Someone Wants To Sell Me A Note

7 Replies

Someone wants to sell me a note. They are asking PAR.

Thoughts?\

Note is for $62,500 for one year, 12% interest only.
Here is what they stated:

Good afternoon John,

>>
>>
>>
>> The buyer came in with $29,408.61 and has put on a new roof since buying
>> the property in November 2017. Can you please let me know the name you
>> want to use, personal or corporate, so I can prepare and endorsement and
>> assignment of mortgage.
>>

John,

You're a HML guy. Does this note meet your underwriting criteria? What's the LTV? If you had to take the property back, would you make or loose money? What is the collateral like? What's your usual rate? What do the docs look like?

In short, underwrite this like you were originating the loan, and make your decision from there.

If all you have is the email you posted,  run far, far away.

Hope that helps. 

Good luck, 

Jim 

Originally posted by @James C.:

John,

You're a HML guy. Does this note meet your underwriting criteria? What's the LTV? If you had to take the property back, would you make or loose money? What is the collateral like? What's your usual rate? What do the docs look like?

In short, underwrite this like you were originating the loan, and make your decision from there.

If all you have is the email you posted,  run far, far away.

Hope that helps. 

Good luck, 

Jim 

I have asked for the note. I asked them how much discount and they stated they want par.
The return is not bad...but I need to look close at the property.  

I just found where the note has already been transferred once..and it was recorded 12/1/2017.

@Jay Hinrichs ??

John,

I know you asked Jay, but I'll chime in as well.

The fact that its been assigned before isn't a problem. You need to make sure that your chain of title is good. Consider using your title attorney to check it. Especially look at any allonges. 

Also insist on original wet signatures on docs, don't rely on a lost note affidavit. If they can only produce a LNA, discount it heavily and plan on doing completely new docs  (modification or new note). The courts have been fussy about LNA's, and in some cases have wiped out the lien.

Make sure that your taxes and other potential liens are known or paid. Discount for any outstanding liens. 

You should get a payment history as well. For this note, it should be from origination.  Again, if it's current,  great, if not it's non-performing and should be priced as such. 

Anything you would want as an HML guy, should be what you get when you buy a note.

Personally, I like my performing notes more in the 18% range, but if this is a particularly clean, easy, low LTV note 12% ain't bad. The balance is a bit low, but given the low hurdle rate of capital today, you can probably make some money on it.

Hope that helps.

Good luck, 

Jim 

@James C.

Thanks. I found out the reason it was transferred so quickly. Original note was sold to the lady at the title company. She states she does some lending. I suspect she got it at a discount but wants full par. I am not inclined to jump at it unless she gives one although it is interest only for one year. They did provide everything including lenders title policy on the note. 12%..not bad..but no stellar. 

John,

So it's legitimate,  that's good news. I think I'd be inclined to do some due diligence,  and make an offer. The worst the seller can say is "no". If the do a bunch of notes like this it could be profitable for you, or you could be a source of funding for deals they have. 

Congrats on running this one down.

Good luck, 

Jim 

Originally posted by @James C.:

John,

So it's legitimate,  that's good news. I think I'd be inclined to do some due diligence,  and make an offer. The worst the seller can say is "no". If the do a bunch of notes like this it could be profitable for you, or you could be a source of funding for deals they have. 

Congrats on running this one down.

Good luck, 

Jim 

 They approached me because I have funded some deals through them. Normally I don't buy notes.

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