My first foreclosure after 70 loans. Here is exactly what happened.

In February 2026, I went through my first foreclosure.

After 70 loans funded and over $28 million in loan volume, a borrower walked away from a property mid-project.

We took over the property, relisted it, and sold it within 30 days.

Final result: 100% of principal recovered. 100% of interest collected. Agent commission covered by sale proceeds. Capital left over.

We actually collected more than we would have if the loan had performed on the original timeline.

I want to walk you through exactly what happened, what I learned, and what it revealed about how the structure holds up when things go wrong. Because how a lending operation handles a default tells you more about the business than how it handles a smooth loan.

1. What Happened

The loan: $465,000 against a conservative ARV validated independently by Camille, our in-house licensed Compass agent with Cromford Report access. Loan-to-ARV at roughly 70%. Six-month projected hold.

The borrower executed the rehab well. Full interior and exterior renovation completed in three months, on time and on budget. The property looked great.

Where it broke down was the exit.

He listed the property well above fair market value and let it sit for four months with no serious interest. When he finally started reducing the price, the adjustments were too small and too slow. By month twelve, his capital reserves were depleted. He could no longer cover monthly interest payments. He walked away.

At that point, I took over the property.

2. What We Did

Three things, immediately.

New photos. The rehab was solid but the listing photos were poor. We hired a professional photographer and reshot the entire property.

Correct pricing. Camille ran fresh comps and we listed at fair market value. Not above it.

Listed with Camille. As a licensed Compass agent she handled showings, negotiations, and closing directly. No third-party agent. No waiting for approvals. We controlled the process from day one.

The property sold in 30 days.

3. The Numbers

Principal recovered: $465,000. Every dollar returned.

Interest collected: The borrower paid monthly interest for 12 months on a loan originally projected to run 6 months. That is 6 additional months of interest we were not expecting to collect.

Agent commission: Camille's 2.5% buyer-side commission came out of sale proceeds, not our capital.

Net result: We recovered more than we would have on a clean 6-month payoff.

4. Why the Structure Held

This is not luck. Every piece of this outcome was built into the underwriting before the loan was ever funded.

Conservative loan-to-ARV. Lending at 70% of ARV means there is a 30% equity cushion between our position and zero. We could sell the property at a meaningful discount and still recover all capital. That cushion is not negotiable on any loan we do.

Independent ARV validation. We did not rely on the borrower's ARV. Camille ran her own comps before we funded. Her number was conservative and it held up when we went to market.

First-position lien. No one gets paid before us. That is the only position we take.

Phoenix market liquidity. When a property is priced correctly in this market, it moves. Thirty days is proof of that.

In-house agent. Having Camille inside the operation meant we could take over the property and relist it within 48 hours. That speed advantage is structural, not circumstantial.

5. What I Learned

Pricing discipline matters as much as rehab quality. This borrower did excellent work on the renovation. The property looked great. But listing 10 to 15% above market and refusing to adjust quickly cost him the deal. Execution is only half the job. Exit strategy and pricing discipline are the other half.

Capital reserves are non-negotiable. He projected a 6-month hold and didn't have reserves to carry 12 months. I now ask borrowers to show reserves for 12 months of payments regardless of their projected timeline. That requirement is now standard across every loan we underwrite.

Never rely on borrower ARV. Our conservative independent valuation is what gave us the cushion to recover everything when things went sideways. If we had used his number, the math would have looked different.

The Bigger Point

We never want a borrower to default. It is bad for them and it takes real time and attention on our end to manage through it.

But the honest answer to the question of what happens when a borrower defaults is not a theoretical one anymore. It is documented.

We took over the property. We priced it correctly. We sold it in 30 days. We recovered 100% of principal and collected more interest than the original loan structure projected.

Seventy loans. Over $28 million in loan volume. One foreclosure. Zero principal loss.

That track record was built on conservative underwriting, not favorable conditions. The structure is designed to hold when things go wrong. February 2026 was the first real test of that. It held.

If you have questions about how we structure loans or how we think about downside protection, reply to this email. Happy to walk through it.

Devon

P.S. This was our first foreclosure after 70 loans and over $28 million in loan volume. We hope it's the last. But if it happens again, the structure that protected capital this time is the same structure on every loan we fund.