When an investor has performed their due diligence (research) and is ready to purchase a seller-financed mortgage note, they will ask the note seller to deliver all original documents and to sign the closing/assignment package. The investor will typically want these original documents to be delivered before the funds are released to the seller.

A note seller might reasonably ask, “How do I know I will receive my money once I turn over these important documents?”

This creates something of a dilemma with the investor wanting the documents before funding the purchase, and the note seller wanting their money before delivering the documents.

Fortunately, there’s a simple and safe solution!

Closing the transaction through a profesional title company, real estate attorney, or escrow company easily solves this impasse. The outside closer acts as an independent and trustworthy third party (or fiduciary), thus protecting the interests of both parties.

An outside closing involves a simple exchange of money for documents. The outside closing agent will receive the purchase proceeds from the investor into their trust account. They will also receive the original note and sales-related documents from the seller. Once the closing agent is satisfied that both parties have met their obligations, they will “close” the transaction and deliver the funds/documents to the appropriate recipients.

In most cases, it isn’t even necessary that the investor or note seller be physically present for the closing to take place. Funds are typically wired by the investor or delivered via certified check. An overnight delivery service can be used by the note seller to send all needed documents to the closing agent’s offices.

The fee for outside closings average $250 – $500 and can be paid by either party or split equally. Any legitimate note investor should be willing to participate in an outside closing through a licensed and bonded closing agent. Any resistance to using an outside closing agent should be weighed carefully by the note seller before proceeding with the transaction.

Outside closings offer protection and peace of mind to both note sellers and note investors. A streamlined closing process and added security are well worth the reasonable fee.

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