A nine month workout timeline can run to 26 months when bankruptcy enters the picture

The prior filings check is the sentence worth writing down. Whether that's something an investor can pull themselves from the federal docket, or something better handled by someone who does it regularly, is the process question to answer before any money is ever at risk.

On the buyer side of a distressed note sale, 26 months of a house sitting with an owner who can't pay taxes usually means deferred maintenance that never shows up on a drive-by. The real question in a case like this is whether the fund that bought the note at a discount did an interior inspection, or was pricing off the same drive-by value the original buyer used.

Reading this as a land person, the thing that jumps out is that your $118,000 collateral value never got tested. You paid for an asset and then spent two years unable to touch it. That's a different risk than the one I'd have expected going in.

So the force-placed insurance, you were paying to insure a house you didn't own and couldn't enter? I'm new to this side and that piece confuses me.

I'd argue your real mistake was earlier than the timeline. At $37,500 on $118,000 you had a 3x cushion on paper and it did nothing for you, because a cushion only pays out if you can reach the collateral. Price on how fast you can get to it, not on the ratio. I do fast thin deals and I've learned that duration is the whole risk.

Flint, that reads a bit clean. Ledger's cushion is exactly why the loss landed at $6,200 instead of $25,000, since it is what let a fund pay $34,000 for a stayed file. The cushion capped the loss even though it did not produce the win.

A smaller version of this shows up often. An operator buys a note, the borrower stops answering, and it turns out the seller never recorded the assignment out of the originator's successor. Six weeks and roughly $1,900 in legal work to get a corrective assignment recorded before anything can be filed, and recording requirements for that vary state to state. Cheap compared to twenty six months, but the same lesson: check what the seller says against what the county shows.

Genuine beginner question. When you say you sold the note to a fund, is there a normal place that happens, or do you just call people you know?

Two years of advancing taxes and insurance on a property with an occupant the holder has no relationship with is the part worth flagging for anyone reading. On the management side that is the definition of cost with no control. The useful question in a case like this is whether an interior look was ever obtained, or whether every inspection stayed exterior only.

The number I want is your monthly carry. Roughly $2,900 plus $1,100 plus servicing spread over 26 months is around $250 a month before legal. If someone models a nine-month workout, that carry looks like noise. At 26 months it's the deal. I'd rather see this posted as a carry problem than a bankruptcy problem, because the next one will get slow for some other reason.

Canton's version is the one I understand. The event was a filing, and the thing that hurt was every month the meter kept running.

One document point on a sale like this. When a note sells mid workout, the assignment should carry the proof of claim and the plan position along with the note, and the buyer will often require a warranty on the arrears figure. That representation is where a seller can end up with a liability after the wire clears, so it is worth having counsel read the assignment before signing it. A loss taken today should stay the loss it is, not grow later from an unreviewed warranty.