Bulk REO Investing 101

With more foreclosures now than ever before, America’s weak real estate market seems to set new dismal records each month. Yet well-funded investors in real estate are seizing upon this opening to profit from an profoundly profitable new opportunity.

This new opportunity – known as ‘Bulk REO Investing’ – is so huge it’s captured attention from wealthy investors and private investment funds alike.

Take a just a minute to consider the basics of this highly profitable business.

To understand Bulk REO investing is to understand the foreclosure process.

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 official foreclosure proceedings begin subsequently, as directed by the lender. From that time through public auction is called ‘preforeclosure’.

When a defaulted property is placed up for auction, the foreclosure process is completed. If the property is not purchased at auction, ownership reverts to the original lender. Such a property is then classified as an ‘REO’ (Real Estate Owned) by the lender.

Lenders have no interest in owning property, and thus usually opt to list their REO properties with a local real estate broker in hopes of a retail sale. Yet with increasing frequency, REO properties are being sold for pennies or dimes on the dollar. This happens because the buyer of the REO is required to purchase multiple REO’s in a single transaction.

Qualified real estate investors are increasingly finding once-in-a-lifetime opportunities in these REO packages. 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 Sal Buscemi of Dandrew Partners, a hedge fund in New York.