Note Analysis

[Joe Martella]

good morning all:

So I found a note that I decided to do some research on, but don't know if I am considering everything, so I come to you to get your opinions to see if I am on the right track.  The property is in Memphis, TN (Shelby county) -a non-judicial state. 

Seller is asking $750.00

UPB: $41,485

Original balance: 47,700 originated on 2/4/02

Interest: 8%

Mo pmt $350.01

Delinquent tax $1,102

BPO: $16,900

If I was to purchase this note and worst case scenario is that I foreclose I was thinking I would have about $6,000 wrapped up into this deal (750 note purchase, 1102 taxes, 5,000 foreclosure cost) with out any repairs to it.  Is this bringing me too close.  How good are the BPOs you receive.   I know you have to verify everything.   All information was updated on July 11,2015.  What do you all think?   If I can't sell it perhaps I can rent it to recoop my money.  Anyone know this area?

[Dion DePaoli]

There is a reason this loan is not be progressed through.  That reason is just unknown to you right now.  Could be the condition of the property and the capital needed to actually recover any advances made.  It looks less like a deal and more like a trap.  A trap you probably are not prepared to deal with.

As far as the BPO question, the only way to confirm a BPO's number is to see the report the number came from.  The data field "BPO" in the market place is a catch all for real property value.  The field can be a Seller's opinion, an AVM or a legitimate BPO.  In this particular case, with a low value property, I would assume it is relatively true and you should be able some type of confirmation with a couple mins of research on the address.  

I find it a little surprising the outstanding taxes are so low.  It could be the property has already been sold as a tax deed and redemption is running out.  It could be the on line portal doesn't show all back taxes.  

In addition, a low value property like this sounds tends to have some additional fines or liens from the municipality for negligence or nuances.  Those can run costs up pretty quick.

Anyhow, a loan with an original balance of $47,700 that has only paid down $6,000 in over 13 years that is trying to trade for $750 is likely not a loan you want to own.  My guess is the loan is not even secured any longer or has some defect relative to enforcement.  

This is not a learning opportunity.  It's a black hole.