Non Performing note fair offer?

Tax Liens & Mortgage Notes
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Non Performing note fair offer?

Jodi GauthierBusiness Member
Real Estate Broker · Houston, TX · Member since 2016 · 87 posts · 47 votes

I am unfamiliar with nonperforming note acquisitions and would appreciate any advice or insight from seasoned note buyers on a current note I hold.  What would a fair offer be for a non performing note with the following criteria:

loan amount 195k

down payment: 25%

Interest rate: 10%

five year balloon

amortized over 30

originated 6/15/2018

no payments made by borrower (45 days late today)

licensed servicing company in place

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Edward B.
Investor · Midlothian, VA · Member since 2015 · 980 posts · 823 votes
8y

@Jodi Gauthier, to somewhat answer your question, I think that you are better off foreclosing on the property because it is worth much more to you than an investor that comes in. NPN investors are looking for outsized returns and will demand a return on top of their purchase price and expenses. You on the other hand are not looking for a profit since you presumably already made it and just want to be made whole. You can generally roll your legal costs etc into the amount they owe you (location dependent) so you will come out unscathed in the end. Also, just filing the foreclosure is usually enough to get someone who just plopped down $65k to start paying again.

To sell it, I would figure at least a 20%-25% discount on the UPB minus whatever the buyer thinks their expenses would be. That's a pretty big bite. I assume that you were hoping that it would go for relatively close to UPB but that does not leave enough reward for an incoming investor who can go buy an already performing note that returns 10%-15% with none of the risk and effort associated with an NPN.

Of course, you could always throw it up on FCI at the UPB and see what happens. God knows I've seen crazier stuff than that offered there.

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  • Debbie W.Pro Member
    Lindenhurst, NY · Member since 2017 · 75 posts · 35 votes
    8y

    THank you @Jodi Gauthier

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  • Edward B.
    Investor · Midlothian, VA · Member since 2015 · 980 posts · 823 votes
    8y

    @Jodi Gauthier, as pointed out, you can certainly go to the auction and bid on the property as well as anyone else. May not be a bad strategy since you will have way more information on the condition and value of the property than the foreclosure investors will. You just have to do the math and see if it is worth your while. You just can't set the auction price higher than what you are owed, though.

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  • Chad U.
    Investor · Boca Raton, FL · Member since 2012 · 1k+ posts · 1k+ votes
    8y
    Originally posted by @Edward B.:

    @Chad U., you are assuming that you get the property back at foreclosure, but that is not guaranteed. In fact, depending on the market, I'd say it may be unlikely. You are only entitled to what you are owed plus expenses and arrears and there are none with this property. Based on your own expense estimate, you would only be able to ask for $200k at auction and someone may think that a $260k property with only $200k reserve is a pretty good deal. If you paid $187k for the note then you may only make $8k...in 6-12 months.

     I didn't say I would pay that for the note, but there's a lot of stupid money out there that would. The last tape of NPN's I bid on with assets in TX, the seller countered back with prices higher than Total Payoff and in one case higher than both UPB and BPO!

    @Jodi G  you actually don't need a licenced servicer in the state of TX.  In any event, I would get an attorney to send out a Notice of Intent to foreclose letter.  That should at least get their attention.  

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  • Christopher Winkler
    Specialist · Dallas, TX · Member since 2014 · 900 posts · 392 votes
    8y
    Originally posted by @Debbie W.:

    Following. What is RLMO?

    Debbie, its RMLO, residential mortgage loan originator... You could have googled it and got a faster respons :-)

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