NEW YORK (Dow Jones)--Anyone looking to sell distressed mortgages may be pleasantly surprised at the potential demand for these assets, even if they face some tough bargaining on prices.

New York-based SecondMarket, an online trading platform for illiquid assets, has seen nearly 500 buyers sign up since sellers began listing blocks of collateralized debt obligations, unsecuritized loans and mortgage securities - totaling less than $10 million apiece - earlier this month.

Quotes sometimes put the bid and ask prices on these assets higher than what the market indicates. But there is still a huge mismatch between price expectations. As a result, a transaction has yet to be executed on SecondMarket, raising the prospect of holders being stuck with these assets unless they're willing to significantly lower prices.

This may change when the government sets up the public/private fund aimed at buying up these assets, however.

Potential buyers of triple-A-rated residential mortgage securities are offering to pay anywhere between 30 cents to 70 cents on the dollar, according to Barry Silbert, chief executive officer of SecondMarket.

In contrast, the derivative index that tracks subprime mortgages now trades at 35 cents on the dollar for triple-A-rated assets. This suggests that potential buyers are willing to put down more for highly rated assets that have retained their ratings through the crisis.

Sellers however, want more and are looking to get anywhere between 50 to 80 cents on the dollar, according to Silbert.

It's a similar situation for commercial mortgage bonds with potential buyers and sellers apparently unable to meet on price. Interested parties are offering anywhere between 60 cents to 75 cents on the dollar. Sellers, meanwhile, are looking for between 65 cents to 80 cents on the dollar, Silbert said.

"When the seller sees bids that low, they aren't going to sell," said Karl D'Cunha, a senior managing director at Chicago-based Houlihan Smith & Company, Inc., which provides valuation services.

To be sure, there have been a few cases where buyers and sellers have been able to agree on a price for individual loans.

Jeff Freud, founder and president of California-based LoanMarket.NET, which launched an online trading platform for unsecuritized loans in California last month, expects to close the sale of a second mortgage valued at less than $250,000 at a price of between 80 cents to 90 cents this week.

But for the most part, investors are reluctant to offer more without completing extensive due diligence.

"People don't know exactly what it is they are putting a bid on," said Ron D'Vari, co-founder and chief executive of NewOak Capital in New York. "It's like trying to market a complex cuisine in MacDonalds."

Sellers, on the other hand, are hesitant to book such low prices before the U.S. Treasury Department's Public-Private Investment Program, or PPIP, gets underway. The program will provide attractive financing to potential buyers of toxic assets currently stuck on bank books. Sellers hope that the government initiatives will generate fresh liquidity and in turn lead to higher valuations on these assets.

Holders willing to sell ahead of PPIP "need the money," Silbert said.

Even so, it's getting the ball rolling on price discovery of these hard-to-value assets.

"Potential buyers want to see what other people are paying for these assets," said Freud.