Buying non-performing notes (deed in lieu)

6 Replies

Hi. I'm learning about buying notes and was curious about non-performing notes. If I buy a note where the borrow is willing to do a deed in lieu of foreclosure, what is involved in that process? How do I profit from it? Do I create a new loan repayment plan or go through a process to sell the property? 

I came across a note that has $27,000 unpaid balance and selling for $2000. Got me curious why it would be sold for such low amount.

@Rafique Karim
There could be many reasons
1. Is it a 1st position lien
2. Are there taxes or other super liens on the property
3. What is the property worth?
4. What state is the property in ?

My guess would be the property had a low value and also owes a boatload on taxes which you would be responsible to pay

@Chris Seveney

1. It's 1st position lien

2. That's great advice. I've not yet checked on any other liens.

3. So far I've seen online, property value is around $55k but that definitely requires more definite valuation.

4. Property is located in Michigan.

Is the property currently being lived in? 

Are you buying the note directly from the bank ?

@Cedric Wilson

It's not through a bank but through an online notes trading platform. I've not done any due diligence so don't have much details. I was curious what the buyers do when when they purchase such notes and the borrower wants a deed in lieu. 

@Rafique Karim
If the seller notes the borrower wants to do a DIL and only wants $2k that sends up red flags as they could take the DIL and then get an agent to sell it or sell it to an investor.

By the way I am not far from you if you want to get together for coffee sometime let me know

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