Operator wants a quarter of marketing spend funded against a 2.1 percent response rate I can't verify

I'll be the voice from the cheap seats. You're being asked to fund the discovery of motivated sellers, with the profit split 50/50, while they contribute time you're also paying for in the labor line. That's not a partnership, that's a salary with upside. If they believed the 2,400 per contract number they'd borrow the 11,100 from a credit union and keep the whole spread.

The marketing arithmetic in the pitch is close enough to be plausible. Postal mail plus skip trace at that scale lands where they say, and 2,100 new NOD records a quarter across three counties is consistent with the current flow. ATTOM put first quarter 2026 foreclosure starts at 82,631 nationally, up 20 percent year over year, concentrated in Texas, Florida and California, so a list of that size refilling every quarter is a reasonable claim if their counties are in a populous state.

The cost per contract line is doing very little work in your decision. Double their marketing spend to 22,200 and halve contracts to two, and you're at 11,100 per contract against a claimed 41,000 spread. The model still looks fine on paper. Every material risk sits downstream of the signed contract. What matters is the share of signed contracts that reach closing before the auction date, the payoff figure coming back from the servicer higher than the arrears in the notice, and junior liens surfacing on title. Their own history, three closings and one lost at title, implies a fallout rate you should price rather than ignore. Ask for contract-to-close by quarter and the reason each dead deal died.

On the calling, the exposure is real and it's not yours to guess at. Telephone outreach to consumers is governed by federal rules plus state level restrictions that differ by state, and several states separately regulate purchases from homeowners already in default, including required contract forms and cancellation rights. Have counsel licensed in each of their three counties' states review the scripts and the purchase agreement, and get their compliance representations in the JV document in writing.

The assumption your answer depends on: whether their 1 in 9 conversation-to-contract figure came from counted records or from memory.

Coming from the tools side, I'd want to know who's putting the repair number on the house between the phone call and the contract. If it's a caller with a script, that number is invented, and on a distressed 1970s house being invented by 25,000 is normal. Their 41,000 average spread has a rehab estimate buried inside it that somebody has to have walked.

Take the 41,000 apart before anything else. Four deals with a mean of 41 could be 92, 34, 22 and 16, and the median is 28. Ask for each closed deal individually: purchase price, payoff at closing, actual repair spend against estimate, disposition price, days held. If they can't produce that for three closings they've done, they aren't keeping records, and then the 2.1 percent response rate is also a feeling rather than a number. Also, rena-expert's point about the servicer payoff coming back high hits their spread directly, because on the deals I've seen it's the owner's cash that absorbs it, and when the owner's cash goes to zero the owner walks.

Probably the confused question of the thread, but if the whole difficulty is reaching the homeowner and racing an auction date, why does anyone work this side rather than buying the defaulted note from whoever holds it? Genuinely asking, I'm reading about paper right now and it's not obvious to me where the extra 40k of spread on the house side comes from compared to buying the debt.

vellum, my rough understanding is that nobody sells you one defaulted first mortgage on a nice suburban house, they sell pools, and the pools are priced by people who do this all day.

Meridian, the part I'd sit with is cobalt's. You'd be funding two people at low pay to call frightened homeowners all day, and the quality of that interaction is the entire ethics of the deal and also the entire economics. If you fund the test quarter, I'd want to hear a live call before the second one.