Bill of Sale

Bill of sale in mortgage note investing is a written document that serves as a receipt for the purchase of one or more mortgage loans. It is signed by the seller after purchase funds have been received, formally acknowledging that payment was made and that ownership of the loans has transferred to the buyer. The bill of sale typically exists as Exhibit B of the loan purchase sale agreement (LPSA) and is one of the final documents executed in the closing process.

Role in a Note Transaction

The bill of sale occupies a specific position in the transaction timeline. Unlike the LPSA itself — which is signed before funding and creates binding obligations for both parties — the bill of sale is executed only after the buyer has wired the purchase funds and the seller has confirmed receipt. This sequencing is important for new note buyers to understand.

When reviewing a completed LPSA package before closing, new investors sometimes notice that the bill of sale is unsigned and assume there is an error. There is not — the bill of sale remains unsigned until the seller has received the purchase funds. It is a receipt, not a pre-closing commitment.

What a Bill of Sale Contains

A standard bill of sale for a mortgage note transaction is a brief document — often one to two pages — that includes:

• Seller identification — the legal entity name of the selling party
• Buyer identification — the legal entity name of the purchasing party
• Reference to the LPSA — the bill of sale references the governing purchase agreement and its effective date
• Loan schedule reference — a reference to Exhibit A of the LPSA, which lists every loan included in the transaction with property addresses, unpaid principal balances, and purchase prices
• Acknowledgment of payment — a statement confirming that the seller received the purchase funds
• Transfer of ownership — a statement confirming that all right, title, and interest in the listed loans has been conveyed to the buyer
• Seller signature and date — executed by an authorized representative of the selling entity

Why the Bill of Sale Matters

In practice, the bill of sale is sometimes treated as a formality — particularly in repeat transactions between established trading partners. However, it serves several important functions:

• Proof of completed transaction — if a dispute arises about whether the sale occurred or when ownership transferred, the signed bill of sale is primary evidence
• Servicing transfer support — when boarding loans with a new loan servicer, the servicer may request documentation proving that you are the rightful owner of the assets
• Legal proceedings — in foreclosure or other legal actions, courts may require evidence that the note holder acquired the loans through a legitimate transaction
• Audit and compliance — for fund managers and institutional buyers, the bill of sale is part of the acquisition documentation trail that auditors review

Best Practices for Note Buyers

• Always collect the executed bill of sale, especially on first-time trades with a new seller. Do not assume the seller will send it unprompted — follow up after funding to request the signed copy.
• Verify the seller entity on the bill of sale matches the entity on the LPSA and the entity in the assignment chain. Mismatches create documentation problems downstream.
• Store the bill of sale with the collateral file for each loan in the transaction. If you purchase a pool of loans and later sell individual assets, having the original bill of sale readily available supports a clean chain of custody.
• Use escrow for new relationships. When trading with an unfamiliar seller, using a third-party escrow agent ensures that both the funds and the bill of sale are exchanged through a neutral intermediary.