A REAL Excel Model To Value a NPN

[Daniel E.]

I see this question come up quite often: How do I actually price / value a non-performing note? How much should I pay for "x" NPN?

Usually, people respond and ask for more details because of the various potential outcomes based on (among other items) collateral value, outstanding balance, and historical performance.

My expertise in is valuing non-performing notes, where I have acquired (either directly or through a Fund) $900MM+ in NPN's secured by everything from small SFR's to $100MM commercial real estate assets.

For my own portfolio acquisitions I have developed a model that, with a few simple inputs, shows you the main scenarios and your anticipated profits (given a purchase price). It is flexible enough to manage your deal post-acquisition to understand where you are operating at all times. It analyzes the various outcomes (borrower files chapter 7, chapter 13, accepts a DIL, short sale, foreclosure, re-performs and others) and focuses on assessing downside risk. 

It can be used to purchase 1 loan or 1,000 loans, however, at this point, is only suited for:

1) small-balance loans

2) LTV 85%+

3) Non-performing for min 6 months

For those in the seminar business:

How big is the market for something like this?

What is a fair price to charge for access to and training for use of the model? 

It is worth pursuing to make it available to the public?

I will point out that with NPN's, what you model pre-purchase and what actually happens tends to be quite different. You can only do what you can before a purchase. But with the right methodology, you can at least understand where you might be in the various scenarios -- and buy right.