Cashing In On Bulk Reo

Buying and selling bulk REO's is the hottest real estateBulk REO's are foreclosed properties that banks own.
niche in the country right now. This business is only aSome of the homes may be currently listed with an
few years old. Therefore, not many people know howAgent while others may not. Banks are not in the
this business works. property management business. They are in the
Lucky for you, I have been one of the few investors inlending business and want these toxic assets off their
the country who has actually closed bulk REO dealsbooks. Therefore, this has created a tremendous
and play in this market everyday. I like doing $1 dealsopportunity for investors who know how to play in this
with Bulk REO's just as much as I do when buying andmarket. 
selling single REO homes. However, I like doing bulkA bulk package is also referred to as a tape. These
REO deals more because the profit potentials aretapes contain tens or hundreds (sometimes thousands)
much bigger. of REO properties. A tape is nothing more than an
In addition, the bulk REO business is far lessexcel spreadsheet list of properties. 
competitive than buying single REO homes from REOCan I Do $1 Deals With Bulk REO's?
agents. Most investors don't understand how to makeYes, in fact you can get started trading Bulk REO
money with Bulk REO's, or they think buying bulk REOdeals without any money. Let's learn exactly how this
packages are too risky. can be done.
Here's why.....There are several ways to make money buying and
When you buy a pool of bulk REO assets from aselling bulk REO's. Your options are either:
bank, you are buying "sight unseen". This is enough to- Brokering Bulk REO Deals
scare away most traditional investors. Don't worry,- Buying Bulk REO Properties from Banks
you're about to discover how to take the risk out ofBrokering Bulk REO Deals
buying Bulk REO's. Brokering Bulk REO deals is much easier to do than
Traditionally, most real estate investors are used tobuying them from banks. A Bulk REO Broker or
going out and physically inspecting propertiesTrader (some people refer to them also as
themselves. I refer to these people as "touch &Syndicators) acts as a middleman between the seller
feel" investors. However, when you buy Bulk REOof a Bulk REO tape and a buyer. It is important to note
homes from banks, "touching and feeling" these homesthat a professional license is NOT required to broker
are impossible to do when you're contracting to buyBulk REO deals.
30-500 homes or more scattered across the country.The great part about brokering Bulk REO deals is that
Therefore, you have to depend on others to go out inyou don't have to use "Cash or Credit" to get
each local market and inspect the properties for you.started.Nor do you need an office, staff or car for that
I have been active doing Bulk REO deals for 15matter and you can do it part-time from the comfort
months now. Traditionally, I am a "touch and feel" typeof your home.Brokering Bulk REO deals only requires
of investor like many of my peers and it was hard forthat you have a telephone, fax machine and a
me to adapt to buying properties "sight unseen" andcomputer.
not inspecting a property before I contracted to buy.Computer: Will be used to network with other Bulk
For that reason alone, I had no choice but to develop aREO Brokers, Bankers and Investors online.
system that would allow me to buy and sell Bulk REOTelephone: Will be used to communicate offline with
deals without ever looking at a single property but stillthe people you network with online.
feel comfortable along the way.Fax Machine: Used to send and receive all the
Why Are Banks Selling Off Bulk REO'S?documents and contracts when doing these deals.
Due to the U.S. economic meltdown and foreclosureHow Do I Get Started Brokering Bulk REO'S?
crisis, banks across the country are failing. This hasThe first thing you have to do is understand the role of
created a unique opportunity to buy properties directlya Bulk REO Broker so you can find your niche to play.
from banks like never before. Today, banks all acrossThere are two types of Bulk REO Brokers. The first is
America have BILLIONS of dollars in defaulted loans.a Seller's Rep and the other is a Buyers Rep.
As I write this report, there are over 1,905,723A Buyer's Rep works exclusively with buyers who
foreclosure filings right now. If foreclosure filingsare looking to take down tapes. They match their
continue at this pace we would have exceeded the 3buyers with sellers of Bulk REO tapes and charge a
million foreclosure filings the U.S had in 2008. fee for their efforts for finding product for their buyer
When a borrower is in default of their mortgage note,to purchase. 
the bank will move to foreclose on their home. TheA Seller's Rep works exclusively with sellers looking
mortgage note is now considered non- performing andto sell Bulk REO tapes. The seller may be a bank,
becomes a liability on the banks balance sheets.private equity fund, hedge fund or a private investor.
