Key Takeaways
- Define the asset, objective, scope, and decision timeline before outreach.
- Keep data, documentation, ownership, servicing, and material exceptions connected.
- Compare complete economics and execution terms rather than a headline number alone.
- Document responsibilities, transfer controls, and the next review step.
Step 1: Define the asset you are valuing
Reconcile eligible accounts, balances, status, exclusions, and the cutoff. State which principal, interest, fees, advances, and other components are included. A quote against one balance definition cannot be compared directly with a forecast using another.
Step 2: Build material segments
Group accounts by factors that affect cash flows or costs: product, age, payment behavior, geography, balance band, collateral, documentation, legal status, and prior placements. Avoid segmentation so granular that assumptions lose meaningful evidence.
Step 3: Estimate net cash by period
Use relevant observed performance where available and explain adjustments. Estimate gross recoveries, expenses, and timing. Include servicing, legal, vendor, collateral, transfer, and other costs where applicable without counting them twice.
Step 4: Test scenarios
| Assumption | Base case | Downside test |
|---|---|---|
| Recovery amount | Supported by comparable evidence and portfolio facts | Lower recovery or a larger ineligible population |
| Timing | Realistic receipt and resolution schedule | Slower collections, legal delay, or delayed collateral realization |
| Costs | Documented operating and transaction estimates | Higher legal, servicing, carrying, or transfer costs |
| Evidence | Available files and confirmed statuses | Missing documents or unresolved ownership and account issues |
Scroll horizontally to read the full table.
Use a stated discounting convention to translate net future receipts into present value. A forecast is not a guarantee, and a buyer will apply its own assumptions.
Step 5: Compare actual proposals
Adjust each proposal for the accepted accounts, expenses, deductions, payment timing, conditions, and material continuing obligations. Compare net sale proceeds with the same pool’s supportable retention or workout value and the institution’s strategic needs.
Maintain a versioned model and decision record. For the technical framework, see recovery curves, timing, and costs; for pricing questions, see what debt purchasers pay.
This page provides general information for institutional and commercial readers. It is not legal, tax, accounting, investment, or transaction-specific advice. Requirements and outcomes depend on the assets, parties, jurisdictions, and agreements. Obtain appropriate professional advice for a proposed transaction.