For several consecutive quarters, foreclosure filings across Texas have climbed. ATTOM Data Solutions has tracked the state among the leaders nationally for new filings through 2023 and into 2024. Adjustable-rate mortgages that repriced into the 7–8% range are doing exactly what the math said they would. The distressed seller pool that nearly dried up during the 2021 frenzy is refilling.
Most agents are undertrained for this cycle — a predictable outcome of a decade of clean retail transactions. When every listing sold in five days at 10% over asking and your broker needed you to stay out of the way and write clean offers, there was no upside to learning short sale negotiation or subject-to acquisition mechanics. Now there is.
The agents who built those skills during the 2008–2012 distress cycle are watching this market like they’ve seen the film before. For the rest of the industry, this wave is arriving with no instruction manual.
What Distressed Property Investing Actually Looks Like Right Now
A seller who bought in 2021 at $340,000 with an FHA loan at 3.25% shows up regularly now. Current retail value is $305,000. They need to move. After commissions, closing costs, and loan payoff, they’re writing a check at the table. A conventional sale doesn’t work for them.
Most licensed agents tell that seller they can’t help and move on. An agent trained in distressed property strategies sees a different set of paths: short sale negotiation with the lender, a subject-to acquisition where an investor steps in and takes over the existing mortgage payments, a lease-option that gets the seller out now and gives a buyer a purchase path, or a seller-financed structure if there’s enough equity in a different scenario.
None of these are exotic or legally complicated in the hands of someone who’s done them. All of them require a broker who won’t kill the conversation before it starts.
Why Your Current Broker Is the Problem
Most brokerages discourage or outright prohibit subject-to transactions because their compliance staff doesn’t understand the due-on-sale clause well enough to explain why the risk is manageable and why the deal structure is legal. Seller-financed transactions and wrap-around mortgages get the same treatment. The broker hasn’t done one, nobody on their team has, and the answer defaults to no.
Short sales are the one exception where conventional brokers grudgingly participate. But even there, the real skill set — building a hardship package, timing the broker price opinion, negotiating with the lender’s loss mitigation team, knowing when to escalate to the PMI carrier — comes from actual deal volume, not a three-hour CE course.
Your broker’s risk management instinct, however understandable, is functioning as a skill cap. Deals are walking past you that you couldn’t close even if you wanted to.
Get the Agency Question Right From the Start
Working distressed sellers comes with one framing error that will sink your credibility fast: offering to buy the property and list the property in the same conversation.
These are two distinct roles with two distinct duties. The moment you present both as interchangeable choices you’re offering, you’ve created an undisclosed dual-interest situation. Regulators read it as you favoring your own outcome over your client’s.
The correct approach: “As a licensed agent who also invests, I can walk you through every option available to you. Retail sale, investor purchase, creative financing structure. Let me explain each one.” You’re the educator. The seller chooses. Your role stays clean.
This framing also makes you actually useful. Most distressed sellers have already talked to three investors who lowballed them and two agents who said nothing could be done. An agent who can lay out all the paths is worth listening to.
How We Work Deals With Our Agents
At StepStone Realty, we partner directly on distressed deals. Not through a coaching program. Not through a referral fee. We look at actual deals together.
Bring a distressed seller you’ve made contact with, not just an address that looks vacant. Work up your ARV estimate, even if you’re not confident in it. Send it over. We’ll work through why it is or isn’t a deal, and if it closes, we split the profit 50/50. For agents who want lighter oversight, the split is negotiable case by case.
I tell every new agent cohort the same thing: creative real estate investing gets its real returns when markets slow down. Increasing distress is when we’re going to have the most opportunity to make money. That window is open in Texas right now at a scale we haven’t seen since 2011.
The Move
The agents who build distressed deal skills during a rising distress cycle build reps fast because there’s real deal flow to work through. The agents who wait for the peak find themselves competing against people who’ve already closed twenty of these.
If your current brokerage prohibits subject-to, discourages seller financing, and treats short sales as a liability rather than a specialty, you already have your answer about what your next two years look like.
Find a brokerage that will let you do this work. If yours won’t, that gap is not going to close on its own.
StepStone Realty: sponsorship at a brokerage that has closed these deals.