Streamlining Bid Process

[Dyllon G.]

Hi Forum!

I am relatively new to the world of real estate notes. I am working with someone at the moment who has experience in this form of investing and they are teaching me the ropes. I am wondering if there is a more streamlined process or industry standard that is used to determine the price to bid on nonperforming real estate notes or put together something like a profitability profile. 

For example, I receive a portfolio of notes in an excel sheet with the loan number, loan amount, UPB, loan program and type, interest rate, term, etc. The typical way I might determine the price to offer is to use BPO value - asking price - costs (legal, interest, etc.) and derive a bid. Is there a way to streamline this process, software that isn't expensive, or a model someone might have already that would streamline the process?

Thanks in advance for any input!

Dyllon

[Dan Deppen]

There isn't an industry standard for pricing non-performing notes. Most people build their own pricing tool. A lot of it will depend on your preferred exit strategy and the type of npn's you are bidding. If you do find a good off the shelf calculator, just make sure you understand everything it is doing. Also understand npn's have a ton of volatility. So although you may calculate returns for various scenarios, what you are really trying to understand is the range of possible outcomes and then what the probability of those outcomes are. For example, my calculator assumes different timelines depending on the state. The timelines can vary based on whether the borrower decides to put up a fight. But I never considered the possibility of those timelines being extended due to foreclosure and eviction moratoriums from a global pandemic.....