Asset Pricing - Make Sure To Understand Collateral

[Chris Seveney]

Just a PSA for people, recently I have been reviewing a significant number of assets on the market which to me are overpriced. One of the main reasons I am saying this is many of them have significant title defects that can be remedied but will also take significant time, effort and cost.

For example I was reviewing a performing 2nd mortgage recently but the mortgage did not include the legal description and metes and bounds as required by the county. So if we were to foreclose we would have to reform the mortgage and the property does have a lien junior to this which could also argue it. Is this the same price as a lien with no issues? The seller believes so but I do not believe so.

There is no FOMO in the note space - there will always be assets for sale so do not think you need to force a deal. If sellers are coming to small main street investors for assets that is because they cannot sell to larger investors. Do not fall into the trap of over paying. 

[Andy Mirza]

@Yael Maroko In my opinion, at the end of the day, the investor is the one that's ultimately responsible for what happens to his or her asset. Even when using 3rd parties to assist with due diligence, their mistake or oversight becomes your responsibility. Depending on your agreement or contract with them, you might go after them but at what cost in time and money and to what ultimate end?

All mortgages and deeds of trust need to have a legal description. That's something that you can check. Make sure that all the assignments of mortgage have the same legal description. Check your O&E report or online assessor records to make sure they match up.

Some descriptions are the metes and bounds type, which it sounds like is a particular requirement for the county that Chris was looking into. This would fall into the "very specific knowledge" category and it's very difficult to know every little detail of every law of every state and county. You do your best and, eventually, you'll get to deal with the "you don't know what you don't know" scenarios. That's the best anyone can do.