The Fundamentals For Investors In Bulk REO

The recession in the U.S. economy has resulted in more foreclosures than experienced by any other generation of Americans. But smart real estate investors are turning these ‘lemons’ into ‘lemonade’ in an incredibly profitable new way.

‘Bulk REO Investing’ is the name of the new strategy, and it’s captured the attention of many well-heeled investors.

Let’s take a moment to analyze the basics of this incredibly lucrative business.

Understanding of the foreclosure process is central to understanding Bulk REO investing.

When a home owner begins to miss payments on their mortgage, the lender begins to send late/overdue notices to the home owner. The formal process of foreclosure begins at the lender’s discretion. The name for this period is ‘preforeclosure’.

Foreclosure is completed when the defaulted property is auctioned. If there are no buyers for the property at auction, the property is returned to the lender. The designation of ‘REO’ (Real Estate Owned) is then attached to the foreclosed 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. 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.

These REO packages represent the potential to acquire huge amounts of equity for savvy real estate investors. The most successful Bulk REO Investors will have a well-respected source of funding for their transactions. 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 Partners, a hedge fund in New York.