Every document and verification step you need before buying a performing or non-performing mortgage note. Check off each item as you go.
You've checked every item on the list. You're ready to close — make sure you have your purchase agreement and wire instructions ready.
What type of note are you buying?
In note investing, what you don't know before closing can cost you far more than the deal is worth. Unlike buying a stock or a mutual fund, buying a mortgage note means you are acquiring a legal claim — and legal claims have to be properly documented, transferred, and enforced. One missing document or one gap in the chain of title can make a performing note into a legal nightmare.
Skipping the title search. Many new note investors assume the title is clean because the seller says so. Always order an independent title search. Senior liens, tax liens, and HOA liens can all reduce or eliminate your recovery in foreclosure.
Not verifying the chain of endorsements. If the note was sold multiple times before it reached you, every transfer needs to be documented with a proper endorsement or allonge. Courts have ruled notes unenforceable because of gaps in the endorsement chain — meaning investors could not foreclose even though they owned the note.
Taking the UPB at face value. Always request a formal balance statement from the servicer, not just the seller's word. The UPB determines your discount calculation and your LTV — if it's wrong, your deal math is wrong.
Ignoring property condition on non-performing notes. The property is your collateral. If the borrower stops paying and you foreclose, you need to be able to recover your investment from the sale. A vacant, vandalized, or severely deferred-maintenance property may sell for 50–70% of its clean value — make sure your offer price accounts for that possibility.
Walk away from any deal where: the original signed note cannot be produced, there are gaps in the endorsement chain that cannot be corrected, title has senior liens that eat into your recovery, the property is in a state with a 2+ year judicial foreclosure timeline and the numbers don't account for carrying costs, or the seller cannot provide a complete payment history.