Value-1st position 7% 10 yr CFD, 46% LTV, just under 8 yrs left?

2 Replies

Hello all, 

When selling a note what is the best way to determine value? 

The note is a 1st position 7% 10 year contract for deed at 56% LTV with 7 years and 10 months left.

Details:

Original purchase price: $138,000

Down Payment: Buyer put about 36% down ($50,000) 

Monthly payment: $1021.75 plus taxes and insurance. Has paid on time every month. 

UPB $74,359.00. Collateral value $160,000+. About 46% LTV.

House being financed is a brick front approx 2k sq ft lakefront home in Lilburn Georgia.

TYIA!

@John C.

I'm no expert, in the note space, but have been studying on it for quite some time.

If your investor buying the note wants to yield 12% he would work backward to figure his purchase price.

For Example: Term is 7.83 yrs, PMT 1021.75, Yield Desired 12%...  we solve for Purchase price using a financial calculator and we get $62,059.85.

This means his/her all in price would be $62,059.85 to yield the required 12%.

Lets say closing costs and boarding fees to take over the loan are $1k for numbers sake.  The investor would discount his offer price accordingly and put in an offer at roughly $61k so this the net yield would be the required 12%

So I would say for an investor that wanted a 12% yield your note would be worth 61k.

Hope this helps.

Jeff V

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