Need Info on NPN offers

[Clifton Jones]

I have two NPN's that I am looking to purchase. Both properties are in the process of foreclosure and I would usually handle these as a short sale. But, in these cases, I believe it would be easier to get the properties via purchasing the notes. So, I need advice on how to go about submitting an offer (i.e. % to offer, based on note).

The first note is a 1st mortgage and the lender has told me the payoff for the loan is $79,900. They are willing to sell the note, but they need to see my offer. The property is a condo worth approximately $59,000-$62,000 and there are past due condo dues in the amount of $3,500. The owner is currently working on a Deed-In-Lieu, so he would be willing to perform a Deed-In-Lieu to me, also. My first question is what else do I need to know about this loan to be able to offer a price? The second, if that is all I need to know, what would be a starting price to offer, and what should be the maximum price?

The next note is a 2nd mortgage. The homeowner owes $500,000 on the 2nd. The property is worth $630,000-$640,000. The homeowner is in foreclosure, but is willing to sell as a Sub-2, if we can purchase the 2nd mortgage. We have not spoken to the lender, so I do not know whether the 2nd is for sale on this property or not, but if so, what would be a valid price to offer? The 2nd lender is not going to buy out the 1st mortgage and then foreclose, so they will be pretty much screwed, if the house is foreclosed on.

Any help would be greatly appreciated.

[Dave Van Horn]

Clifton,
When making an offer on the 1st, we usually back into a number that's a % of UPB, after running a BPO, and backing out typical expenses the sr. lien would encounter, such as Realtor commissions(6%), property preservation & maintenance(1.5%), Taxes & condo fees due, Legal & recording fees, Closing costs(@ 3%), Opportunity Cost (6% lending to client base), carrying cost (1.5%) , and REO costs.
As for your partial equity second, we would offer somewhere between $70,000-$103,500 for the second based on a $630,000 value and pending more due diligence. For example, what is the reinstement amount on the 1st? Will the 1st consider a discounted payoff? What state is the property in? FL? What is the Bankruptcy status?
In reference to the last comment about the 2nd paying off the 1st, if the 2nd lien holder wants to protect their interest on their secured lien they can reinstate the 1st, foreclose and take title to the property, subject to the first mortgage (as long as it's not in redemption) just like you plan to. Anyway, hope this helps. Good Luck!

Dave VH