Bulk REO Investing Basics

No generation in American history has ever experienced the number of foreclosures and defaulted mortgages as is happening now. Yet as always, this challenge has given rise to a huge new opportunity for alert real estate investors.

This new opportunity – known as ‘Bulk REO Investing’ – is so huge it’s captured attention from wealthy investors and private investment funds alike.

Foreclosures are at the heart of the Bulk REO business, so let’s consider the foreclosure process.

You can’t understand Bulk REO Investments without understanding the process of foreclosure.

As a home owner misses a payment or two, the lender sends the predictable barage of threatening letters and warnings. Following a period of time determined by the lender, formal foreclosure proceedings begin. From that time through public auction is called ‘preforeclosure’.

Foreclosure is completed when the defaulted property is auctioned. 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’.

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. Yet with increasing frequency, REO properties are being sold for pennies or dimes on the dollar. But the price of receiving such great pricing is the need to purchase multiple REO properties (a ‘package’) rather than individual properties.

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 Sal Buscemi of Dandrew Partners, a New-York based hedge fund.

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