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Bulk REO Investing For Beginners
By OnTopic | March 9, 2010
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.
The real estate investing strategy du jour is called ‘Bulk REO Investing‘ and is a real monster.
Foreclosures are at the heart of the Bulk REO business, so let’s consider the foreclosure process.
You can’t understand Bulk REO Investments without understanding the process of foreclosure.
As a borrower becomes increasingly behind in his mortgage, the lender regularly calls and writes the borrower with default warnings and threats. The lender directs the subsequent timing of the actual foreclosure proceedings. From that time through public auction is called ‘preforeclosure’.
The defaulted property is ultimately auctioned, thus completing the foreclosure process. If there are no buyers for the property at auction, the property is returned to the lender. Such a property is then classified as an ‘REO’ (Real Estate Owned) by the lender.
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. But as a consequence of the weak economy, lenders are frequently selling their REO properties far below their actual value. 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. REO packages are easiest to buy and sell with a well regarded source of financing in place. 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 hedge fund in New York.
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