BiggerPockets

Hi, I don't want to say that the book value of the note, or the par value is irrelevant to you, but it almost is. What you you likely be looking at is much of the same aspects of a short sale. The capacity of the borrower to continue with the loan, the cost of the bank taking and holding the property and the value of the property. Selling the note is another way out of the deal for the bank, what they will accept may be close to the same as in a short sale, but consider any government incentive too, since to my knowledge there is no government program to assist banks in selling notes.

Now, if you're buying the note as a means to avoid foreclosure, with consent of the borrower and the note will be modified for some deal, your purchase price for the note will probably be close to the payoff, but again, what is the alternative for the bank? They will cut the book value to a point where they might be with an alternative loss.

Your purchase of any note will likely be based on your yield requirement, the collateral, the credit history and payment history of the borrower and the maturity. These are considerations that the buyer needs to look at and has nothing to do with the book value the bank has. Good luck! Bill

Note sales do not require a BPO or an appraisal, but if the loan is in default they bank will want to know what the alternative is, so they will probably go down that path first as a customary operation to cure, their first thought is usually not to sell the note. OTH, many notes are bundled and sold in blocks and some may be cherry picked, but this is usually accomplished in a more institutional manner or with companies or brokers that participate.

Originally posted by Financexaminer

Selling the note is another way out of the deal for the bank, what they will accept may be close to the same as in a short sale, but consider any government incentive too, since to my knowledge there is no government program to assist banks in selling notes.

Bill,
You have to factor in loss FDIC loss sharing agreements. This is really an issue with participation loans, when one side has one of those handy agreements with Sheila Bair

I sent several unsolicited offers to buy the note and trust deed to several different lenders. My offer was acknowledged but declined. Since then I learned that Fannie will not sell and I know a couple of them were Fannie.
It is a highly specialized business and you can't just trust the guru's out there who say it is easy as pie. The truth of the matter is that you will mostly be stuck with pools of whatever they have to sell IF they are selling. My understanding is that you can target specific notes but the success rate will be low.
Donna Bower teaches a method of starting a SS then switching to just buying the note. I think she said they have a 30%notes/70% SS average. But the price point will be the same as with a SS so I don't see the point.

Originally posted by Jeff Tumbarello

I would ask your guru's to provide their 1040's that show their income comes from buying and selling notes..

A local guru was holding a free educational seminar where he was giving away a free copy of his best selling book. I had nothing to do that night my wife and children were away at granny's.

I did not want to rain on the guru's parade, but he kept stating that his book was a best seller, so I asked on what site? I was met with a glare, and he moved on to the rest of the educational seminar.

Later during the powerpoint he showed one of his killer deals, I recognized the property, as I own the building next door.
I was always wondering who was the evil owner next door, he touted the $100K purchase price the $50k of renovations, the 50K cash out at the refinance of the property with an appraisal showing $50k in equity left in the deal.

Sounded oh so great except that the area is zoned only for a 3 units, he had created a 5 unit, and his rents which I know, barely covered the expenses and I would bet do not cover the mortgage in the present market. The area is a management challenge, the rent must be collected face to face (my office is down the block).

Either way I knew a secret that no one in the room knew, this cash cow (his description) was two years behind in the tax payments, in our area the city is totally inept and allows folks to get 10-15 years behind.

During the break I asked him to give me his book so I could go early, or I would pester the crap out of him with specific questions regarding his real estate dealings, and do a search on my laptop now that I knew the name of his LLC.

He gave me the book, a pen, a pad of paper, and gave me a six pack of spring water bearing his real estate guru brand name.

Later I found out from another participant whom I traded cards with, that he collected $7000 from 6 participants who wanted to be rich and escape the rat race that very night.

Not bad money if you can get it. Like P.T. Barnum said many years ago "There is a sucker born every minute." I would add, there are many suckers created at every free educational REI seminar.