Buying a non performing note from a bank

[Jacob G.]

I have a property that the owner went into bankruptcy. How do I negotiate with the bank on buying the first mortgage note from them?

[Ron S.]

Originally posted by @Jacob G.:

I have a property that the owner went into bankruptcy. How do I negotiate with the bank on buying the first mortgage note from them?

You don't.  A) the owner went into bankruptcy and as a result, all assets and liabilities are under the control of the bankruptcy court. You will have to seek permission from the court in the form of a hearing in order to remove the asset from control of the trustee. B) The chances of you successfully doing that are almost non existent. If there is any equity, the trustee will sell the property to pay other creditors after the first lien has been paid off. B) Assuming the one in a million miracle of "A" happening, there is no bank that is going to sell a first lien note to an individual investor. Why would they? If the property is attractive to you from a monetary standpoint, it's attractive to the bank as well, and they will more than likely wait the bankruptcy out and foreclose if the borrower is in default or, if the borrower isn't in default, just keep collecting those payments, which is what the bank does for a living. I get you said its a non performing note but again, they will just foreclose. They might have to foreclose depending on whether or not there is an investor on the note (Fannie/Freddie, etc.). They might have to foreclose if there isn't an investor but their policies and procedures or their state/federal regulators require them to foreclose.

If the bankruptcy is over and the borrower still has the property, see "B" above.

Yes...there are countless examples of people successfully buying notes from banks. Their situation is more than likely not your situation. Their deal is more than likely not your deal. Their relationship with the guy that sold them the note is more than likely not your relationship. There are too many pitfalls for us to sell notes these days to mom and pop investors. The due diligence and the liability associated with note sales to individuals are too great for the one off situation you are proposing. I sell non performing notes all the time but not to any schmo off the street. I'm not saying you are a schmo off the street but, you have not established yourself as an institutional note buyer with a history in buying notes, based on your post.