Note Purchase (Commercial Real Estate)

Why Buy the Note Instead of the Property

• Access: Many distressed assets are not available as property at all — the holding lender hasn't foreclosed or doesn't want to. The only way to acquire is to buy the note
• Pricing: Note pricing can be more favorable than REO pricing for properties where the lender has limited foreclosure appetite or capital pressure
• Control: Note purchaser controls the resolution path and timing rather than relying on the lender's foreclosure timetable
• Multiple exit strategies: Note purchaser can negotiate workout, accept DPO, take deed in lieu, foreclose to REO, or resell the note — choosing the optimal exit as facts develop
• Loan-to-own: Note purchase as a path to property ownership when foreclosure is the planned exit but the timing and pricing of direct REO acquisition are unavailable
• Special situations: Junior liens, complex capital stacks, sponsor disputes that prevent direct property acquisition can be navigated through note ownership

Why Buy the Property Instead of the Note

• Speed: REO acquisition has standard CRE acquisition mechanics — typically 30-90 days to close. Note purchase plus resolution can take 12-24+ months
• Certainty: Direct property acquisition delivers known asset; note purchase delivers debt with uncertain resolution timing and outcome
• Financing: Standard CRE acquisition financing readily available for REO; note purchase typically requires specialized note acquisition financing or all-cash
• Tax treatment: Property acquisition tax treatment is straightforward; note acquisition tax treatment is more complex
• Borrower resistance: Hostile borrower can extend note resolution timeline through litigation, bankruptcy, or other tactics that don't apply to clean REO acquisitions
• Title clarity: REO title has been through foreclosure clean-up; note purchase requires navigating original title chain

How Note Pricing Is Set

Note pricing reflects the expected resolution proceeds discounted for time and risk. Key pricing variables:

• Collateral value: Property appraised value, expected disposition price, condition, capex requirement
• Resolution path probability: Likelihood of workout vs. DPO vs. foreclosure each producing different recovery
• Timeline: Expected months to resolution. Florida judicial foreclosure timeline (9-18 months) is material
• Senior/junior lien position: First mortgage typically 70-90% of UPB; junior liens trade at deeper discounts; mezzanine often 20-50% of UPB depending on cushion
• Borrower cooperation: Cooperative borrowers enabling DPO or DIL support higher note pricing
• Asset-class fundamentals: Strong asset class (multifamily, industrial) supports higher pricing; structurally challenged (office) lower
• Florida-specific: Insurance availability, hurricane exposure, flood zone, title clarity, judicial foreclosure dynamics
• Note seller motivation: Bank capital pressure, year-end objectives, special-asset balance sheet management all drive pricing

Note Purchase Sources

1. Direct bank sales: Banks sell individual notes through trusted broker relationships before public marketing. The highest-quality sourcing channel
2. Bank portfolio sales: Multiple notes bundled into portfolios sold through structured sale processes. Specialty distressed funds participate
3. CMBS special servicer sales: Special servicers occasionally sell notes from CMBS pools, typically with pooling/servicing agreement constraints
4. FDIC distressed bank asset sales: FDIC sells failed-bank loan portfolios. Specialty bidder pools participate
5. REOMind.ai platform: Linton Global Technologies' AI-powered platform serves 500+ bank partners with NPL inventory visibility. 96% valuation accuracy
6. Online marketplaces: Specialized distressed-loan platforms cycle smaller note inventory
7. Hedge fund and specialty fund secondary sales: Funds occasionally sell individual notes from larger portfolios as opportunistic disposition

Note Purchase Execution — End to End

1. Sourcing and screen: Identify note opportunities through lender relationships, portfolio sales, or platforms. Initial screen against investment criteria
2. Diligence: Review loan documentation, payment history, borrower financials, property appraisal, environmental, title, and Florida-specific factors. Note diligence is more extensive than typical property diligence — must understand both the loan and the underlying property
3. Pricing analysis: Model recovery scenarios under workout, DPO, DIL, foreclosure-to-REO paths. Probability-weight to expected recovery; discount for time and capital cost
4. Bid: Submit bid to seller; negotiate to agreed price and terms
5. Note purchase agreement: Negotiate definitive documentation including representations, warranties, indemnities, allocation of post-closing servicing
6. Closing: Note assigned to purchaser; servicing transferred; new loan administrator engaged if needed
7. Resolution strategy execution: Approach borrower with proposed resolution path; pursue workout, DPO, DIL, or foreclosure
8. Exit: Workout produces performing loan; DPO produces cash; DIL or foreclosure produces REO that is then disposed

