No generation in American history has ever experienced the number of foreclosures and defaulted mortgages as is happening now. However, opportunistic real estate investment professionals are turning the recession into great profits with a bit of creativity.
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.
When a home owner begins to miss payments on their mortgage, the lender begins to send late/overdue notices to the home owner. The official foreclosure proceedings begin subsequently, as directed by the lender. Between the formal beginning of the foreclosure process and the public auction is the ‘preforeclosure’ period.
Foreclosure is completed when the defaulted property is auctioned. If there are no buyers at the foreclosure auction, the lender regains title to the property. This property is then considered to be ‘Real Estate Owned’ by the lender, also known as an ‘REO’ 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’. 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 recession in the United States has yielded huge profits to real estate investors prepared to take advantage. Bulk REO Investors are most successful when they have a well-established source of funding for their REO packages. 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 Bushemi of Dandrew Partners, a hedge fund in New York.
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