No generation in American history has ever experienced the number of foreclosures and defaulted mortgages as is happening now. Yet as always, this challenge has given rise to a huge new opportunity for alert real estate investors.
That opportunity is called Bulk REO Investing, and the opportunity is huge.
Foreclosures are at the heart of the Bulk REO business, so let’s consider the foreclosure process.
To understand investing in Bulk REO, you have to understand the foreclosure process.
Mortgage lenders faced with a non-paying home owner send a large volume of threats, warnings and documentation to the borrower who is late. The official foreclosure proceedings begin subsequently, as directed by the lender. The name for this period is ‘preforeclosure’.
The defaulted property is ultimately auctioned, thus completing the foreclosure process. If there are no buyers at the foreclosure auction, the lender regains title to the property. 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. However, REO properties are now frequently sold for far less than their ‘book value’. The trade-off is that the buyer must purchase multiple REO properties in each transaction.
These REO packages represent the potential to acquire huge amounts of equity for savvy real estate investors. REO packages are easiest to buy and sell with a well regarded source of financing in place. 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 Sal Bushemi of Dandrew Capital Partners, a New-York based hedge fund.
