Basics of Being A Bulk REO Investor
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.
The new opportunity is known as ‘Bulk REO Investing’ or ‘REO Package Investing’ and it’s a huge opportunity.
The basis of the Bulk REO business is foreclosures, so let’s analyze the foreclosure process now.
Understanding the notion of Bulk REO’s requires understanding of the foreclosure process.
When a home owner begins to miss payments on their mortgage, the lender begins to send late/overdue notices to the home owner. After a certain period, the lender will then formally begin foreclosure proceedings. The ‘pre-foreclosure’ time starts with filing of foreclosure paperwork and concludes at public auction.
Foreclosure is completed when the defaulted property is auctioned. If the property is not purchased at auction, ownership reverts to the original lender. The property then receives the designation of being an ‘REO’ or the more formal name, ‘Real Estate Owned’.
Lenders usually try to unload their REO properties at close to retail price by listing their REO’s with a real estate broker. Yet with increasing frequency, REO properties are being sold for pennies or dimes on the dollar. But the price of receiving such great pricing is the need to purchase multiple REO properties (a ‘package’) rather than individual properties.
Qualified real estate investors are increasingly finding once-in-a-lifetime opportunities in these REO packages. The most successful Bulk REO Investors will have a well-respected source of funding for their transactions. There are many sources of funding for these transasactions including: hard money and commercial financing, as well as non conventional sources such as hedge funds and private investors. Additionally, one man is becoming very well known in the field of bulk REO investing, and his name is Salvatore Buscemi of Dandrew Capital Partners, a hedge fund in New York.
