Bulk REO Investing Basics
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.
As a borrower becomes increasingly behind in his mortgage, the lender regularly calls and writes the borrower with default warnings and threats. The formal process of foreclosure begins at the lender’s discretion. Between the formal beginning of the foreclosure process and the public auction is the ‘preforeclosure’ period.
To complete the foreclosure process, the property is auction to the public. If the property is not purchased at auction, ownership reverts to the original lender. The lender then categorizes the property as ‘Real Estate Owned’ - or ‘REO’ for short.
Lenders usually try to unload their REO properties at close to retail price by listing their REO’s with a real estate broker. However, REO properties are now frequently sold for far less than their ‘book value’. But the price of receiving such great pricing is the need to purchase multiple REO properties (a ‘package’) rather than individual properties.
The REO investment packages available today have provided a way to profitably capitalize on the U.S. recession. Bulk REO Investors are most successful when they have a well-established source of funding for their REO packages. 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 Bushemi of Dandrew Partners, a New-York based hedge fund.
