How to Buy Non-Performing Bank Notes

by Jack Gerard, studioD

Non-performing bank notes are debts held by banks that represent loans such as mortgages. While other non-performing investments may result in a financial loss, non-performing bank notes are significantly less likely to result in loss due to the fact that the loans are secured by real property such as a mortgaged house. Even if the borrower does not recover the loan from default and the bank forecloses on the property, the note owner can claim the property itself instead of profits from the note.

Develop an investment plan. The plan should include an estimate of how much you can afford to invest in bank notes, the number of debts you want to purchase and how long you can afford for the debt to remain unpaid before taking action. Your plan should also include potential real estate agents or other agencies through which to list properties if you wind up pursuing foreclosure on one or more note properties.

Contact a loan broker in your area and inform him of your interest in purchasing non-performing bank notes. The broker will locate notes for sale by banks and credit unions, act as your representative in purchase negotiations and will advise you in regard to state-specific legal matters involving the purchase of debts.

Negotiate the purchase of notes with banks or credit unions. The negotiations should include disclosure of information about the properties and may include access to the properties for the purpose of inspection and appraisal as well. Adjust your purchase offers as needed if you find that properties you are considering buying the notes for aren't worth as much as the bank wants for the corresponding notes.

Investigate your financial options once your purchases are complete. You may be able to hire a collection agency to restart payment on the debt, though if the borrower is unwilling to make payments once the agency is hired then you may suffer a loss in profits due to the cost of hiring the agency. If you are unable to restart payment on the notes you purchased, consult an attorney to begin the foreclosure and eviction process so you can list and sell the properties.

About the Author

Born in West Virginia, Jack Gerard now lives in Kentucky. A writer and editor with more than 10 years of experience, he has written both articles and poetry for publication in magazines and online. A former nationally ranked sport fencer, Gerard also spent several years as a fencing coach and trainer.

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