@bachi The letter you received was from a wholesaler - an individual (or a company) that will market for sellers directly, based upon various lists they can pay for or pull manually from city/county records. Lists such as probate, foreclosures, etc. They may have seen that you have a lot of equity in your home, thus a good target for them.
They'll contact people directly and attempt to negotiate a quick cash deal. Once they have that deal under contract, they'll add their mark-up and go market that deal to their investors that will actually buy the house, flip it/renovate and rent it - guys like me. When I close on the property, they make their money and the seller gets whatever they get. Yes, they are usually capitalizing on someone in a distressed situation.
Normal profit margin varies. I've seen some make only $3K but more recently I see them make quite a bit more ($10k or more). Pretty impressive for what was probably less than a few hours of work and very little risk on the wholesaler's end.
There are marketing expenses for the wholesaler, of course. Smaller shops or solo gigs may be only spending a couple grand a month. The big shops are spending in excess of $30k/mo in marketing in all forms - snail mail, virtual assistants making calls all day, digital marketing, etc.
And yes, definitely a trolling candidate. Hell, see what they'll offer you. Try not to laugh when it's 50 cents on the dollar.
It can be an unclean business but it does serve a need. I see a lot of properties that have been passed down from parents that have died and the children let the property get behind on property taxes, repairs, etc...and simply don't have $30-50k+ to renovate the property back up to market value. I've purchased a house where there was a suicide and the family wanted to close that chapter and move on asap, while the property needed a lot of repairs.
There's certainly a need for it. But it does capitalize on a distressed situation.