The weakness of the U.S. economy has given rise to the largest epidemic of foreclosures in American history. However, opportunistic real estate investment professionals are turning the recession into great profits with a bit of creativity.
‘Bulk REO Investing’ is the name of the new strategy, and it’s captured the attention of many well-heeled investors.
Take a just a minute to consider the basics of this highly profitable business.
Understanding of the foreclosure process is central to understanding Bulk REO investing.
As a home owner misses a payment or two, the lender sends the predictable barage of threatening letters and warnings. After a certain period, the lender will then formally begin foreclosure proceedings. Between the formal beginning of the foreclosure process and the public auction is the ‘preforeclosure’ period.
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 designation of ‘REO’ (Real Estate Owned) is then attached to the foreclosed property.
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. 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.
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 Sal Buscemi of Dandrew Capital Partners, a hedge fund in New York.
Tags: bulk reo, bulk reo investing, buyer mandate, reo packages, seller mandate