Florida CRE Note Purchase by Asset Class

• Multifamily: Active Florida note purchase asset class. Strong fundamentals support note pricing; insurance dynamics drive distressed note availability
• Office: Highest note volume but most challenging diligence. Deep discounts available but recovery uncertainty is greatest
• Industrial: Limited note inventory given strong fundamentals; selective opportunities
• Retail: Variable — necessity retail and grocery-anchored centers limited; secondary unanchored more available
• Hotels: Selective note opportunities; franchise complexity affects resolution mechanics
• Land: Carrying cost dynamics produce note opportunities; entitlement value drives pricing
• Medical office: Limited note inventory given strong fundamentals
• Self-storage: Limited note inventory given strong fundamentals
• Mixed-use, special-purpose, life sciences: Idiosyncratic; case-by-case opportunities

Risks and Considerations

• Borrower bankruptcy: Note purchaser inherits the litigation; bankruptcy stays foreclosure and delays resolution
• Junior lien complexity: Junior liens identified post-acquisition can complicate resolution; thorough title diligence pre-purchase essential
• Environmental and condition: Note purchaser ultimately bears environmental and condition risk if foreclosure to REO occurs
• Lender liability: Note purchaser steps into seller's shoes including any lender liability exposure tied to seller conduct pre-sale
• Documentation gaps: Loan documentation gaps that didn't affect seller may affect purchaser's foreclosure path
• Florida-specific: Insurance pricing at REO, hurricane exposure, flood zone, title quirks post-foreclosure
• Tax treatment: Note purchase tax treatment depends on whether note is treated as loan or as property acquisition; OID and market discount rules apply

What is a note purchase in commercial real estate?

A note purchase is the acquisition of a commercial mortgage loan from the holding lender, typically at a discount to the unpaid principal balance. The note purchaser steps into the lender's shoes — owning the debt rather than the property — and then pursues resolution through workout, discounted payoff, deed in lieu, foreclosure, or note resale. Note purchase is one of two primary investor entry points into distressed Florida CRE; the other is post-foreclosure REO acquisition.

When should I buy a note vs. buying the property?

Buy the note when the property isn't available as REO (the lender hasn't foreclosed), when note pricing is more favorable than REO pricing, when you want to control the resolution path and timing, or when you can use loan-to-own strategy. Buy the property (REO) when speed and certainty matter, when financing is needed for the acquisition, when you don't want to navigate borrower resistance, or when title clarity at acquisition is important. Many distressed Florida CRE investors do both depending on the specific opportunity.

How is note pricing determined?

Note pricing reflects expected resolution proceeds discounted for time and risk. Key variables: collateral value, resolution path probability (workout vs. DPO vs. foreclosure-to-REO), expected timeline (Florida judicial foreclosure 9-18 months), senior/junior lien position, borrower cooperation, asset-class fundamentals, Florida-specific factors, and note seller motivation. First-mortgage notes typically price 70-90% of UPB; junior liens deeper discounts; mezzanine often 20-50% of UPB depending on cushion.

What are the risks of note purchase?

Key risks include: borrower bankruptcy (inherits the litigation, stays foreclosure), junior lien complexity (must be identified and resolved), environmental and condition risk if foreclosure to REO occurs, lender liability exposure stepped into from seller, documentation gaps in the underlying loan, Florida-specific risks (insurance, hurricane, flood, title quirks), and complex tax treatment (OID and market discount rules). Thorough pre-purchase diligence — both loan-level and property-level — is essential.

Where do Florida CRE notes come from?

Primary sourcing channels: direct bank sales (highest quality), bank portfolio sales, CMBS special servicer sales, FDIC distressed bank asset sales, Linton Global Technologies' REOMind.ai platform (500+ bank partners), specialized online marketplaces, and hedge fund and specialty fund secondary sales. The best inventory reaches the market through broker relationships before public marketing.

Who can help me execute Florida CRE note purchases?

