Note Buyers Please Help - Posted by Buddy

Real Estate Investing Real Estate Law
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Posted by Michael Morrongiello on June 28, 2001 at 22:29:33:

Buddy:
This is a tough one to call for several resons…

I am assuming that the seller held note has roughly $73K owed on it. So there apparently is some equity in the property right now and clearly a lot more with some renovations that will bring the property up to its $130K “top shape” value.

The questions I would ask myself if I were the note holder are:

  1. What state is this property located in? how complex, expensive, and protracted can the foreclosure action be?

  2. Is the market stable or are properties increasing or decreasing in value at this time?

  3. What is the nature of the work that is needed and the expense to bring the property up to its true $130K value?

  4. Do I have the intestinal fortitude to enter the foreclosure process and its uncertainties?

As for what the note is worth; this is largely going to be determined by the credit profile of the current payors, their credit scores, their past payment history on the note, are they up to date other than the balloon payment, their employment, stability, etc. - under IDEAL circumstances, assuming there is some positive feedback to the above issues, and with some restructuring of the existing note payment stream with the current buyer,(perhaps extend the balloon, increase the interest rate, etc.) that note might bring somewhere in the $60,000.00 + /- to perhaps $65,000.00 or that range.

Using the above as a yardstick, your offer of $60K cash, seems reasonable considering that they can avoid legal fees, court costs, potential damange to the home, and an interuption in income.

See if you make them see angle and take their temperture.

Another way to go, is if you cannot acquire the property, perhaps you can assist the payor on the note and the note holder to get the deal restructured and still achieve a large degree of cash liquidty through the SALE of the note. You then make a brokerage fee for your service.

To your success,
Michael Morrongiello

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Note Buyers Please Help - Posted by Buddy

Posted by Buddy on June 28, 2001 at 21:09:09:

Today I ran across a man who purchased a home in July of 1998 for 86K, put 11k down and financed 75K @ 8% amortized over 30 years with a three year call. Guess what, his loan is due in full on 7/15/2001 and he does not have the money to pay it off or the ability to obtain another loan. The note holder lives about 1000 miles away and does not want to forclose, but expects her full payment on 7/15 (approx 73k). She did not find out until the owner called her today that he was unable to make the baloon payment. She is willing to sell me the note and the owner is willing to give me the deed in lieu of forclosure if I buy the note. The noteholder feels that her note is worth full payoff, but I feel that if I buy it for cash, she is receiving substantial benefit and saving a lot of money trying to forclose on a mortgage from so far away. I want to offer her about 60K for the note. Any ideas? Is this reasonable? The property is worth about 100K as is or 130K in top shape. I want the property and am really willing to pay the full note balance but do not feel that I need to in this instance. What is the value of the 73K note that the noteholder will have to forclose on and ready the house to sell, pay a commission, do fix up etc? Remember, she lives 1000 miles away and does not want to fool with the whole forclosure process. I think 60K cash is an excellent offer. Thanks ! I value your opinions

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Re: Note Buyers Please Help - Posted by JT - IN

Posted by JT - IN on July 01, 2001 at 13:47:54:

Several thoughts here.

First, if the owner is willing to deed over to you in lieu of Fc, why wouldn’t he be willing to do the same to the gal holding the note? This could be a problem for you, if the note holder is interested in pursuing this angle, to avoid the cost of FC process.

Second, is the note holder willing to let you assume the note, with a renegotiated, and 3 additional years, to the baloon payment, at the face amount of the 73K, hopefully without making up any back interest or payments. She may favor this over taking the property back, whether through Fc or a deed over.

Sounds like a pretty good deal, either way, and one that you should get locked up pretty quickly, before a competitor steps in. Good Luck.

JT - IN

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here are some easy solutions… - Posted by David Alexander

Posted by David Alexander on June 29, 2001 at 01:58:47:

pay her face value for the note… 73k. But offer to pay her say somewhere between 650 and 850 month… and dont mention interest… just tell her you’ll get her all her money back.

Trade her a 73k note… that you buy or create at a discount.

Offer her full face value say half now and half later… she say how much later… you’ll say ten years… she say TEN YEARS? you’ll say you werent getting your money back that fast anyway… You say what are you thinking? She will probably say a year… you counter would five work… and settle on two to four… Never mention interest.

For the back half of the note that you owe her secure it with anther property or note.

Or offer All cash around the 60k mark… as said earlier. with No Payor you dealing on the property and her ability and willingness to foreclose.

David Alexander