$28k asked on a $71k balance, in a town with no comps I can find

I've been circling notes for about a year without buying anything, which is normal for me. A small seller sent me a one-off: balance $71,400, borrower hasn't paid since March 2024, ask $28k. Single family, 1,340 square feet, built 1968, in a town of about 4,000 people six hours from me.

What I have: the note, the recorded deed of trust, a payment history that looks complete, and a tax record showing an assessed value of $84,000. What I don't have is any sense of what the house is actually worth. Two sales in that zip in the last year that I can find, one of which was clearly a family transfer. I've also read that some states don't publish sale prices at all, and I'm not sure whether this is one of them.

The seller says he's had the note four years, it paid fine until 2024, and he doesn't want to deal with a default. That sounds honest and it also sounds like the story anybody would tell.

So the question I can't answer: how do you underwrite recovery when you cannot value the collateral? Everything I read says the discount to value is the whole protection. If I don't know value, I don't know if $28k is a 33 percent basis or an 80 percent basis. Do I just pass on rural, or is there a way people actually get a number in a town this small?

6 replies

1omar_haddadActivePRO11

Also pay someone to look inside, or at least walk the outside carefully and photograph it. A 1968 house that stopped being maintained when the payments stopped can have $30k of roof, furnace and water damage sitting in it. That's the number that kills rural deals, not the comps. I've walked into two where the ceiling was on the floor.

1angela_burkeServicePRO6

verity's broker is right and I'd add one thing. In a town of 4,000 the question isn't just what it's worth, it's how many months it takes to sell at that price. My team works a couple of small markets and 180 days on market is a normal answer out there. If you end up owning it, your money sits.

1bmoreno23AB1B

I'm starting from zero so I'm just following along, but the four-years detail stood out. He held it while it performed and is selling now that it doesn't. So he's selling you the work. Which is fine, that's the whole strategy as I understand it, I just think it means his "sounds honest" story and a low price are the same thing.

2mikeoconnell7SP2APRO6

anchor, on the sale price question: recording practice and whether prices are public varies by state, and roughly a dozen states don't disclose them at all. So instead of trying to figure that out from here, call a title company in that county and ask what they can pull. They'll tell you in one call whether you're in a non-disclosure state and what they can give you instead.

4brandonlee36Passive

The thing that breaks in small portfolios out in places like that is nobody local will service, manage, mow or fix anything for a reasonable price, because there's nobody there. Before you value the house, find out whether you can hire two people within thirty miles. If you can't, $28k on $71k stops mattering.

$28k asked on a $71k balance, in a town with no comps I can find

6 replies