The weakness of the U.S. economy has given rise to the largest epidemic of foreclosures in American history. Yet well-funded investors in real estate are seizing upon this opening to profit from an profoundly profitable new opportunity.
The new opportunity is known as ‘Bulk REO Investing’ or ‘REO Package Investing’ and it’s a huge opportunity.
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.
As a borrower becomes increasingly behind in his mortgage, the lender regularly calls and writes the borrower with default warnings and threats. 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.
When a defaulted property is placed up for auction, the foreclosure process is completed. If there are no buyers for the property at auction, the property is returned to the lender. This property is then considered to be ‘Real Estate Owned’ by the lender, also known as an ‘REO’ property.
REO properties are usually listed for sale with local real estate agents. Yet with increasing frequency, REO properties are being sold for pennies or dimes on the dollar. But the price of receiving such great pricing is the need to purchase multiple REO properties (a ‘package’) rather than individual properties.
The recession in the United States has yielded huge profits to real estate investors prepared to take advantage. The most successful Bulk REO Investors will have a well-respected source of funding for their transactions. 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 Salvatore Bushemi of Dandrew Partners, a New-York based hedge fund.