Purchasing a note with no payments

[Michael Vaughn]

Hello fellow BP investors. I have gotten a lead to a deal that is basically buying a note that was just created a month ago, buyer gave down payment of 25,000 on a house sold at 75,000, and the seller is now trying to sell the note (50,000 balance), before any payment, and is willing to sell it at a discount (I believe its gonna be around 10% discount). Something does not feel right to me. Why would someone sell a 50 grand note for 45, a month after the sale? the rate of the loan is 11.5%. Is this a scam?

[Rodel Usam]

Hi Michael,

Sounds like this could be a great deal..  There's many reasons why a person would want to sell a note at a discount.  Most likely their profit is already pocketed and they are willing to lose a little to get lump sum payment upfront, then he/she can move on to the next deal, whereas an investor will have to wait years to be made whole again, then to finally start receiving net profit.  To be certain, you would need to take a good look at the originated note to be sure you can collect the collateral if the borrower/buyer defaults.  Usually without a good pay history, you could get deeper discount.  Then you need to make sure the collateral is indeed worth what the home sold for.  All part of your due diligence when buying notes.  Take your time and ask all the questions you need to and maybe bring in an attorney if you're still not sure, to review the paperwork.