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Bulk REO Investor Basics
By Vic Hurlstorm | December 22, 2009
No generation in American history has ever experienced the number of foreclosures and defaulted mortgages as is happening now. Yet as always, this challenge has given rise to a huge new opportunity for alert real estate investors.
‘Bulk REO Investing’ is the name of the new strategy, and it’s captured the attention of many well-heeled investors.
Let’s take a moment to analyze the basics of this incredibly lucrative business.
To understand investing in Bulk REO, you have to understand the foreclosure process.
A home owner who misses one or more mortgage payments is faced with an ever-increasing volume of threatening correspondence from their lender. The official foreclosure proceedings begin subsequently, as directed by the lender. ‘Pre foreclosure’ is the name given to the time between implementation of the foreclosure proceedings and the public auction.
When a defaulted property is placed up for auction, the foreclosure process is completed. The lender regains ownership of the property if there are no buyers at auction. The designation of ‘REO’ (Real Estate Owned) is then attached to the foreclosed property.
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. Lenders are willing to do so in exchange for the buyer’s agreement to purchase a ‘package’ of REO’s rather than a single property.
There is huge profit potential in these REO packages for qualified real estate investors. The most successful Bulk REO Investors will have a well-respected source of funding for their transactions. 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 Capital Partners, a New-York based hedge fund.
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