The volume math on the service side of REO is scaring me

On the listing side, the gate isn't only relationships. Several asset managers I've talked to while getting licensed want a minimum number of closed REO transactions and specific certifications before they'll assign, and the brokerage you hang your license at may have its own rules about who can take corporate assignments. Ask the brokerages in your market whether they already hold REO relationships, because joining one that does is faster than building one from zero.

Your 0.6 percent share assumption is doing a lot of work. Repossessions aren't distributed by housing units, they cluster by loan vintage and by state procedure. Judicial states run slower and pile up, and the chapter here lists Florida, Texas, California, Indiana, and South Carolina among the most active. If your metro is in a slow judicial state your monthly count could be half your estimate and then triple in 2027 when the backlog clears. Which state are you in? The answer changes your whole plan.

The part I'll push on is net-45, having run a service business for five years. That's not a payment term, that's you financing a national outsourcer with your own payroll. On preservation specifically I've heard 60 to 90 days real-world, with chargebacks months later for photo documentation they say was incomplete.

If you take that work you need enough cash to run three months of crew payroll with nothing coming in, and you need a documentation habit that borders on obsessive because the photos are the invoice. People who fail at this fail on working capital, not on getting the work.

Two years of low margin to get in a system is a long time to be wrong. What does the same crew do if the pipeline stays flat? If the answer is regular rental turns and lawn contracts for local landlords, the downside is fine and REO becomes upside. If the crew only makes sense on preservation volume, you've built a business with one customer type and a national fee schedule you don't control.

I'd want the dull version of this: which of the three lines pays predictably every month regardless of what the foreclosure numbers do? Sounds like lawn cuts and lock changes, which nobody wants to hear.

Naive question. If much of the distress resolves before the auction through modifications and early buyers, does the preservation work still happen? Or does the property never get to the point where somebody's paying to secure it?

wren, some of it happens earlier. Servicers order inspections and sometimes secure and maintain properties during default before any repossession, so that volume is tied to delinquency rather than to completed foreclosures. That's a bigger pool than the 14,020.

beacon, from the management side I'd say the fee schedules are the whole story. I've seen published grass cut rates that assume a 4,000 square foot lot and 20 minutes, and half the assets are neither. You either build routes tight enough that drive time disappears or you lose money on the schedule and don't notice for two quarters. Ask for the actual fee schedule and a sample work order before you sign the vendor agreement, and check who eats the cost when they order the same lock change twice.

The thing I'd check is concentration. Two national outsourcers will take you, and if one drops you or loses the servicer contract, you lose half your revenue overnight in a month you'd already spent. I've watched that happen to a vendor who was doing well right up until the contract moved.

You've described a plan that requires you to be right about 2027 volume. Is there a version where you test it for 90 days with one truck and no hires, take whatever they assign in one zip code, and measure the actual dollars per hour and the actual days to pay? That answers most of what you're asking without the insurance and crew commitment.

Trash-outs are worse than they sound once you're doing the work. You're pricing a volume that you can't see until you open the door, and the schedule pays by the cubic yard estimate someone made from a photo. I've been in houses where the estimate said 8 yards and it was 30. Get the change order process in writing before the first job.

The number missing here is windshield time, and I say that from the service side with a small crew. REO assets scatter. If your 25 to 30 a month sit across 400 square miles, a two-man crew does maybe four stops a day, not eight, and your revenue per truck day is half what the fee schedule implies. Map the last six months of repos in your county from the recorded deeds and see how far apart they actually are before you buy anything.

Also, on BPOs: they're a decent way into a vendor panel and a poor business on their own. 75 dollars a report with photos and comps and a drive is not an hour of work once you count the drive.

I'd read the vendor agreement before the fee schedule. The ones I've looked at for a different service line had indemnification language that put property damage and even trespass claims on the vendor, plus insurance minimums well above what a small crew usually carries. Whether those clauses hold up depends on state law and the facts, so an attorney in your state should read it, and the insurance cost belongs in your margin math now rather than after you sign.

Rural version of this is different. Out where I look, one preservation vendor covers four counties and the drive time is brutal, and the local guy who does it also does septic pumping and hauls scrap. Nobody's building an REO-only business at low density. If your metro is dense enough that cobalt's windshield problem is solvable, you have an advantage that doesn't exist here.