This is the process Adam Davis uses at Goliath Capital to acquire distressed real estate through auctions, foreclosures, and pre-foreclosures. No fluff, no "software-will-save-you" pitches — the same five channels, six-step workflow, and red-flag checklist we run every week.
A distressed property is real estate whose owner (or lender) is under enough financial or physical pressure to accept less than full market value. The distress can be financial — mortgage default, tax delinquency, divorce, probate — or physical — deferred maintenance, code violations, storm damage. The best deals sit at the intersection: a motivated owner and a property most retail buyers won't touch.
What it is not: an MLS listing marked "handyman special." By the time a distressed property is on Zillow, twenty investors have already passed on it or bid it up.
Every distressed acquisition Goliath Capital closes came from one of these five channels. Pick the one that matches your capital and risk tolerance — don't try to run all five in month one.
The earliest signal. When a lender files a Lis Pendens or Notice of Default at the county courthouse, the owner has usually 90–120 days before the auction. This is where the best deals hide — reachable, negotiable, and off-MLS.
Public auctions held at the courthouse steps (or online via Auction.com, Xome, Hubzu). Cash required, minimal inspection, real title risk. Best pricing, hardest execution.
The property didn't sell at auction and the bank now owns it. Listed on the MLS through an REO agent. Less competition than retail, financing allowed, but priced closer to market than pre-foreclosure or auction.
County tax assessor and city code-enforcement offices publish lists of owners behind on property tax or with open violations. These owners are often motivated well before any bank starts a foreclosure clock.
Overgrown lawns, boarded windows, stacked mail, absentee owners. Pair a route through the neighborhoods you want to own in with a consistent direct-mail sequence to the addresses you flag.
Skip a step and the deal punishes you later. Do them in order, every week, and distressed acquisition becomes boring — which is exactly what you want.
The mistake most new investors make is chasing every channel in every county. Pick one channel (e.g. Lis Pendens filings) and one market you can drive in an hour. Depth beats breadth.
Pull the county's pre-foreclosure filings every week. Skip-trace phone numbers and mailing addresses. This list is your entire business — protect it and work it consistently.
Estimate ARV (after-repair value), rehab cost, and holding cost. Your maximum offer is roughly 70% of ARV minus rehab. If it doesn't pencil on paper, no amount of negotiation saves it.
These are people in the worst month of their financial life. A short, honest letter or call — 'I saw the filing at the county, I buy houses in this situation, would a cash offer help?' — outperforms every gimmick.
Walk the property with a contractor. Foundation, roof, mechanicals, and water damage are the four things that turn a good deal into a bad one. Adjust the offer to what you actually see.
The reason a distressed seller works with an investor instead of listing is speed and certainty. Cash, 14-day close, no contingencies you can't cure. Reputation compounds — do what you say.
The starting formula every distressed-property investor learns is:
ARV is the honest after-repair value from three sold comps in the last 90 days within a half-mile. Not a Zillow estimate, not a wish. Rehab is a real scope of work priced by a contractor who's actually going to swing the hammer.
The 30% spread covers your holding cost, closing cost on both ends, agent commissions on resale, and your profit. In hotter markets you can tighten to 75%; in soft markets or heavy rehabs, tighten to 65%. Never assume the market will bail you out.
The Goliath rule of thumb: if the deal only works when everything goes right, it isn't a deal. Underwrite to what happens when two things go wrong.
Any one of these can turn a discount into a disaster. Verify each before wiring earnest money.
Real estate whose owner is under financial pressure — behind on the mortgage, facing foreclosure, or already lost to the bank. Because the seller (or lender) needs to move quickly, these properties often trade below market value.
The earliest public signal is the pre-foreclosure filing (Lis Pendens or Notice of Default) at the county recorder's office. Combine that list with driving neighborhoods, tax-delinquency lists, and direct mail to owners in default — before the property ever hits the MLS or the auction calendar.
Auctions can produce the best pricing, but they require cash, a rehearsed underwriting model, and a tolerance for buying properties sight-unseen with title risk. Beginners are usually better off starting with pre-foreclosure outreach where they can inspect, negotiate, and use financing.
No. You're the principal buyer, not an agent. A license can help with access to the MLS and reduced commission on the resale, but it isn't required to source, close, or resell distressed real estate.
Distressed real estate is a discipline business, not a deal business. Adam's books cover the mindset side — how to stay patient, decisive, and honest through the years it takes to compound.