With more foreclosures now than ever before, America’s weak real estate market seems to set new dismal records each month. Yet well-funded investors in real estate are seizing upon this opening to profit from an profoundly profitable new opportunity.

This new opportunity – known as ‘Bulk REO Investing’ – is so huge it’s captured attention from wealthy investors and private investment funds alike.

The basis of the Bulk REO business is foreclosures, so let’s analyze the foreclosure process now.

To understand investing in Bulk REO, you have 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. The formal process of foreclosure begins at the lender’s discretion. ‘Pre foreclosure’ is the name given to the time between implementation of the foreclosure proceedings and the public auction.

When a defaulted property is placed up for auction, the foreclosure process is completed. Ownership of the property is returned to the lender if the property is not sold at auction. The property then receives the designation of being an ‘REO’ or the more formal name, ‘Real Estate Owned’.

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 more and more, lenders are selling their REO properties for a greatly reduced price. The trade-off is that the buyer must purchase multiple REO properties in each transaction.

The REO investment packages available today have provided a way to profitably capitalize on the U.S. recession. One of the best ways to take advantage of Bulk REO Investing opportunities is to partner with a well-regarded source of funding. 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. One excellent source of funding for Bulk REO Investment transactions can be found here: Bulk REO Investment Training.

With more foreclosures now than ever before, America’s weak real estate market seems to set new dismal records each month. Yet as always, this challenge has given rise to a huge new opportunity for alert real estate investors.

‘Bulk REO Investing’ is the name of the new strategy, and it’s captured the attention of many well-heeled investors.

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.

When a home owner begins to miss payments on their mortgage, the lender begins to send late/overdue notices to the home owner. Following a period of time determined by the lender, formal foreclosure proceedings begin. ‘Pre foreclosure’ is the name given to the time between implementation of the foreclosure proceedings and the public auction.

Foreclosure is completed when the defaulted property is auctioned. Ownership of the property is returned to the lender if the property is not sold at auction. 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. However, lenders are increasingly willing to take much less than their REO asset is actually worth. The trade-off is that the buyer must purchase multiple REO properties in each transaction.

These REO packages represent the potential to acquire huge amounts of equity for savvy real estate investors. One of the best ways to take advantage of Bulk REO Investing opportunities is to partner with a well-regarded source of funding. 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. One excellent source of funding for Bulk REO Investment transactions can be found here: Bulk REO Investment Training.

Bulk REO Video Training

Everyone feels the negative brunt of non-performing assets, not just the lenders.  A defaulted mortgage could greatly limit a bank’s borrowing ability by nearly 900%.  Even if the amount in default is only $100,000, the impact on the bank is that it is forbidden to borrow up to $900,000 until the property is sold.  Also, as the defaulted asset loses value the lenders must record the adjusted value, thereby taking a great financial hit.

(A quick note from the editor:  For related information, check out Bulk REO Investing.)

There aren’t many solutions for banks when it comes to easing the negative impact non-performing assets have on their accounts.  Only as a last resort will banks foreclose.  These actions are pricey for lenders and start with exhorbitant legal expenses.  While the property is still REO (Real Estate Owned) it incurs the expense of considerable property management.  REO properties increase the chance for liability every minute they sit unoccupied, amplifying the risk that the asset will further nose dive.  When selling any property there are expenses – from marketing to transactions that accompany selling real estate.

Furthermore, lenders mus face the problem of staffing.  Still, if a mortgage lender thinks foreclosure is teh only reasonable option, it is faced with the daunting task of finding enough staff to oversee and unload REO’s, especially bulk REO’s.  The last time anyone saw a lending crisis of this magnitude was almost 15 years ago, and not since then have the valuable number of REO experts been lost at such perplexing numbers.  Also, the larger lenders in the United States are hard pressed to come up with current in-house experts who can manage bulk REO’s or provide the proper management or security for them while preparing to sell them without incurring too great a loss.

Nowadays the progression of most bond managers, lenders and servicing agencies seems to be this: Shake off troubled loans at ridiculously low prices just as fast as possible.