how do I determine note's value - Posted by Kelly

Posted by John Merchant on August 05, 2003 at 17:56:08:

If the above is ALL you know, it’s way too little to make any intelligent determination about the value of the note.

Credit & value of the RE securing the note, along with info about other notes or liens on the RE…all these are very important to a knowledgable note buyer in determining FMV of the note.

Since the payments are covering interest only, the PV is remaining the same as the face, without change.

Does the note not have a due date?

Have you seen the note? If not, get a copy so you can see for yourself what it says.

If the note has NO due date, would you buy it? What would prevent the debtor from just paying it for next 50 years and never paying it off?

You just need to ask more questions until YOU know all these things…then you’ll be in an intelligent position to guage the true value of the note.

Until then, you’re just operating in the dark.

how do I determine note’s value - Posted by Kelly

Posted by Kelly on August 05, 2003 at 11:58:36:


I’m making a start in the real estate business by buying notes. I’ve gotten a call from a potential note seller for the following note.

origianl amount: $240,000
balance: $240,000
interest: 10%
monthly payment: $1,700/mo interest only
1st payment: Sept '02

property value: $1,200,000
1st loan: $650,000
2nd loan: $240,000 (note)

The potential note seller would like to know what his note is worth. However, the note does not have a length on term on it, it goes on indefinately with interest only payments. How do I determine the value on something like this? Is this a good note?

The note payor has missed one payment which was late by one week. The note seller never owned the property. The note was created when the note payor refianced the house.

Any advice on how to proceed with this would greatly be appreciated. I would like to know how to place a value on this so that I do not make an offer for more than what it’s worth.

Thanks in advance.


Re: how do I determine note’s value - Posted by NCPaul

Posted by NCPaul on August 20, 2003 at 22:02:40:

I have an old note valuation guide I picked up from ANN. It may still be there but if it’s not I’ll be glad to e-mail it to you. David Butler put it together and it’s a really usefull tool to get a basic clue before calling a note-buyer. Not exact and as you know, every buyer is different, but it’s a good guide to the average notebuyer.

Good luck