Immediately the bank will hire an attorney to begin theThe seller's rep will get paid a fee for their efforts at
foreclosure process. In addition to attorney's fees; iffinding a buyer to buy the tape from the seller. 
the homeowner in default fails to pay the hazardousSome Brokers work as both buyer and seller reps.
insurance policy, the property taxes and neglects toThe hat they wear will depend on what lead source
maintain the property, the bank will have to step in andthey have. If they have a source of product for sale,
pay those expenses as well. Some banks havethey may become the seller's rep. If they have a
thousands of these properties and the financial burdenserious buyer of Bulk REO product they may wear
is enormous. At this point the bank wants nothing morethe hat of the buyer's rep.
but to get rid of this money pit! I have acted as both the buyer and seller rep and
The timeline to foreclose on a property will depend onmade money. However, I prefer to wear the seller's
if the property is located in a judiciary or non-judiciaryrep hat because my strength is creating marketing
State as we discussed in the Foreclosure Frenzyadvertisements that sell Bulk REO product. Last
article. In a non-judiciary State, the process tomonth I closed on a small Bulk REO deal and made
foreclose is much faster and can be done in 2-3$25,000 working as a seller's rep. It only took 4 hours
months, while in a judiciary State the process normallyof work to get this deal done.
takes about 6-12 months. Let me explain how this deal worked:
Once the court has issued a "Notice of Judgment" in aStep 1 – Find The Product
judiciary State or a "Notice of Trustee Sale" in aA Bulk REO private seller called me about a small 24
non-judiciary State, the bank will move to sell thehome nationwide tape he had just taken down from a
property at the foreclosure auction. The foreclosurebank. He was asking $300,000 for the tape. 
auction is normally handled by the local Sheriff's office.Step 2 – Find A Buyer
At auction, an opening bid on the property is set by theI passed on taking down the tape myself but decided
foreclosing lender. This opening bid is usually equal toto call a buyer I knew who was interested in taking
the outstanding loan balance, interest accrued, and anydown a nationwide tape. My buyer was very
additional fees and attorney fees associated with theinterested. 
sale. If there are no bids higher than the opening bid,Step 3 – Arrange A Conference Call
the property will be purchased by the attorney workingI arranged for my buyer and seller to talk about the
on behalf of the bank.particulars of the deal. The buyer provided verifiable
If this occurs, and the opening bid is not met, theProof of Funds (POF) to my seller and the tape was
property is deemed a REO or Real Estate Owned.sent to him via email. 
This typically occurs because many of the propertiesStep 4 - Due Diligence
up for sale at foreclosure auctions are worth less thanThe buyer conducted his due diligence in 3 days and
the total amount owed to the bank or lender. moved forward to take down the tape. 
Banks have become accustomed to using thisStep 5 – Master Fee Agreement
process to sell off foreclosure homes to remove themThe seller and I signed the Master Fee Agreement to
from their books. These homes are consideredpay me the difference between the seller's price of
"toxic-assets". Today, due to the U.S. foreclosure$300,000 to me and my sale price to my buyer for
frenzy, banks are plagued with these toxic-assets$325,000. 
while the courts that handle these foreclosureStep 6 – Contract & Closing
proceedings are backed up making the foreclosureThe buyer executed a contract and made
process take longer then ever before. arrangements to close the next day. Once the funds
With Federal Regulators breathing down the throats ofwere sent to my seller's Title Agent, I picked up a
banks to do something about all the defaulted loans oncheck for $25,000. 
their books, banks are now seeking otherThe worst part about brokering Bulk REO deals is
non-traditional ways to get rid of their toxic assetsfinding [REAL] buyers and sellers. Most of my time is
such as selling their non-performing notes and pools ofspent filtering through the fake buyers and sellers of
Bulk REO properties to investors. Bulk REO's. There are lots of fake buyers and sellers
This new approach of bundling up Bulk REO propertiesof Bulk REO who care nothing more than to waste
and selling them at steep discounts saves the banksyour time.
the headache of continuing to pay for the propertyAs a Broker you have to learn how to distinguish
taxes, hazardous insurance, utilities, maintenance costbetween the real buyers and sellers of Bulk REO from
and more importantly, removes the toxic assets fromthe fake. There is an art to this and the better you are
the banks balance sheets enabling them to stay inat it, the fewer headaches you will have, the less time
compliance with Federal and State bank regulations. you will waste and ultimately the more money you will
What Are Bulk REO's?make.