When to do which parts of due diligence?

[Lucas Allmon]

So, say I got ahold of a tape, and filtered it down by my criteria that I want out of a note. When do you do what parts of your due diligence?

It seems as the DD is AFTER you make a bid on a note, while you have a window open for due dilligence?

Do you order an O&E Report right away, or do you do a BPO first in order to make sure it even makes sense to get the title report? Or would you estimate the Value of the property online, and then get a BPO if you needed more clarification?

Is this point when you might talk to your potential JV partner, or should you have that waiting in the wings?

I'm not quite understanding the flow of how one might go about buying a note, and all the books I have read so far are a bit nebulous on this. They all seem to have good info about differing parts of the note flow, but not what the 'order of operations' is.

And again, thanks for all your help. :)

[Adam Adams]

You make some assumptions. I assume the title is clean. I assume the water bill is current. I assume the property is in OK condition. I place my bids based off of just two things. What do I think the rough value of the property is and are there any delinquent taxes. Then I lowball it a bit because it's a dance and I like to tango with offer, counter offer, counter the counter offer, etc.. Finally we agree on a price.

THEN I check the values of the property by doing visits. Sometimes I pay for two BPOs. Then I pay to have the taxes researched. I pay for a title search. I contact the utilities and code enforcement. Finally I have my attorney review the digital collateral and title search and give me his opinion. I pretty much put two sets of eyes on everything, not counting my own because for me getting this valuation and final price is the most important part of the deal. Then I take all the deficiencies I find and I fade my bid. 

Hey, the water bill is over $1100 in a state that I'll have to pay for it, I need to fade my bid. Hey, the roof and windows are shot and need to be replaced, I need to fade my bid. Hey, there is a civil judgement against the seller for $7,000. I need to fade my bid.

Rarely is my initial bid on an asset the same as what I pay. Most of the time I am fading it. Sometimes I overreach on my fades, but I am usually buying in small pools, so what I can't get a fade on with this asset, I can get a really good fade on the other asset. I even got a $5000 fade once because I told the seller that I MIGHT have to pay for a legal issue that MIGHT be associated with the property. I wound getting that property so cheap that the county required an affidavit from me and the seller on why it was so much lower than the appraised value before they would record the deed. 

Anyways, the indicative bid is just a bid. It's not the final sale price.