There are many types of notes, but the most common one that people are after for flipping are mortgage notes. These are legal documents (IOUS) which are part of the mortgage loan. The person buying the house or property is promising the bank to repay the money (promissory note) over a certain period of time.
Banks usually own the majority of these notes, but when there are homes for sale by owners, they might make deals with the person buying the house from them. The one selling the home then becomes owner of the note.
Mortgage notes can be tricky because you need to evaluate the value of the note and to see if there are any legally binding debts attached to it. Often as a note flipper you will have to pay to have an appraisal done of the property and to do your own investigating of the true value. Many times a note owner might not be upfront about the condition of the property or anything that will devalue the note because they want as much money as possible considering they are taking a big loss for the cash upfront.
Before you get into finding notes that need to be sold, you would have been wise to find investors. It makes no sense to have a note only to scramble around hoping to find a buyer. You will probably lose the deal before it happens. Make friends with a successful real estate agent who may already know people who buy notes. Ask them for a list of names of people who buy notes. Contact them in person and let them know you are interested in sending them your leads from time to time. If you have a lawyer working for you, have him/her draw up a working contract between you and potential buyers to guard your interests so they do not steal your leads.
If one of your investors is interested in purchasing the mortgage note you found, he/she will make an offer based on your appraisal findings. You then contact the note holder with the offer and see if it is acceptable. Feel free to negotiate back and forth until you can come to a satisfactory offer for both parties. Remember, an investor wants to make as much profit as possible and does not want to be stuck with a dud property. The seller wants as much money as he/she can get knowing they are taking a huge loss. At any time the seller might decide to backout unless they are really desperate for the money.
When there is an agreement, contact your lawyer to draw up the closing documents such as an Assignment of Mortgage which gives ownership of the note to the buyer. This is recorded at the court. Then the funds can be disbursed in a few weeks or a few months. You will NOT get money forwarded into your account in a matter of days.
The deal can still fall through after all of this within a small window of time, so until you get the money, do not think you have succeeded. You still need to keep the ball in play and as the middleman you have two parties to keep happy.
