Verifying the Value of a Property

[Henley H.]

I am interested in purchasing notes, however, have concerns about being able to accurately value the property attached to a given note- the collateral.  As a former real estate agent who has completed BPO's, I understand their limitations in valuing a property.  A BPO will not unearth unseen problems that may exist, such as termite damage, excessive interior damage caused by an occupant, etc.  How do you manage this issue?  Thanks so much!

[Roma Korenyuk]

You cannot really "manage this", that is why you buy notes at significant discount. This way you have cushion to work it out and fix potential problems. As a note buyer, you cannot gain access to the property and cannot contact borrower. Everything you do to value the assets needs to be sneaky. There are many great tools, websites, and agents that can help you get as close as possible to the value. Don't forget, notes are an investment and every investment carries some sort of risk with it.

Also, if the house looks immaculate and manicured from the outside, then it is probably close to that on the inside and its maintenance. If the property looks like a crackhouse on the outside you should already be able to guess what the inside looks like.