Bulk REO Investments - The Basics
With more foreclosures now than ever before, America’s weak real estate market seems to set new dismal records each month. But challenge always gives rise to opportunity, and opportunistic real estate investors are rising to the challenge.
‘Bulk REO Investing’ is the name of the new strategy, and it’s captured the attention of many well-heeled investors.
Consider with me, if you will, the fundamentals of the Bulk REO business.
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. ‘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. Ownership of the property is returned to the lender if the property is not sold at auction. The lender then categorizes the property as ‘Real Estate Owned’ - or ‘REO’ for short.
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. However, lenders are increasingly willing to take much less than their REO asset is actually worth. The trade-off is that the buyer must purchase multiple REO properties in each transaction.
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. 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 Sal Bushemi of Dandrew Partners, a New-York based hedge fund.
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Tags: bulk reo, bulk reo investing, buyer mandate, reo packages, seller mandate