Fundamentals Of Bulk REO Investing

The weakness of the U.S. economy has given rise to the largest epidemic of foreclosures in American history. But smart real estate investors are turning these ‘lemons’ into ‘lemonade’ in an incredibly profitable new way.

The new opportunity is known as ‘Bulk REO Investing’ or ‘REO Package Investing’ and it’s a huge opportunity.

Consider with me, if you will, the fundamentals of the Bulk REO business.

Understanding the notion of Bulk REO’s requires understanding of the foreclosure process.

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 ‘pre-foreclosure’ time starts with filing of foreclosure paperwork and concludes at public auction.

To complete the foreclosure process, the property is auction to the public. If the property is not purchased at auction, ownership reverts to the original lender. The property then receives the designation of being an ‘REO’ or the more formal name, ‘Real Estate Owned’.

Lenders usually try to unload their REO properties at close to retail price by listing their REO’s with a real estate broker. But as a consequence of the weak economy, lenders are frequently selling their REO properties far below their actual value. This happens because the buyer of the REO is required to purchase multiple REO’s in a single transaction.

The REO investment packages available today have provided a way to profitably capitalize on the U.S. recession. 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 Capital Partners, a New-York based hedge fund.