Bulk REO Investor Basics

The weakness of the U.S. economy has given rise to the largest epidemic of foreclosures in American history. But smart real estate investors are turning these ‘lemons’ into ‘lemonade’ in an incredibly profitable new way.

‘Bulk REO Investing’ is the name of the new strategy, and it’s captured the attention of many well-heeled investors.

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

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. The official foreclosure proceedings begin subsequently, as directed by the lender. Between the formal beginning of the foreclosure process and the public auction is the ‘preforeclosure’ period.

The defaulted property is ultimately auctioned, thus completing the foreclosure process. If there are no buyers at the foreclosure auction, the lender regains title to the property. The designation of ‘REO’ (Real Estate Owned) is then attached to the foreclosed property.

REO properties are usually listed for sale with local real estate agents. However, lenders are increasingly willing to take much less than their REO asset is actually worth. But the price of receiving such great pricing is the need to purchase multiple REO properties (a ‘package’) rather than individual properties.

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. 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.