Get Best Prices and Quick Cash for your Note Today!

Cardiac Transactions

I could have called this article – why we do not do transactions where the note holder needs to close next week OR costly mistakes that could be made in a rush. But this title is catchier! 

When you find that “dream note” to purchase you might feel a flush in your face and have an inability to do anything except look at those beautiful numbers (yield, cents on the dollar, ITV, etc). If that sounds like you, then you likely have note fever. When you allow your emotions to drive you and you rush through due diligence to close on a good deal OR when a note seller wants to close quickly (or they won’t sell you the note) and rush you because they need the money yesterday, I call these “cardiac transactions”. While there is nothing wrong with excitement about your potential note purchase, note fever often comes with the side effect of rushing through your due diligence and potentially overlooking routine steps along the way.

In these cases, your dream note can turn into a nightmare after you buy it. Knowing what to consider before closing the transaction is crucial in seeing your dream note materialize as you had planned. Some of these note buyer thoughts may seem a bit out there, until, that is, they happen to you.  These are some of the worst mistakes people realize they made after buying a note:

Skipping a drive by appraisal

Before closing on a note purchase, a note buyer is responsible for getting a professional drive by appraisal to get a current valuation of the secured property.

Those who skip an appraisal can find themselves facing issues so major that they would have been deal breakers had they been known. But unfortunately, after closing without an appraisal, those problems become all yours.

“How bad can it be?” you might ask. Problem properties often don’t show their issues on the outside. But that doesn’t mean they aren’t there. In fact, speaking from my note buying experience and horror stories I have heard, some of the worst property issues you can imagine aren’t even exposed for your eye to see, including:

Chinese dry wall: It looks like normal dry wall but it causes health issues and metal corrosion.

Asbestos: This is a highly toxic mineral built into the fabric of many homes. Many homes and apartments built before 1980 “often are filled with asbestos.”

Lead paint: Another hazardous material found in homes. If the house was built before 1978, “there is a good chance it has lead-based paint.”

Your property securing your dream note could also have a bad foundationfaulty electrical wiringpoor drainagestructural damageroofing issues…the list can go on and on.

Only a professional appraisal (or BPO – Broker’s Price Opinion which I sometimes prefer so I can call the Real Estate Broker and ask questions) will ensure the buyer/payor does not face health and financial issues later. I might not be able to find out for sure that the property securing the note does or does not have these items but by doing some research, asking the right questions and looking for these things you will be much better off if you ever have to foreclose and take back the property. 

Forgetting to add up the costs.

The price you pay isn’t just the price tag of the note.

There’s appraisal and title costs, processing fees, overnight fees, recording fees and wire charges. All these added costs effect your ultimate NET profit and final yield when buying a note.

Many note buyers forget to factor these costs in, then are surprised they’re paying a lot more than they expected – or they realize they are not making what they thought they would.

Not learning about the demography and the area of the property securing the note.

Imagine this: You bought a great note and you have been receiving payments for the last 6 months. You are feeling like you are at the top of your note buying game. Then one Monday you get a call from your payor telling you that he has lost his job and won’t be able to make his payment this month or in the foreseeable future. Could this have been avoided? Possibly.

A website like can be very informative and help a note buyer get information that would be very helpful during the due diligence process. Excited note buyers may forget to consider crime, unemployment, area income, census details as well as what kinds of institutions, like schools, hospitals and police stations are in the surrounding area. 

Think also of future development plans and traffic noise from highways and even researching the neighbors, etc.Would you choose to move in next to a sex offender? No, of course not. A property does not exist inside its own bubble. Factoring in the kind of neighborhood and its neighbors in your note buying search just may save you from a situation like the above. A reverse address lookup is a great first step for learning about neighbors and sex offenders closest to your potential new address.

Acting too soon.

Either by excitement, social pressure, or thinking you came across a great find, many note buyers jump into a note purchase without being thorough. These factors can be compounded in a “hot market” where notes don’t stay on the market very long.

For the reasons listed above and others, some note buyers will tell you their stories of notes that they bought too soon, too fast, caught “note fever,” overpaid due to impatience or are now servicing nightmares. Don’t be one of those note buyers. Buying a note is a major investment decision and you should anticipate the fact that life can change. 

Take your time and wait out your note fever until you know you aren’t making any of the above mistakes. Remember success demands action, keep on marketing, it’s going to work!  TWITA! (That’s What I’m Talkin’ About!)

Jeff Armstrong of Armstrong Capital has been a note broker and investor specializing in the seller financed note industry since 1991.  He can be reached by email at For more updated and current information on how he can help you with your note business, your note investments or to request a quote on a note you currently have visit

Leave a Comment