If you had to build a repeatable process at one foreclosure stage this year, which one would it be?

Question

For anyone running a business on the side and looking at foreclosure buying, the same question keeps surfacing. There are three doors into this, and it is hard to be competent at more than one while still running something else. Pre-foreclosure means marketing and human conversations. The cash requirement is low, sometimes nothing on an assignment, and the competition is other people with a mail list. The cost is that most of these leads cure or sell to somebody else, so months get burned finding the one owner who genuinely wants out, and the buyer has to be comfortable sitting across from someone on the worst day of their year. The auction is where the biggest discounts are and it is also the door most newcomers are least equipped for. Cash, often certified funds same day, no inspection, whatever liens survive the sale survive it, and in a lot of places the bidding is against people who have done it every month for a decade. But it is one morning a week and it does not need a marketing budget at all. REO is the cleanest. Cleared title, an agent to talk to, financing possible, a real inspection period. Also the most competitive, because it is listed publicly and any retail buyer with an FHA loan can see it too, and the filing numbers say bank repossessions are rising but from a low base, so the supply reaching listings is not huge. There is an argument for each. From anyone who has actually picked one, what did the second year of it look like rather than the first?

monica_tran3 · Accepted Answer

REO, and the reason is the other business, not the returns. What decides whether a side strategy survives alongside a service business is whether it fits into scheduled time. REO does. Listings appear, alerts get set, offers get written with an inspection period, and the closing runs on a calendar someone else maintains. A bad week on the service side does not touch an REO offer sitting in queue. Pre-foreclosure does not work that way. The owner calls at 7pm on a Wednesday, and if that call goes unanswered, the next person who picks up gets the deal. Past the first year it becomes a second job with a phone attached, and the people who do it well tend to do only that. Auction is worse for this situation. It is a fixed morning that cannot move, in cash that is usually needed for payroll, on a property that could not be inspected, against bidders whose entire week is built around that morning. The discount is real and so is the reason for it. The trade with REO is losing most offers and accepting smaller discounts. A realistic hit rate runs around one in nine written offers, and the winners tend to be the tired listings, 90 days plus with a cut already taken, in the price band retail buyers with financing cannot reach because of condition. That is a narrow lane, but it is enough for two or three a year alongside a running business. What does not work is dabbling in all three and being slow at every one of them.

karen_whitfield · Answer

Thatch is right about the calendar and I would go further. If you already own a business, the scarce thing is attention, and pre-foreclosure eats attention in unpredictable chunks. I chose the slowest possible version of all this and I have never once regretted moving at the speed of a listed transaction.

tylerbrooks9 · Answer

REO is the right choice for the reason nobody in the poll options says out loud, which is that a cleared title means the thing bought is the thing it was believed to be. Every account of an auction gone wrong involves someone discovering a lien or an occupant after the money is gone, and that kind of risk has no place in an opening move.

paulgrant17 · Answer

Genuine beginner question on the pre-foreclosure option. When you say the owner calls at 7pm, are you cold calling or is this all mail? Because the sitting-across-from-someone part is what stops me, and I cannot tell if it is a skill or a personality.

tonyv88 · Answer

Different angle from managing other people's property. Whichever door you pick, the occupancy question follows you through it. REO can absolutely still be occupied, and it is common for management to be taken over on bank-owned houses where the former owner or a tenant was still in place months later, so clean title does not mean an empty house. Ask the listing agent when someone last physically entered the property and what they saw, and if the answer is vague, price the removal cost in. That question is worth more than any comp.

brandonlee36 · Answer

Short sale is the option worth arguing for. It's slow and infuriating and the servicer will lose the file twice, and that's exactly why the competition thins out. A crew on hand means an operator can carry a 120 day approval timeline in a way a wholesaler with no cash cannot. The downside is doing all the work and having the lender decline the price, with no recourse. Deals die that way often enough, and the ones that close can still leave a number worth thinking about for a while.

ehernandez74 · Answer

How much of the REO argument survives if the discount keeps shrinking? Repossessions are up 45 percent year over year but the room keeps saying supply is still historically low, so if listings stay competitive a smaller discount plus commission on the way out may not leave much. Does anyone track their average discount to comps over a few years rather than per deal?

mitchell_ray4 · Answer

The auction option is the only one where my trades background is worth anything, and it is also the one where I cannot see inside the house, which is a bad joke. Voted REO because I can at least get in with a flashlight before I commit.

If you had to build a repeatable process at one foreclosure stage this year, which one would it be?

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