Non-performing note exit strategy

[Daniel M.]

After reading several books about note investing and attending some local REO networking events, I'm still not clear about the exit strategy when purchasing non-performing notes.

Let’s say there is an offer by a hedge fund for the following property:

Principle Balance: $34,255
Payoff: $46,035
Property value: $208,650
LTV: 16.42%

The hedge fund asks for 70% of the payoff.

My general question in NPL with equity would be; how would I maximize profit. I assume, if the owner doesn’t catch up with the payment, in case of foreclosure, I would probably get back the amount I have invested but every excess amount would go to the owner.

I could do a deed in lieu but why would the owner do that if he could wait for the foreclosure and profit there?