Letter 4 discounting liens...what do you think? - Posted by DavidCAL

Posted by Brent_IL on March 20, 2002 at 18:29:29:

I suppose it could be used to describe some kind of indemnification process, but I’ve never heard it used in that context.

Letter 4 discounting liens…what do you think? - Posted by DavidCAL

Posted by DavidCAL on March 19, 2002 at 12:47:15:

Also, is it ok to let them know that you’re considering buying the property, but the only way you can do so (since the property is upside down) is to get a deep discount on the liens?

March 18, 2002

Joe Smith
Homecomings Financial
P.O. Box 890036
Dallas, Texas 75389

Dear Mr. Smith:

As I mentioned on the phone, I am interested in purchasing the 2nd trust deed that you hold on the property located at 10000 N. Main St, Santa Clarita, CA 91351. The loan number is 12464556. The first is foreclosing in 8 days. The balance on the first is $230,000 + $13,000 in arrears. This totals approximately $243,000.

My estimate based on the market value and the condition of the interior of the house is that it will sell at auction for a price of NO MORE than $235,000 leaving you with nothing. In order for me to get involved, I cannot pay more than $4,000 for your 2nd trust deed. There cannot be a short sale, as the owner?s won?t agree to it and are planning to file for bankruptcy in the next several days. My offer is simply to buy the note outright. This offer is good for 48 hours, afterwhich I will focus on other deals.

Please contact me at 818-xxx-xxxx at your earliest convenience if you are interested in this offer.



Re: Letter 4 liens…what do you think? - Posted by JD

Posted by JD on March 19, 2002 at 21:54:51:

That looks pretty good. If I were offering to buy the TD, I would feel obligated to give some explaination as to what I was going to do with it ("I will cure the 1st, then do my own foreclosure; I will bid at the sale; etc…). My experience has been that a Bank holding a 2nd Trust Deed will usually not sell at a discount until within days of a real deadline. I don’t think they will be at all impressed with your 48 hour ultimatam, unless it realated to some real deadline.

What do you think? - Posted by JoeKaiser

Posted by JoeKaiser on March 19, 2002 at 20:03:37:

I always like to use the word, “token,” so they can justify accepting a number that is so greatly discounted.

They may not accept an offer of $500 on a $20k note . . . that sounds like stealing. So instead, offer a “token payment” of $500 for taking the trouble to sign off on the paperwork. Now you’re not so much offering the $500 for the note itself, your offering $500 for them to take the effort to get the thing signed off . . . the note itself is assumed to be worthless and essentially, free.

It’s just a little different way to look at things. Would you accept $500 for a $20k note? Probably not. Would you accept a “token payment” of $500 if all you had to do was sign your name to dispose of a worthless piece of paper? Maybe so . . .

You’re offering $4k. Too much! $4k sounds like you know something, like there may be something there you’re not telling. He may be thinking, “If it’s worthless like you say it is in the rest of your letter, why are you offering me $4k?”

As a negotiator, I need him to believe it’s worthless, and I’ll pay a few bucks for his trouble to get the thing cleared up . . . but zip for the note itself.

I know it makes no sense, but it works.


Re: Letter 4 discounting liens - Posted by Stew(NE)

Posted by Stew(NE) on March 19, 2002 at 16:13:17:

This sounds what I have sent in the past, with reasonably good luck. However, I always fax my offer letter to them. The numbers you are using are just examples, right? I don’t tell them what’s owed on the first. They should know that. By the time you find the decision maker, he is probably in the workout or foreclosure department. I let them tell me what is owed on the first, because they had to have been served and offer a chance to buyout the first.
Happy Investing

good point (NT) - Posted by DavidCAL

Posted by DavidCAL on March 20, 2002 at 07:06:26:


$500 on $20K?! Wow. - Posted by DavidCAL

Posted by DavidCAL on March 20, 2002 at 07:02:57:

Thanks as always for great advice. What should they think is my motivation for wanting the note? I took the approach of telling them that I was thinking of buying the house, but could only make it work if I could buy the junior liens at a deep discount. Afterall, if I wasn’t going to buy the house, why the heck would I even pay $500 for a worthless piece of paper? Also, should I say that the owners are going to file for bankruptcy?

thanks for the info,


A dangerous thing to do… - Posted by Ben (NJ)

Posted by Ben (NJ) on March 19, 2002 at 21:48:49:

at least in NJ. Here, we have a statute (NJSA 54:5-89, if inclined to look it up) specifically aimed at investors who try to defeat a foreclosure by paying a nominal consideration for an interest in the property AFTER the filing of the complaint. I am battling a guy right now who is trying to defeat one of my foreclosures by his purchase of a junior lien for $1.00. If he had paid more than nominal consideration(which he claims he has but so far can’t really prove it)he would be on solid ground.

Re: A dangerous thing to do… - Posted by JoeKaiser

Posted by JoeKaiser on March 20, 2002 at 24:19:06:

Interesting. So, how is he trying to defeat the foreclosure and what are you trying to accomplish?


Great Info. I need to do some research (NT) - Posted by Stew(NE)

Posted by Stew(NE) on March 19, 2002 at 23:29:24:


What if? - Posted by Brent_IL

Posted by Brent_IL on March 19, 2002 at 22:31:02:

If he had paid $1.00 plus a $5,000 no-interest, no-payment non-recourse note for the junior, would it have made any difference?

Just wondering.

Re: What if? - Posted by Glen SoCal

Posted by Glen SoCal on March 20, 2002 at 02:34:27:

What is non-recourse again? And are you suggesting that the second be paid at some future date?

Thanks, Glen

Re: What if? - Posted by Brent_IL

Posted by Brent_IL on March 20, 2002 at 09:35:43:

No suggestions. When I read the post by Ben (NJ), I wondered if a higher payment, using non-cash, would be viewed more favorably by the court if the legality of the transaction was questioned. The note could be due in forty years.

Just curious.

A non-recourse note is a note that is collateralized solely by the property that is pledged as security for the note. It’s most often the property you are buying. If one defaults on the terms of the note, the payee can take the property in foreclosure, but can not sue the individual signing the note to get a judgment for any deficiency if the value of the collateral is less than the amount owed. That’s the non-recourse part.

Re: What if? - Posted by Glen SoCal

Posted by Glen SoCal on March 20, 2002 at 10:51:52:

Recoursable/non-recoursable loan. I remember also something about penalties for pre-payment of a non-recoursable loan, where the financer cannot collect on the loss of their ‘expected return’ or collect any penalty for prepayment (prepayment penalty). Is that a correct use of the term also?