Question about Notes
Question is this:
Lets say that a homeowner bought his house in 1990 for $200,000 and he kept paying on it until his principal was cut in half, right at $100,000 by January 2015. Since then, the homeowner couldn't afford to make payments anymore. Now, here comes Steve and purchases the note from the bank at $ .30/ $1.00 at the end of January 2015. Steve placed his NPN note on FCI Exchange and is selling it for 50% or $50,000 off the principal balance left on the loan.
My question is as follows: Since the homeowner already paid $100,000 off the original $200,000 loan and Steve bought the $100,000 balance leftover with $30,000 and is hoping to sell it for $50,000, I assume that `Steve will get to make a profit of $20,000, but, I as a potential investor looking to buy the NPN off Steve for $50,000, what equity do I have in the house? Is it:
a) $150,000 ($ 100,000 + $ 50,000 off Steve)
b) $ 50,000 off Steve selling me the $100,000 balance owed for $50,000 ( .50/$1.00) or
c) Just $ 100,000 paid off by the homeowner between 1990-2015?
I would really appreciate anyone's input and I hope my question isn't confusing..
Thanks a lot,
Alin