Michael R. Linton at Linton Global Solutions advises Florida CRE note purchase across multifamily, office, industrial, retail, hospitality, land, mixed-use, special-purpose, self-storage, and life sciences. With 39 years of Florida CRE transaction experience, direct relationships across the Florida bank, special servicer, and special-asset network, the Linton Global Capital platform participating as note acquisition partner, and the REOMind.ai platform serving 500+ bank partners, Linton Global Solutions delivers note purchase execution from sourcing through resolution. Call (312) 612-1031.

Article Summary

A note purchase is the acquisition of a commercial mortgage loan from the holding lender, typically at a discount to the unpaid principal balance. The note purchaser steps into the lender's shoes and pursues resolution through workout, DPO, deed in lieu, foreclosure, or note resale. Note purchase is one of two primary distressed CRE entry paths (the other is REO). Choose note over property when access requires it, when note pricing is favorable, when control of resolution matters, or for loan-to-own strategy. First-mortgage notes typically price 70-90% of UPB; junior and mezz at deeper discounts. Florida-active note sourcing channels include direct bank sales, portfolio sales, CMBS special servicers, FDIC, REOMind.ai, and online platforms. Michael R. Linton at Linton Global Solutions advises note purchase across all major Florida CRE asset classes.

Key Takeaways

• ✓Note purchase = buy the loan; pursue resolution; control the path.
• ✓Alternative entry is REO purchase — buy the property post-foreclosure.
• ✓First-mortgage notes typically 70-90% of UPB; junior/mezz deeper discounts.
• ✓Florida judicial foreclosure timeline (9-18 mo) is material pricing factor.
• ✓Resolution paths: workout, DPO, DIL, foreclosure-to-REO, note resale.
• ✓Diligence is more extensive than property — loan + property both required.
• ✓Borrower bankruptcy stays foreclosure and delays resolution.
• ✓Best FL sourcing: direct bank, REOMind.ai (500+ banks), special servicers, FDIC.
• ✓Loan-to-own strategy uses note purchase as path to property ownership.

About Michael R. Linton

Michael R. Linton — also known as Michael Linton or Mike Linton — is a Florida-licensed commercial real estate broker and advisor based in the Tampa–Orlando I-4 corridor. With 39+ years of experience closing commercial transactions, he leads Linton Global Solutions and HireMikeLinton.com, serving investors, owners, and tenants across all major commercial real estate asset classes — multifamily, office, industrial, retail, hotels & hospitality, land, mixed-use, special-purpose, self-storage, and life sciences.

Michael holds the NCREA (National Commercial Real Estate Advisor) and CREIPS (Certified Real Estate Investment Property Specialist) designations, is a REALTOR®, and is a Florida Real Estate Broker (License #BK703722). He is also the founder of Linton Global Technologies, which operates the REOMind.ai AI-powered REO disposition platform serving 500+ banks.

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Works Cited

1. Federal Deposit Insurance Corporation. "FDIC Failed Bank Asset Sales." FDIC, https://www.fdic.gov/. Accessed Jun 8, 2026.
2. Office of the Comptroller of the Currency. "OCC Guidance — Note Sales and Loan Disposition." OCC, https://www.occ.treas.gov/. Accessed Jun 8, 2026.
3. Mortgage Bankers Association. "Commercial Real Estate NPL and Note Sale Resources." MBA, https://www.mba.org/. Accessed Jun 8, 2026.
4. Trepp. "CMBS Special Servicer Note Sale Reports." Trepp, https://www.trepp.com/. Accessed Jun 8, 2026.
5. Internal Revenue Service. "OID and Market Discount Rules." IRS, https://www.irs.gov/. Accessed Jun 8, 2026.

Disclosure & Compliance

Disclosure: This article discusses proprietary technology developed by Linton Global Technologies. Michael R. Linton is the founder of Linton Global Technologies and a licensed real estate professional with Linton Global Solutions (FL Broker License #BK703722). This content is for informational purposes only and does not constitute investment, legal, or financial advice.

Compliance Statement: All CREDDS and REOMind.ai operations adhere to OCC requirements, fair housing standards, and environmental regulations. Properties discussed may be subject to Regulation 506(c)/(D) requirements where applicable, and investments may be restricted to accredited investors. Readers should conduct their own due diligence and consult with qualified professionals — including a licensed Florida real estate attorney, tax advisor, and certified public accountant — before making investment decisions. Past performance does not guarantee future results.