtacks) and add tear-off tabs with “cash for mortgages” and your phone number.
Stores and community centers clear their boards regularly, often every two weeks, so keeping notices up becomes almost a full-time job. Eventually you may want to hire a student to do the legwork. Treat this as a supplement, not your only method. The response can be so poor that it discourages people from notes altogether, so expect nothing and you may be pleasantly surprised.
The courthouse
You can research property sales at the county courthouse, looking for sellers whose buyers are making payments to them. The seller’s name and address should be in the records, so you can send a postcard offering to buy the note. It’s expensive and time-consuming, but it sometimes pays off.
The note information form
Make several copies. When someone calls about a note, ask these questions, fill in the answers and send the form to us.
Your details
- To: [Broker Name], [Company]
- Your name, phone and email
About the property
- What is the address of the property securing the note?
- Does the payor live there? If not, is it rented, and for how much?
- What kind of property is it (single-family home, condo, duplex, apartment building, lot or land)? Describe the property and neighborhood in detail.
- What was the sale price, and the sale date?
- How much cash did the buyer put down? How much was the first mortgage?
- Is there a current appraisal? For how much, and when? If not, what is the property worth today?
About the mortgage, trust deed or contract
- Is the note you want to sell a first mortgage? (If yes, skip the next three questions.)
- Who holds the first mortgage? Is it FHA, VA, conventional or private?
- What are the first mortgage’s original amount, current balance, interest rate and monthly payment? Does the payment include taxes and insurance?
- What was the original balance of the note you want to sell, and the current balance?
- What term was it written for, at what interest rate?
- How much are the payments, and how often? Are they current? If not, how far behind?
- When was the first payment, and when is the next one due?
- How many payments have been made, and how many remain?
- Is there a balloon payment? How much, and when is it due?
About the payor
- How often have they been late?
- What is the payor’s employment?
- What are the payor’s name(s) and address?
About the note seller
- Why do you want to sell the note?
- How much cash do you need right now?
- What else should we know about the note, the payor or the property?
- What do you think is a fair price for your note?
- Seller’s name. (Put the seller’s address and phone on the back; don’t send them to the investor unless requested.)
The referral commission agreement
Copy the agreement, fill in the names, sign it and return it. It’s free, and either side can cancel at any time.
THIS AGREEMENT is entered into this ____ day of __________, ____ between [Your Company], hereinafter referred to as PRINCIPAL, and [Associate Name], hereinafter referred to as ASSOCIATE.
1. This agreement establishes PRINCIPAL as the entity to complete the purchase of mortgages, deed of trust notes, contracts for deed, annuities, lottery proceeds and other negotiable instruments (all referred to as “notes”) from note sellers referred by ASSOCIATE.
2. It is mutually understood and expressly agreed that ASSOCIATE is acting as an independent contractor and is not an employee or agent of PRINCIPAL. ASSOCIATE agrees not to make any representations or commitments in the name of PRINCIPAL without prior approval of PRINCIPAL, and agrees that PRINCIPAL is not bound by any such representations or commitments.
3. ASSOCIATE engages PRINCIPAL as the sole and exclusive funding source on every note submitted to PRINCIPAL, and will not submit the same note to any other entity, directly or through third parties, without the prior written consent of PRINCIPAL.
4. ASSOCIATE’s duties under this agreement are to locate note sellers and obtain the information PRINCIPAL needs. PRINCIPAL will contact and negotiate with note sellers directly.
5. PRINCIPAL will pay ASSOCIATE a commission of two percent of the purchase price for each note purchased, unless both parties agree on other compensation. PRINCIPAL agrees to pay this commission on any future dealings with note sellers originally referred by ASSOCIATE, even if the note sellers go directly to PRINCIPAL.
PRINCIPAL: ______________________________
ASSOCIATE: ______________________________Associate name (please print), address, city, state or province, ZIP or postal code, phone:
______________________________Return to: [Your Name], [Your Company], [Your Email]
