What am I missing?
Please forgive me if this post is naive.
I have a friend who has been investing in real estate for years. Specifically, he is involved in non-performing loans in the New York and New Jersey areas. He always has told me how he buys mortgages from the banks at a significant discount, forecloses on the property, then takes the property to auction. He makes it seem so easy.
I've been given the opportunity, through him, to review a portfolio of mortgages being offered from a bank, and to make offers on anything I find interesting - there are hundreds.
The spreadsheet I looked at had the following info:
Property Address
Foreclosure Start Date
Original Balance
Current Balance
Corp Adj
Escrow Adv
Months Dlq
So for instance, here is an example (and the properties span the tri-state area):
55 Main Street, Newark, NJ
Foreclosure Start Date: 10/17/2013
Original Balance: $350,000
Current Balance: $322,000
Corporate Adj: -$5822
Escrow Adv: -$56,918
Months Dlq: 83
He tells me that the bank will probably accept an offer of 50-60% of the current balance (Again, he has done this dozens of times.) For the owner to become current they would have to come up with $322,000 + $5822 + $56,918. The property is probably valued around $375k. When foreclosed and brought to auction, the loan value and interest and penalties are more than the estimated property value - so I would most likely wind up with the house.
I suppose I just don't get it...what am I missing from this picture?
Please tell me why this is a terrible idea to get involved with.