Finally!!!!!!!! My FIRST DEAL EVER!!!!

[Alin Toncz]

I finally put up an offer and was accepted. I placed a $ 2,000 bid on a NPN of $ 92,000, but the house has a value of only $ 65,000 max. I'm thinking if I can get the current occupant to agree with a restructured and lower principal balance that I can turn this into a Performing Note. If not, I can still foreclose and sell the house 20-30% below market value and still make some money. This is my first deal, hope it all goes well....

[Dion DePaoli]

Allin,

Congratulations on getting into a deal.

The purchase price was $2k and the RE Value is $65k and UPB is $92k. Is this a first lien or a second lien? What state is the subject property in? Also, when was the last payment made on the borrower's account?

That is an unusually low purchase price for a first lien worth $65k.  

FCI does not do any title work.  That is the title company which the report is from.  I also was not aware that FCI does any level of real due diligence which includes reconciling the title report that was ordered or any other level of file review.  I have heard some of that misunderstanding before.

To clean up some of your jargon:

Mortgagee = Lender
Mortgagor = Borrower
You are the Mortgagee when you buy a loan.  

You would not hire a "property inspector" to inspect the home.  More like an agent or appraiser.  As a Mortgagee you have limited rights to enter the property.  So property "evaluations" are typically exterior only while the property is occupied.

If a borrower vacates a property you may NOT simply rent it out.  It is the borrower's property still NOT the Mortgagee's.  The borrower must still be foreclosed or turn over the deed.  

Offering cash for keys is a method of getting the borrower to sign over the deed in lieu of foreclosure.  Often times called a DIL.  If the borrower does DIL you can enter the property but that doesn't mean you will not still have to foreclose.  Getting the property deed is not the same thing as having clear title to the property.  

Anyhow, back to your asset that you purchased.  I am concerned for you that price is too low and there is serious defect in the loan you purchased.  That loan, if first position, should have been north of $23k.  So something here doesn't line up well.  Is the property in disrepair, in which case it is not really worth $65k until it is fixed up?  If so, what is the value of the property as is, right now?

While every once in a while a patient investor can pick off a pretty good deal in NPN's, they still follow a general market price level. When a price is excessively low, like in this case if the lien is in first position, then the low price should be a red flag that something is wrong and you should look for that defect and ensure you can deal with it.