Here's the senario: Sam Seller sells his home to Bob Buyer for 50K, but Bob only has 10K right now so Sam creates a seller financed note for the other 40K. Two years from now Sam decides he doesn't want the note anymore and would rather have cash so he sells the note to an investor for a discount. The investor wants to buy another note at a discount, but doesn't have the money. Can the investor get a loan by using the note (that he just purchased) as collateral?

This would be an individual decision by each financial institution based upon its apetite for risk. Have you discussed this with your banker?

Yes, it could be collateral. But Pales response is correct, you'll have to find a lender who wants it as collateral.

Areas that would have to be considered include the value of the Note being offered, the value of the home collateralizing it, the payment history of the borrower, insurance status and more. It would not be an easy loan to do and the original documents would need careful review by counsel to ensure they are valid, meet the lenders requirements and that they are able to be pledged.