Some note brokers call note sellers their “clients.” In the author’s business, and for other note brokers he knows, nothing could be further from the truth.
Note sellers are customers, not clients
Generally, note brokers do not work for the note seller. To have a client, which implies agency, you would have to work for the note seller to get them the highest possible price, and then be paid a fee for that service.
Note sellers are customers. Note brokers generally buy from their customers to make a profit. The broker is not collecting a fee for serving a client. In fact, many deals would never close if the seller knew the broker’s profit, even when it was fair under the circumstances.
The agency clause to strike from your agreements
The author sees a potential hazard ahead for unsuspecting note brokers. The documents of the country’s largest note buyer state: “Seller represents to such investor that the Purchaser (note broker) is the sole agent of the Seller.”
Again, nothing could be further from the truth. Note brokers aren’t paid by the seller. They make a profit on the spread.
Every note broker should have that language struck from their agreements. The investor in question strikes it for the author each time he closes a transaction.
Why agency could become a legal problem
The real estate industry has been through significant tests, changes and legislation on agency over the past decades. Let’s hope no one in the note industry gets sued by an unhappy note seller over agency.
