The recession in the U.S. economy has resulted in more foreclosures than experienced by any other generation of Americans. But challenge always gives rise to opportunity, and opportunistic real estate investors are rising to the challenge.
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.
To understand Bulk REO investing is 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. Following a period of time determined by the lender, formal foreclosure proceedings begin. 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. Such a property is then classified as an ‘REO’ (Real Estate Owned) by the lender.
Local real estate agents are usually used to resale REO properties at retail price to the general public. However, REO properties are now frequently sold for far less than their ‘book value’. However, the purchase of a ‘package’ (or group) or REO properties is the trade-off for receiving such great prices.
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. 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 Buscemi of Dandrew Partners, a hedge fund in New York.