If you had to pick one stage to build a repeatable process at this year, which one

Question

Every time I look at buying, I end up stuck on the same question, and the pull toward it keeps coming even with a small crew to run on the service side. There are three doors into this and I do not think I can be competent at more than one while still running a business.

Pre-foreclosure means I am doing marketing and human conversations. My cash requirement is low, sometimes nothing if I assign, and my competition is other people with a mail list. The cost is that most of these leads cure or sell to somebody else, so I burn months to find the one owner who genuinely wants out, and I need 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 I am least equipped for. Cash, often certified funds same day, no inspection, whatever liens survive the sale survive it, and in a lot of places I am bidding against people who have been doing 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.

I can see the argument for each. Somebody who has actually picked one, tell me what the second year of it looked like rather than the first.

monica_tran3 · Accepted Answer

REO, and the reason is your other business, not the returns.

I have run a service company for five years and the thing that decides whether a side strategy survives is whether it fits into scheduled time. REO does. The listings appear, you set alerts, you look at them on your own hours, you write offers with an inspection period, and the closing runs on a calendar someone else maintains. When my crew has a bad week, an REO offer sits there and waits for me. Nothing bad happens.

Pre-foreclosure does not work that way. The owner calls at 7pm on a Wednesday and if you do not pick up, the guy who does picks up the deal. Second year of pre-foreclosure is a second job with a phone attached. I know two people doing it well and both of them do only that.

Auction is worse for your situation. It is a fixed morning you cannot move, in cash you probably need for payroll, on a property you could not inspect, and you are bidding against people whose entire week is built around that morning. The discount is real and so is the reason for it.

The trade you accept with REO is that you will lose most offers and your discounts will be smaller. My hit rate is somewhere around one in nine written offers, and the winners are 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 and it is enough for two or three a year alongside the business.

What I would not do is what I did in year one, which was dabble at all three and be 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

I voted REO for the reason nobody in the poll options says out loud, which is that a cleared title means the thing you buy is the thing you thought you were buying. Everything I have read about auctions involves someone discovering a lien or an occupant after the money is gone, and I have no appetite for that as 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 I have taken over management on bank-owned houses where the former owner or a tenant was still in place months later, so the 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 has been worth more to me than any comp.

brandonlee36 · Answer

I will argue for the option nobody voted for. Short sale is slow and infuriating and the servicer will lose your file twice, and that is exactly why the competition thins out. Cobalt, you have a crew, which means you can carry a 120 day approval timeline in a way a wholesaler with no cash cannot. Downside is you can do all the work and the lender declines the price, and you have no recourse. I have had two die that way and one close at a number I still think about.

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 I am not sure a smaller discount plus commission on the way out leaves 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 pick one stage to build a repeatable process at this year, which one

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