A $14k note resolved by deed in lieu and sold for $46k five months later is a case worth studying
Paper notes confuse a lot of people for months, and the cleanest way to learn them is to study the smallest deal that still has real collateral behind it. Take a note with a $27,400 balance, last payment in mid 2022, secured by a small two bed frame house in a working town where the rented version goes for around $700 a month. Say the note trades at $14,000. The reason a deal like that works is that the borrower does not want the house. Picture someone who moved two states away with no plan to come back and has ignored the prior servicer's letters for a year and a half. When the new servicer's introduction letter goes out with an actual phone number on it, that borrower often calls within a week. What she wants is to stop having her name attached to the property. So the resolution is a deed in lieu of foreclosure instead of a filing. Her signature and a release of the debt, plus $2,500 in cash for keys because there is still furniture inside and it is better that she clears it out properly than that the holder hauls it. Delinquent taxes of $2,100 get paid. Attorney and title work to clear the deed and confirm no other liens runs about $1,800. Total in: $20,400. Sold as-is to a local landlord for $46,000, closing at month five, the net lands somewhere around $23,500 after selling costs, which on a sale like this run roughly 6 percent. The part that nearly breaks a deal like this is the title work. A common scare is an old judgment against a person with the same last name as the borrower, and for a week or so the holder believes they have bought into a mess. Usually it turns out to be a different person entirely, but if it had attached, the holder would be staring at a foreclosure that was never budgeted. What to keep from the case: buy small enough that you can afford to be wrong, and call the borrower early with a real option instead of just sending demand letters.
