With more foreclosures now than ever before, America’s weak real estate market seems to set new dismal records each month. However, opportunistic real estate investment professionals are turning the recession into great profits with a bit of creativity.
That opportunity is called Bulk REO Investing, and the opportunity is huge.
The basis of the Bulk REO business is foreclosures, so let’s analyze the foreclosure process now.
You can’t understand Bulk REO Investments without understanding the process of foreclosure.
When a home owner begins to miss payments on their mortgage, the lender begins to send late/overdue notices to the home owner. The lender directs the subsequent timing of the actual foreclosure proceedings. The name for this period is ‘preforeclosure’.
When a defaulted property is placed up for auction, the foreclosure process is completed. If there are no buyers for the property at auction, the property is returned to the lender. This property is then considered to be ‘Real Estate Owned’ by the lender, also known as an ‘REO’ property.
Typically, lenders list their REO properties with local real estate agents in hopes of selling the property to a retail buyer who will pay full price. However, lenders are increasingly willing to take much less than their REO asset is actually worth. Lenders are willing to do so in exchange for the buyer’s agreement to purchase a ‘package’ of REO’s rather than a single property.
There is huge profit potential in these REO packages for qualified real estate investors. 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 Salvatore Bushemi of Dandrew Partners, a hedge fund in New York.