With more foreclosures now than ever before, America’s weak real estate market seems to set new dismal records each month. But challenge always gives rise to opportunity, and opportunistic real estate investors are rising to the challenge.
That opportunity is called Bulk REO Investing, and the opportunity is huge.
Let’s take a moment to analyze the basics of this incredibly lucrative business.
To understand Bulk REO investing is to understand the foreclosure process.
As a borrower becomes increasingly behind in his mortgage, the lender regularly calls and writes the borrower with default warnings and threats. The formal process of foreclosure begins at the lender’s discretion. Between the formal beginning of the foreclosure process and the public auction is the ‘preforeclosure’ period.
Foreclosure is completed when the property is put up for auction. 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 have no interest in owning property, and thus usually opt to list their REO properties with a local real estate broker in hopes of a retail sale. Yet with increasing frequency, REO properties are being sold for pennies or dimes on the dollar. 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.
Qualified real estate investors are increasingly finding once-in-a-lifetime opportunities in these REO packages. Bulk REO Investors are most successful when they have a well-established source of funding for their REO packages. 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 Sal Bushemi of Dandrew Capital Partners, a New-York based hedge fund.
Tags: bulk reo, bulk reo investing, buyer mandate, reo packages, seller mandate