Sent one letter, the borrower reinstated, and I think I got lucky

I'm the person in this room who has read about notes for two months and still gets stuck on words. What does reinstate actually mean here? Did the loan just go back to normal like the last 19 months never happened?

How did you know he was still living there? I do screening on the rental side and the thing I'd worry about is paying $31k for a condo that turns out to be empty with a broken pipe in it since last February.

The letter is the part I'd want to understand. Who actually sent it, you or the servicer, and under what name? Collection contact with a borrower is regulated and licensing for that kind of activity differs by state, which is why most small buyers I've talked to won't touch the borrower directly. Sounds like you used a licensed servicer, which is the answer, but say it out loud for the people reading who'd otherwise pick up the phone themselves.

Two questions on the file. Did you get the original wet-ink note or a copy with an endorsement, and did the seller record an assignment into your name or leave it sitting in theirs? The second one matters most if the resolution had gone the other way, because in a judicial state your complaint has to line up with the recorded chain and I've watched a case get dismissed over a gap in it. Also, $450 title search on a $31k buy is cheap and you got the HOA lien out of it. That's the sentence in your post I'd underline.

Take away the sister. He ignores you, you file, and you're 14 months into a judicial case on a condo with HOA dues accruing the whole time. Did you actually run that number, and what did it come out to?

That's my question too. Your win came from the collateral, not the letter. At $92k drive-by value, minus say $6k selling cost, minus HOA arrears, minus 14 months of taxes and insurance advances, minus legal, you'd have been somewhere around $70k gross recovery on $31k. That's a fine base case, which is why the deal was safe. Worth being explicit that you bought a foreclosure outcome and got handed a reinstatement instead.

Get the reinstatement quote and the fee waiver in writing from the servicer, dated, and keep it with the file. I've seen a borrower reinstate and then dispute the late fee math a year later, and the person holding the paper had nothing but a phone log. Did your buyer at $46k ask for that documentation in their diligence?

Curious how the pool seller priced it. Did he tell you what he paid for the whole pool, or was the $31k just a number he needed to clear the leftover?

Property taxes. You listed the HOA and the title search but not the tax status. On a 1972 condo with 19 months of nonpayment I'd expect at least one unpaid installment, and in some states a tax certificate can be sold and start a redemption clock that runs against you while you're waiting for the borrower to call back. Did you check the treasurer's site, and were they current?

Numbers as posted: $33,100 out, $55,100 back counting the arrears and the note sale, roughly eight months. That's a big annualized figure and it's a sample of one, which halyard already said. The line I'd fix is the four payments, they aren't in your total. Also worth naming that the exit price of $46k is a market price, not a fact. A performing-note bid on a 6.5% note with 19 years of amortization moves with rates, and a buyer wanting 12 percent yield pays a different number than one wanting 9.

Starting from zero over here. Is $31k plus $2k of costs roughly the smallest a first one of these can be, or do people buy smaller?

My crew does clean-outs for a couple of local buyers. Occupancy checks run us $60 to $90 a pop and we photograph the meter and the mailbox. Cheapest insurance in this whole business, and I'd have ordered one before wiring rather than trusting a drive-by valuation photo.

Can you list the $2,100 line by line? I'm building a first-deal cost sheet and every post I read hides the small stuff inside a round number.

The question I'd be embarrassed to ask in person. Why would the seller let go of a note where the borrower had $60k of equity and a family member with money? He had to know it was likely to reinstate.

On the service side of this, what does a servicer actually charge for a single small note, and do they take one-offs from someone with no track record? That looks like the real barrier for a beginner, not the $31k.

Selfishly I wanted you to get the condo. Then again a 1972 two-bed that's been sat in by someone who couldn't pay for 19 months is usually a full kitchen, a full bath and a surprise under the flooring, so maybe the $46k was the smarter end of it.

Did the condo docs show any pending special assessment? An association that's been chasing $1,880 from one unit is sometimes an association with a roof reserve problem, and that shows up as a five-figure assessment against your collateral right when you take title.

Following beacon's point from the other direction. If small note buyers need occupancy checks, photos and local eyes on condo boards, that's a service anyone with a car and a phone can sell. Halyard, who did you use for the drive-by, a local agent or a national vendor?

Five years of dealing with people on their worst day taught me that the borrower who'd been trying to find out what he owed is the common case, not the rare one. Files get transferred and nobody answers. Your letter was the first straight number he'd seen.

So is this passive? I want income without a second job and I can't tell if this is a mailbox or a project.

Marlow, it's a project. I had a reinstatement like halyard's last year, borrower cured $7,400 and then re-defaulted after three payments. Second time there was no sister. I'm now 11 months into the case and the roof failed in month six. Same setup, different ending.

The scale problem here is servicing cost. On a $604 payment, a servicer fee plus a default-servicing add-on plus inspections is a real percentage. One note is fine. Twenty small-balance notes and the fixed cost per file is what decides whether you made money.

I came in looking for boring and this thread has HOA super liens, tax certificates and a judicial timeline in it. Useful post, but nobody should read it as the easy version of note buying.

Eight months is a blink. The thing I'd want to know is whether you'd have been comfortable holding it three years, because that's the version where the borrower neither pays nor leaves.

How did you find the pool seller? That's the part I can't replicate from where I sit.

I keep circling between this and small rentals. What I take from halyard is that the skill here is legal patience plus a valuation you trust, and I have neither yet. Quarry's re-default post is the one I'm going to reread.

Would you share the sheet you used to compare reinstate versus foreclose? I'll build my own but I want to see which line items you had that I don't.

I've been reading for six months without closing a single deal, and what stands between me and this post is $33,000 and a lawyer's phone number.

First thread I've read in this room that I mostly followed. Saving it.