Seller wants reasonable / fair price for his note -

7 Replies

is 70-75% of UBP reasonable? (Assuming credit is good, as is payment history, etc.) ??

Thanks.

This is a performing note (not CFD)? Property value? # of payments remaining? Interest rate? Location (judicial vs. non-judicial)?

I'd say 70-75% is a pretty good deal in general for a performing note but there are many other factors to consider. 

performing, 12 years - never missed payment, in town near Phoenix, AZ. 18 years pymts remaining.  5.5% IR (yea, not great).  house built in 2007.  upb 235k - house value 335k-400k

By my quick calculation, 70% of UPB would give you about at 10.5% yield (minus servicing costs, etc.). And 75% is closer to about a 9.5% yield.

Not a home run but it seems like a pretty safe (very well protected with collateral) and easy (not chasing the borrower) way to make a double-digit return. 

To answer your original question - yes, I think that is reasonable on the part of the seller. 

@Sean Mcintire

Is it 5.5% currently or 5.5% yield after discount?

If the latter There are funds out there (if you are accredited) where you can get anywhere from a 6-10% preferred return.

Make sure to do diligence including title report, BPO, confirm if it was 3rd party serviced, get pay history and servicing comments.

Originally posted by @Sean Mcintire :

is 70-75% of UBP reasonable? (Assuming credit is good, as is payment history, etc.) ??

Thanks.

 That's a pretty decent discount given the pay history, and should produce nice mailbox money. And in the off chance the borrower pays off or refis the loan, could be a quick ~30% return.