Blink and you won't miss it

Help me out here because I can't help feeling that I'm missing something about trading in property loans.

Take 6142 for example, currently selling on the SM at 1.3% discount. Presumably the seller will also have to pay the 0.25% selling fee, so those together seem to eat away most of the 2% splashback. Then considering the time that your cash is tied up waiting for the loan to be drawn down, resale delay etc, I can't see how it's worth the effort?

Hi Fasty. Agreed that with 6142 selling is not worthwhile, but then it was not a loan I thought worth while at the time, being 7% over 18 months. I have a rule that I will not purchase any of these loans which I am unhappy to hold to term - in case they will not sell, and since the value of the cashback decreases with the term, and the cashback is not subject to income tax, I look for 12 months term. 6142 has its third repayment tomorrow and the second tranche has been had, which means that it should have been sold a while back. Basically the A+ rate has gone up to 8% and so you have to discount 6142 heavily to make it compare with a new 8% loan over 12 months. I have sold all my 7% loans and am nearly through the 7.5% 7504, which is going on average a bit better than -1%.
I agree that with discounts greater than 1% it is not good, but so far the average has been much better. 6762 went at about -.3% and 6514 about -.2%. 6879 is not so good and is currently a little better than 1% on average. 7220 is not worth selling at present rates - which is a worry.
Some things to consider:- drawdown has generally been immediate. If the bulk of the parts sit at par then some get taken up by autobid - not many - because of the diversity settings. There is of course the interest to add, and unlike other loans there is generally no risk of missed repayments because FC seem to collect the interest money for the term and hold it themselves to make the repayments. So no risk in holding longer. Also, on a short loan, as the remaining term reduces, a given discount will have an increasingly beneficial effect on buyer rate - the opposite to the effect of a mark up.
I must admit to a concern about 7220 - but last year an A+ secured loan at 8% would have been gold dust. I am having a punt at the A loan at 9% just closing - it may not be saleable but then it will just join the rest of the loans. At some point I may not have any cash to recycle.

Post Script: to respond to Mark-r below without wishing to knock it down the order. I agree with Mark-r. However, the only risk from these loans is in the eventual repayment, and since I do not intend to hold for that I am not much worried about diversity. So I take the first loan of a series only and can afford to miss the 36 month loans, or preferably anything over 12 months. The need for and ability to obtain diversity on A+ property loans is questionable, but FC have decided to make no distinction for Autobidders and therefore the existing diversity rules are applied. To lose one of these loans (rather than a delayed/recovered payment) would be very serious for FC and I am happy to put large sums on the best offers as a serious diversity criminal and to let the autobidders have small parts on the SM according to their inapproriate (IMO) diversity rules. This is really just playing FC's game, but for how long we will see.

I'm with blender on this one, and have a similar strategy. I only bid what I'd be happy to hold to maturity (well, maybe more than I'd be happy with but not more than I'd be comfortable with), but list all my parts continuously on the SM at par, and they slowly trickle away. I've never listed at a discount, at the moment I'd rather sell unsecured loans at par to release funds, or add new funds, to bid on new property loans. Also, unlike blender, I'm happy with the 36 month loans. Yes, the cashback is diluted over the term, but I also have longer to sell them before the final payment. FC hold all interest, so these loans should be trouble free repayers until the end, so a year from now these loans will (hopefully) be well behaved 8% A+ 24 month loans, and all the deeply discounted flipper parts will be gone.

One thing to consider is that we are in at the beginning of property loans. They've only been going for a few months, so the amount of new money that wasn't in when they were live is tiny compared to the size of the loans. And being mainly interest only they are currently huge money sinks so it is little wonder they are draining liquidity out of the SM and the flippers are having a race to the bottom. Again, 9-12 months from now when these loans start repaying capital, there's going to be big dollops of returned funds in search of a new home. These investors may well look to the secondary market for other property loans, and at the very least may well remove the discounted flipper parts. Also, new money will be coming in and so new autobid accounts or manual browsers may like the look of the at-par parts. Who knows, the cashback promotion may have ended by then so our at par parts will be especially valuable since flippers will need a 0.3% or more mark up to profit from newer loans (although we'll need a new strategy for our returned funds then!)

The main risks to the strategy as I see it are (1) the rates on new loans increases, but this seems unlikely since P2P rates seem to be falling generally (yes there were the 7% and 7.5% loans but I think this was FC testing the water and it seems to have settled around 8% now), and (2) there is a significant amount of defaults at term, which would knock confidence in FC's loan book making parts hard to sell, and expose me to defaults since there's bound to be some loans I haven't completely sold out of at term. (2) is one reason I'd be happy for FC to need to underwrite some of the multi-part loans; there's nothing like having a thumb in the pie to add urgency to the CTCTB.

This is one for Auto Pilot bidders.

I saw it appear, hide and re-appear but failed to Spot The Difference. I will not be alone (I had no interest in bidding - but does this kill the secondary market?).

... or maybe the end of the beginning?

Wot no cash back? I wonder if all those bidding have noticed the lack of cash back.