NPN Story: Double Header Short & Sweet

I wrote a blog post on what it looks like when things are easy. Not all borrowers fight. Not all foreclosures have overly complicated title or other issues.

Lots of borrowers choose not to fight for various reasons and some foreclosures happen without delay. Here are two stories of quick foreclosures (I wish all of them were like this!).

Vacant Home

During the due diligence phase of the acquisition of a non performing note backed by a residence in Petersburg, VA, we read in the servicing comments that the property was vacant.

This is almost always great news because it’s a huge indicator that the borrower has given up on the property and won’t fight for it. (Here’s another story of a quick foreclosure on a vacant home.)

For delinquent borrowers, the house represents a free place to live. Leaving the house means they’re giving up the main benefit of occupying it.

Borrower Not Going to Fight

Further research indicated that the borrower had moved to a nursing home. The borrower’s son was an authorized point of contact and indicated that he’d be willing to deed the property back to the lender.

It was good that there was a point of contact that would be willing to discuss a resolution to the default. We’re always trying to work something out with our borrowers but, unfortunately, most ignore us and try to stay in the property for as long as they can without paying anything.

Our numbers looked good and the rest of the loan passed due diligence so we purchased it.

Trustee Sale During Interim Servicing

We never got a chance to reach out to the borrower’s son. The property went to trustee sale during interim servicing and sold to a third party bidder.

This NPN had the quickest resolution of any I’ve ever purchased!

Final Numbers:

Purchase Price: $52,000

Total Cost Basis: $52,450

Sales Price: $95,100

Net Sales Price: $94,375

Net Profit: $41,925

Days Held: 38

Return on Investment (ROI): 79.9%

Annualized ROI: 767.8%

Another Vacant Home

We didn’t discover that the Houma, Louisiana home backing another NPN was vacant until after we bought it. Due diligence had come back clear and our numbers were good so we bought it.

After a hurricane went through the general area, we had a local real estate agent go by the location to check it out. The agent could see inside the windows that there was no furniture or anything else inside. The house had been cleared out.

Nothing to do but wait for the sheriff’s sale! No drama with the borrower, no risk of a bankruptcy filing to stop the sale.

Sold to Third Party

The sheriff’s sale took place without any issues. Not only that, a third party bidder won the auction. A second asset sold without us having to do anything. Like I said, I wish all of our NPNs were like this!

Final Numbers:

Purchase Price: $148,500

Total Cost Basis: $156,667

Sales Price: $200,000

Net Sales Price: $190,830

Net Profit: $34,164

Days Held: 91

Return on Investment (ROI): 21.8%

Annualized ROI: 87.5%