Figures from the New York Fed are balances outstanding, not sale prices. Bands cited from DebtMarket’s pricing study are conversation ranges, not offers. This note is education for operating companies and creditors. It is not legal advice.
Due diligence is the work between the NDA and the bid. The snapshot got you into the file. The sample tells you whether the snapshot was true. Buyers who bid the gross face and plan to argue later are negotiating against their own close.
Sample in this order
| Pull | Pass |
|---|---|
| Forty accounts across the balance range | You can open the rows, not only the totals. |
| Media on the flagged accounts | The contract and the charge-off statement match the media flag often enough to trust the percent. |
| Exclusions | Deceased, settled, and bankrupt match the cut-off, or they are listed as a dollar amount to remove. |
| Title | The seller on the tape appears on the assignment you were given. |
| States | The states in your box are the states in the sample. |
Write the bid against the sample
If the seller said media on 80 percent and your sample shows contracts on 50 percent, the bid uses 50 percent or you pass. Say which face the percent applies to: unpaid principal after the exclusions you named. A bid that hides that sentence will be read two ways at the purchase agreement.
The field list is the data tape. The document list is the media checklist. The sequence around the bid is how to buy a portfolio.
Write the exceptions into the bid
Your sample of 40 accounts found 3 outside the states in your box and 2 marked settled in the notes. Put those five counts, and the dollar amount, in the bid email. “Subject to diligence” without the counts is how the purchase agreement reopens the price. The seller can accept the exclusions or keep the accounts. Either answer is better before the wire.
Open enough rows to have a count
On a first read, this desk opens 25 accounts when the file has fewer than 500, and 40 accounts when the file has 2,000 or more. Spread the pull across the balance range and across the states named in the file. These are working sample sizes for a bid conversation. They are not a statistical confidence claim. The point of the pull is a count you can put in the bid: how many documents opened, how many balances matched, how many accounts sit outside the buyer’s box, how many notes say settled, bankrupt, or deceased.
Four lines that belong in the bid
- Media. “Statements opened on 22 of 40. The flag said 40.”
- Title. “Originator is the seller” or “prior assignment is missing for the 2019 sale.”
- Exclusions. The count and the unpaid principal of rows outside the box, or marked settled, bankrupt, or deceased as of the cut-off.
- Balance. “Price is on unpaid principal at the cut-off. Post-charge-off fees are excluded.”
A bid that says only “subject to diligence” leaves those four lines for the purchase agreement to reopen. Write them while the sample is open. The sequence around the sample is how to buy a charged-off portfolio. The fields you are sampling are on the data tape page.
An exception log the seller can answer
Number the exceptions. On a 40-account pull: accounts 14, 22, and 31 are outside the states in the box, unpaid principal $4,200 combined. Accounts 8 and 19 are marked settled in the notes, $1,100 combined. Account 27 has a statement balance $600 higher than the tape because a fee posted after charge-off. Send that list with account IDs. Ask the seller to drop the five geographic and settled rows and to confirm the fee on 27. A reply that drops them is a file you can price. A reply that says “see the agreement” is a file you are still negotiating. Keep the log. It is the exhibit if the warranty later asks whether a paid-prior or a deceased status was knowable at the cut-off. The warranty itself starts after closing and funding, which is spelled out on cut-off, closing, and funding.