Value of mortgage


#1

I am in the process of purchase a park and going through due diligence right now.

How do I handle the value of mortgages that current owner/seller currently has with existing tenant who purchased mobile home?

The first mortgage is for $20,000 - 7 years at 9% and it’s relatively new. Only a few months into it.

Second mortgage is about the same terms but at 10%.

How do I value these mortgages when we close or do I just let seller keep them upon closing?

Thanks


#2

Because the loans are so new I would simply offer the actual cash /market value of the homes, and then assume the notes as part of closing (after having an attorney review their legal compliance). Had they been seasoned longer I would consider 50-70% of the full value.

Unless the Seller can demonstrate some reasonable underwriting, screening, etc there is likely a high risk these notes will not perform and then you have to foreclose and deal with the fallout…and that’s why you’re not going to pay market rates for those.