The recession in the U.S. economy has resulted in more foreclosures than experienced by any other generation of Americans. But challenge always gives rise to opportunity, and opportunistic real estate investors are rising to the challenge.
The new opportunity is known as ‘Bulk REO Investing’ or ‘REO Package Investing’ and it’s a huge opportunity.
The basis of the Bulk REO business is foreclosures, so let’s analyze the foreclosure process now.
Understanding of the foreclosure process is central to understanding Bulk REO investing.
Mortgage lenders faced with a non-paying home owner send a large volume of threats, warnings and documentation to the borrower who is late. After a certain period, the lender will then formally begin foreclosure proceedings. ‘Pre foreclosure’ is the name given to the time between implementation of the foreclosure proceedings and the public auction.
To complete the foreclosure process, the property is auction to the public. If the property is not purchased at auction, ownership reverts to the original lender. This property is then considered to be ‘Real Estate Owned’ by the lender, also known as an ‘REO’ property.
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. The trade-off is that the buyer must purchase multiple REO properties in each transaction.
These REO packages represent the potential to acquire huge amounts of equity for savvy real estate investors. REO packages are easiest to buy and sell with a well regarded source of financing in place. 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.