Owner sells home. 1st Note current. 2nd Non-performing. Now what?

[Amber Bennett]

Good day, All! 

New to this whole note buying business and I have run across an interesting scenario that I'm hoping you all can help me out with. I just bought a non-performing 2nd note on a home where the 1st note is current, but I just found out the house is under contract and listed for 189K.

1st note balance is 196K.

2nd note balance is 51K.

Market Value is 232K, but it's listed at 189K.

To me, the math just doesn't add up. If this house sells for the listed price, what happens to my 2nd note?

Thanks In Advance, 

Amber

[Jay Hinrichs]

well I am not a NPN expert by any means but this is an interesting question so this is my best guess's

1. the 189k is all the property is worth.. in reality.. so that's why its listed at that price.. and probably in contract for around that number.

2. the seller does not realize you own the 2nd and who ever sold you the second probably realized the value was not there and unloaded it to you..

3. your in the drivers seat in that this deal can't close without you signing off on your payoff.

4. this is a short sale .. the first lender will be asked to take a short and will usually only cooperate if you as the second take no more than about 5k for your position.

5. if you paid for than a few grand for the 2nd your in jeopardy.

6. if you don't cooperate and the 2nd is in default you can foreclose payoff the first and deal with the asset..

7. if the seller gets frustrated they just walk and squat stop paying on the first it forecloses and you either pay it off or it wipes you out completely .

either way.. 2nds for most folks are pretty risky.. unless of course you paid next to nothing for it and its just mad money.. that you can easily lose. and just chalk it up to well that did not work.

@Chris Seveney is an active NPN investor he may have a different or more thorough take on this situation. I personally don't do NPN and except I will buy the occasional first but don't do any thing with seconds.