Help - What Is Normal Rate On Delinquent Notes?
Hi,
I recently became the purchaser of certificate of a piece of property that was in foreclosure. I outbid the first lien holder at the public auction at the courthouse. Now, a second lien holder has filed intent to redeem.
He has contacted me and is interested in selling his interest to me. However, I think his price is high. What is the going rate for notes that have been delinquent for over 18 months? This note was a second and had already been sold once after it was delinquent and this man bought it in what he called a "batch" of deliquent notes.
I want to be fair, but I don't want to double or triple his money on a 10-15 day investment.
Any Ideas?
ARV is after repaired value.
When dealing with banks this is the most important number. You can generally pick up a property for about 80-85% of this number.
However, it is important to know the ARV and repair cost so that you can analyze the property as an investment.
I still don't know the as-is market value for the property. You should also check into who owns the loan. Is it a private guy that stands to lose his investment or do they have the ability to redeam the property to protect their investment.
There is likley no chance that you will be able to find out what they paid. At first glance the $60k offer is a decent offer but I would always haggle more.
Give us some numbers!
What was the 1st total owed?
What did the 1st bid at the sale?
What was your winning bid?
What are the terms of the sale?
How much is the 2nd?
How much did the 2nd offer to sell to you for?
What is the property's as-is fair market value?
Repairs? How much $$?
What is the property's ARV?
Without the numbers how can we help you analyze the offer? The going rate is only what someone is willing to pay. Know your market, know your property, and know the numbers.
GOOD LUCK
The principal on the first was $350,000 but had nearly 60,000 more in interest and fees. The first bid $409,109.45. The county requires a bid of $25 dollars over. I was the only bidder at $409,134.45. In CO the Redeemtion period is 75 days for the owner, 10 more days for the second, 5 more days for the third and 5 more days for a fourth. All parties interested in redeeming must file intent to redeem 60 days after public auction. The second was for $190,000 with $34,000 being due in interest bringing the total to $224,000. The second offered to sell to me for $60,000. The county has the property appraised for $600,000, but I have been told that actual value is around $630,000 to $650,000. This would be value in top shape. My estimate is that there is $70,000 of repairs needed to restore the property to this value. However, I am not looking at this for a short term investment, but rather a long term investment and I can do the repairs myself for significantly less. However, this plays into the amount that the second would have to pay to flip the property.
As far as the ARV, I am not familiar with this term. This is the first time I have tried to do this and am experiencing a huge learning curve.
I am trying to find out what the second may have paid to obtain his position so I can better negotiate with him to buy him out.
Thank you for your help.
[ Edited by jetadoll on Date 10/24/2004 ]
Quote:
I want to be fair, but I don't want to double or triple his money on a 10-15 day investment.
This is a great example of what I call counting the money in the other guys pocket. What he is making is irrelevant to you. The only question is what is it worth to you to buy this position or not.
So you bid $410,000 on a property you think is worth $650,000 max. Plus your $70,000 rehab budget and a 10% hold means you are in for around $520,000 or about 80% of value. That looks pretty close to market to me. In other words I would want at least a 20% discount to take the rehab risk, the market risk, etc. etc.
So if you are in at pretty close to your max number then how much can you afford to give the second? How much more are you willing to have in this deal? If it were me I'd be getting pretty close to my max number right now.
The real question is how likely is the 2nd to cash your position out? Not very. I'd offer him $10,000 to go away but otherwise I'd take my chances.
The ARV is $650,000. My problem is that he is showing the house to potential buyers and entering the house as well as taking items from the house so he can show it (Example: Remote for the electronic gate). Basically, he has a very small investment in the property ($10,000) and is riding on my $410,000 until he has to redeem me. That won't occur until the end of November. Any Ideas.
Thanks