Questions About Making an Indicative Offer

#1 · March 7, 2024, 4:02 pm

Should your indicative offer be based solely on what your financial analysis projects the price you need to pay so that you attain your objective returns, or do you factor in what the calculated fmv of the note is? What resources should be used to come up with your indicative offer and should you leave room in anticipation of negotiation? Is there a specific format that the offer should be presented?

#2 · August 26, 2024, 1:37 pm

Quote from Bill on August 26, 2024, 1:37 pm
Bids and purchase prices are based on numerous factors. Every note investor views these factors differently to determine their bid amount and purchase price amount. It's based on their experience, their strategy and their note portfolio. Depending on your strategy with non-performing mortgage notes; are you going to need to go through the foreclosure process and or the eviction process to get the borrower's attention or get possession of the property.

Non-Performing Mortgage Notes:

When bidding on and purchasing non-performing mortgage notes, it's based on a percentage of the loan's unpaid principal balance. To determine what percentage you're comfortable bidding on a non-performing mortgage note, and what you would purchase it at, these are some factors that will help you determine that:

What is the reputation of the note seller.

How is the collateral documentation.

Is there a loan payment history with the file.

Are the property taxes current, and are there any other liens on the property that you will need to address.

If it's a 2^ndmortgage, what is the status of the 1^st mortgage. Is it current, is it delinquent, is it in foreclosure or is it unknown.

What's the value of the property, and what is my equity position, is there equity covering the mortgage.

What state is it in, is it in a Judicial Foreclosure State or is it in a Non-Judicial Foreclosure State. What are the foreclosure and eviction costs associated with that state, and what is the timeframe for the eviction and foreclosure process. Are there extra fees associated with the sheriff sale.

What are the loan servicer's cost to service the loan.

Reperforming Mortgage Notes:

When bidding on and purchasing reperforming mortgage notes, it's based on the yield (TVM - time value of money) that you want, and the yield that the note seller is willing to sell it at. I use the 10bii financial calculator to determine my yields, and in my opinion the 10bii financial calculator, is a note investor's number one tool. The app cost $5.99.

To determine what you're comfortable bidding and purchasing a reperforming mortgage note at, these are some factors. These factors influence the yield I would buy it at:

What is the reputation of the note seller.

How is the collateral documentation, including their loan modification document.

Is the borrower set up on ACH payments. Are you listed as loss payee on the homeowner's insurance policy. If it's a 2^ndmortgage, and you're not listed as loss payee on the homeowner's insurance policy, do they have the homeowner's insurance information. If it's a 2^ndmortgage do they have the homeowner's authorization form for the 1^stmortgage lender.

What is the seasoning on the loan & how is the payment history on the loan.

What's the value of the property, and what is my equity position, is there equity covering the mortgage.

The state that it’s in, just in case the loan goes non-performing, and I need to take legal action.

What are the loan servicer's cost to service the loan.

Everything is negotiable in this business. The more data and information that you have, will help you get comfortable with your bid and purchase price offers. I hope this helps.

Bids and purchase prices are based on numerous factors. Every note investor views these factors differently to determine their bid amount and purchase price amount. It's based on their experience, their strategy and their note portfolio. Depending on your strategy with non-performing mortgage notes; are you going to need to go through the foreclosure process and or the eviction process to get the borrower's attention or get possession of the property.

Non-Performing Mortgage Notes:

When bidding on and purchasing non-performing mortgage notes, it's based on a percentage of the loan's unpaid principal balance. To determine what percentage you're comfortable bidding on a non-performing mortgage note, and what you would purchase it at, these are some factors that will help you determine that:

What is the reputation of the note seller.
How is the collateral documentation.
Is there a loan payment history with the file.
Are the property taxes current, and are there any other liens on the property that you will need to address.
If it's a 2^ndmortgage, what is the status of the 1^st mortgage. Is it current, is it delinquent, is it in foreclosure or is it unknown.
What's the value of the property, and what is my equity position, is there equity covering the mortgage.
What state is it in, is it in a Judicial Foreclosure State or is it in a Non-Judicial Foreclosure State. What are the foreclosure and eviction costs associated with that state, and what is the timeframe for the eviction and foreclosure process. Are there extra fees associated with the sheriff sale.
What are the loan servicer's cost to service the loan.

Reperforming Mortgage Notes:

When bidding on and purchasing reperforming mortgage notes, it's based on the yield (TVM - time value of money) that you want, and the yield that the note seller is willing to sell it at. I use the 10bii financial calculator to determine my yields, and in my opinion the 10bii financial calculator, is a note investor's number one tool. The app cost $5.99.

To determine what you're comfortable bidding and purchasing a reperforming mortgage note at, these are some factors. These factors influence the yield I would buy it at:

What is the reputation of the note seller.
How is the collateral documentation, including their loan modification document.
Is the borrower set up on ACH payments. Are you listed as loss payee on the homeowner's insurance policy. If it's a 2^ndmortgage, and you're not listed as loss payee on the homeowner's insurance policy, do they have the homeowner's insurance information. If it's a 2^ndmortgage do they have the homeowner's authorization form for the 1^stmortgage lender.
What is the seasoning on the loan & how is the payment history on the loan.
What's the value of the property, and what is my equity position, is there equity covering the mortgage.
The state that it’s in, just in case the loan goes non-performing, and I need to take legal action.
What are the loan servicer's cost to service the loan.

Everything is negotiable in this business. The more data and information that you have, will help you get comfortable with your bid and purchase price offers. I hope this helps.