The weakness of the U.S. economy has given rise to the largest epidemic of foreclosures in American history. But challenge always gives rise to opportunity, and opportunistic real estate investors are rising to the challenge.
That opportunity is called Bulk REO Investing, and the opportunity is huge.
Take a just a minute to consider the basics of this highly profitable business.
You can’t understand Bulk REO Investments without understanding the process of foreclosure.
Mortgage lenders faced with a non-paying home owner send a large volume of threats, warnings and documentation to the borrower who is late. The formal process of foreclosure begins at the lender’s discretion. The name for this period is ‘preforeclosure’.
Foreclosure is completed when the property is put up for auction. If there are no buyers for the property at auction, the property is returned to the lender. The lender then categorizes the property as ‘Real Estate Owned’ – or ‘REO’ for short.
Typically, lenders list their REO properties with local real estate agents in hopes of selling the property to a retail buyer who will pay full price. However, REO properties are now frequently sold for far less than their ‘book value’. However, the purchase of a ‘package’ (or group) or REO properties is the trade-off for receiving such great prices.
These REO packages represent the potential to acquire huge amounts of equity for savvy real estate investors. Bulk REO Investors are most successful when they have a well-established source of funding for their REO packages. Some sources of funding for these transactions are: personal funds, hard money lenders, commercial lenders and non-conventional sources such as private investors and hedge funds. Additionally, one man is becoming very well known in the field of bulk REO investing, and his name is Salvatore Buscemi of Dandrew Partners, a New-York based hedge fund.
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