I lost $4,400 without ever owning a note

Worth writing down because everything I'd read about this strategy assumes you get to the closing.

A seller was breaking up a small tape and I bid on three files out of it. To move past the summary data and into the actual collateral files, they wanted $2,500 as a diligence deposit, credited at close and nonrefundable if I walked for anything other than a defect they'd defined in the bid letter. I read that clause, understood it, and sent the money anyway because the summary numbers looked like the best thing I'd seen in four months of looking.

Then I spent my own $1,900 on two drive-by valuations and a title search on the largest of the three.

The biggest file was the one carrying the deal, and the valuation came back at $71,000 against a $103,000 balance that I'd priced assuming $95,000 of value. The tape had a value field in it and that field was five years old. Nobody lied to me. I just treated a number in a spreadsheet column as a valuation.

I asked to re-trade the price on that one file and keep the other two. They said no, the three were priced as a group, take it or leave it. Taking it meant paying my original number for collateral worth 25 percent less than I thought, and the whole margin lived in that one file. I left it. The $2,500 stayed with them, exactly as the letter said it would.

So, $4,400 and about five weeks, no note.

What I'd do differently. I'd order the drive-by valuation on the file that carries the deal before I put up any deposit, and pay for it out of pocket even if that means bidding on less. If a seller won't let me value the main collateral pre-deposit, that tells me something. And I'd stop bidding on grouped files where one asset holds all the upside, because a group price removes the only lever you have when the diligence goes against you. The clause did what it said. I paid for reading it and agreeing to it anyway.