The weakness of the U.S. economy has given rise to the largest epidemic of foreclosures in American history. 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.
Consider with me, if you will, the fundamentals of the Bulk REO business.
Understanding of the foreclosure process is central to understanding Bulk REO investing.
A home owner who misses one or more mortgage payments is faced with an ever-increasing volume of threatening correspondence from their lender. After a certain period, the lender will then formally begin foreclosure proceedings. The name for this period is ‘preforeclosure’.
To complete the foreclosure process, the property is auction to the public. The lender regains ownership of the property if there are no buyers at auction. The lender then categorizes the property as ‘Real Estate Owned’ - or ‘REO’ for short.
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. 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.
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 Salvatore Buscemi of Dandrew Partners, a New-York based hedge fund.
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