With more foreclosures now than ever before, America's weak real estate market seems to set new dismal records each month. However, opportunistic real estate investment professionals are turning the recession into great profits with a bit of creativity.
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.
Understanding of the foreclosure process is central to understanding Bulk REO investing.
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. 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.
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. This happens because the buyer of the REO is required to purchase multiple REO's in a single transaction.
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 Salvatore Bushemi of Dandrew Partners, a hedge fund in New York.
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