Bulk REO Investing – The Basics

There are more foreclosures in the United States right now than we have ever experienced before. Yet as always, this challenge has given rise to a huge new opportunity for alert real estate investors.

That opportunity is called Bulk REO Investing, and the opportunity is huge.

Consider with me, if you will, the fundamentals of the Bulk REO business.

To understand investing in Bulk REO, you have 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 lender directs the subsequent timing of the actual foreclosure proceedings. Between the formal beginning of the foreclosure process and the public auction is the ‘preforeclosure’ period.

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 property then receives the designation of being an ‘REO’ or the more formal name, ‘Real Estate Owned’.

Lenders usually try to unload their REO properties at close to retail price by listing their REO’s with a real estate broker. But more and more, lenders are selling their REO properties for a greatly reduced price. However, the purchase of a ‘package’ (or group) or REO properties is the trade-off for receiving such great prices.

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 Salvatore Buscemi of Dandrew Capital Partners, a hedge fund in New York.