Can I Get Scammed When Selling My Private Mortgage Note?

A question that comes up from time to time with many private note sellers is:

Can I get scammed when selling my private mortgage note?

This is obviously a question that would need to be addressed (and answered) if you are planning on selling your mortgage note on the secondary loan market.

Just to be clear — when I say “selling a private mortgage note,” I am referring to someone who is currently collecting on a debt secured by real estate. This is usually the result of a property sale in which the property seller creates a seller-financed mortgage note and acts as the bank for the next 10, 20 or 30 years (depending on how you structured the note).

I am not talking about people and/or borrowers who are currently making payments to a bank, credit union or institution on a mortgage loan (like Wells Fargo, Bank of America, PNC, etc.), in which you found out that the bank that lent you the money has now sold your loan to third party lender.

Key takeaways

1. It’s practically impossible to be scammed out of a private mortgage note that you hold, but you can still be taken advantage of if you’re not careful.
2. There are protections and procedures in place that ensure you won’t lose a note without getting paid.
3. It is possible to lose money on private mortgage notes at a guaranteed rate of return.

The Answer is NO!

Back to the question at hand: The short answer is no, you can’t get scammed if you are only selling a private note to a mortgage buyer on the open market.

Getting low-balled on an offer

Now that being said, getting scammed out of your mortgage note and getting a low-ball offer (or ripped off on a note offer) are two different things.

Anyone selling real estate notes can get a low-ball offer and in turn, get ripped off on note pricing. Let me throw a plug in here — to avoid this issue, you need to work with a direct note buyer, like us at Amerinote Xchange, in order to secure a solid note offer and get the most cash possible for your mortgage note.

Protections and procedures

I will say that after operating in the note buying industry for over a decade, it is impossible for a private note seller to sell their note to a note buyer and get scammed out of their mortgage note. This is due to the simple fact that their are many layers of procedures and protections in place in order to protect all parties. These procedures allow the assignment of a mortgage to take place ONLY if it is properly recorded through the county courthouse and signed off by you, the note seller, thus becoming a legal debt owed to the new owner (which is now enforceable in the case of default).

As a matter of fact, in most cases when Amerinote Xchange buy notes, we actually fund the note sale transaction prior to the final mortgage documents being recorded through the county recorders office, so technically, you are still the owner of the note for about one to four business days even after you receive your lump-sum payment. This is not the case with all note buyers, as some do require the assignment of mortgage to be recorded before the note seller receives their funds.

What Are the Most Common Mortgage Frauds?

While it’s rare to be outright scammed when you sell a mortgage note through a proper process, mortgage fraud is still widespread—and often affects buyers, investors, and sellers in more indirect ways. Below are some of the common types of fraud you should be aware of:

• Promissory note scams: One of the most dangerous schemes involves fake investments in promissory notes. These are usually marketed to older investors and promise above-market returns. The problem? The notes are either worthless, backed by nothing, or tied to properties that don’t exist. Always check if the note is registered with the SEC or flagged by state securities regulators.
• Fake mortgage note buyers: Fraudsters may pose as mortgage note buyers or note-buying companies, offering a lump sum of cash today in exchange for your note. Once they receive sensitive documents, they disappear. Always work with a reputable mortgage buyer, verify licensure, and ensure you’re working with a title company during the note sale.
• Partial sale misrepresentation: Selling a portion of the note can be a useful tool—but only when done right. Some buyers pitch a partial sale while quietly filing for full ownership. If you want to sell your mortgage note, read the terms carefully and never sign a promissory note transfer without clarity on the deal.
• “Too good to be true” offers: If you got an offer that promises top dollar, no closing costs, and a full value payout with no verification, walk away. Note investors typically want to determine how much your note is worth based on loan terms, LTV, payments from the borrower, and whether there’s a balloon payment. No real buyer skips due diligence.
• Investment fraud: If someone promises a guaranteed return for “investing in mortgage notes,” ask if the securities are registered with the SEC. These are often unregulated deals that collapse. If it sounds too good to be true, it probably is. Report suspicious offers to your state insurance commissioner, state securities regulators, or through the SEC’s online complaint form.
  

The real scammers in the mortgage note industry

Now there is an area of this industry where you can get scammed out of money, and that is if someone approaches you to invest your money into mortgage notes at a guaranteed rate of return. If you are thinking about investing in mortgage notes yourself, I would definitely do a little research on the company or person soliciting you. This is where you can get hurt…

If you have any questions about selling your mortgage note or any questions about the industry in general, please feel free to contact me at any time at: 415-295-1401 ext 3 (ask for Abby). Good luck.

Frequently Asked Questions 

How can I avoid a promissory note scam?

Start by verifying whether the promissory note is a form of debt secured by real estate contracts or simply an IOU. Real promissory notes come with a deed of trust, structured loan terms, and payment history. If you’re receiving letters offering to buy your note for 2–3x its value with no due diligence, stop and vet the company to work with via the Better Business Bureau.

What should I look for in a mortgage note buyer?

If you want to sell a private mortgage note, work only with a buyer who explains the process clearly, uses a title company, and outlines fair note purchase terms. Reputable firms won’t promise a lump sum payment without reviewing the remaining balance, interest rate, appraisal, and full loan terms. If a buyer avoids answering questions or pressures you to commit quickly, move on.

What makes a legitimate promissory note investment?

A legitimate promissory note should be backed by real property, tied to a recorded deed of trust, and supported by consistent loan payments. Be wary of companies offering to finance your involvement or promising guaranteed returns without verifying collateral. If it isn’t registered with the SEC or recognized by state securities regulators, it’s worth investigating further. When in doubt, get a second opinion from a licensed advisor.

Can I sell the note and still receive payments over time?

Yes, this is known as a partial sale. You can sell the note partially to receive a lump sum now and still collect monthly payments on the remaining balance. Some sellers choose this method to keep a portion of the income stream while still getting some cash for your mortgage note upfront.

Why do offers for your note vary so much?

Note pricing depends on a range of factors: interest rate, credit history of the borrower, remaining term, property type, balloon payments, and more. The higher the interest rate, the more valuable the note may be to investors. But not all buyers are equal—some note-buying companies use aggressive margins, while others offer closer to the full value.