A promissory note is the quintessential "negotiable
instrument" in a legal sense – that is it may be
bought and sold. The concept sounds simple enough, yet in the world
of commercial real estate, the sale of a promissory note secured by
real property can evolve into an extremely complex matter. Much
depends on the nature of the underlying collateral and its use
(office, retail, residential, hotel, land, industrial), but also
the structure of the deal.
When a purchaser buys a promissory note secured by real
property, it really has to perform its due diligence on the loan
and the property. The extent of the due diligence is initially
determined by the purchaser. Ultimately, it becomes a matter for
negotiation between purchaser and seller. While common ground may
include recent financials on the property, the loan documents,
relevant third-party studies, any evidence of default by the
borrower or notices of default, acceleration notices issued by the
seller/note holder,
