| What is the difference between one and many? The | | | | must reclaim, they are still obliged to seek the best |
| answer to such a question is a wide variety of | | | | prices for them. When a group offer is made, |
| possibilities, but when talking about REO portfolios it | | | | however, their resistance to price reduction tends to |
| means the difference between a single home and a | | | | weaken. Consider the boost to the financial institution's |
| large collection of them. | | | | profitability when hundreds of assets are sold in one |
| REO means "real estate owned" and this tends to | | | | fell swoop. |
| mean a property that is owned by a financial institution | | | | Usually, the company making the purchase is going to |
| of some kind or another due to a foreclosure or | | | | pay around a quarter of the value of each property, |
| repossession. Because of the catastrophic trends in | | | | and while this might automatically perk up the ears of |
| the global economy and the real estate markets, there | | | | an investor, it is important to note that many such |
| are more bank-owned, or REO, homes than ever | | | | properties will be in need of a great deal of work and |
| before. | | | | attention. Most REO portfolios are first available |
| Interestingly enough, these homes have become a | | | | through an acquisition specialist or an actual REO |
| boon to investors who are seeking out an alternative | | | | management company. There are few banks who |
| to the shakier stocks and bonds markets. There are | | | | handle their reclaimed properties directly, and it is only |
| now individual specialists and companies that seek out | | | | through an REO agent that purchases can occur. |
| banks with numerous properties with obvious profit | | | | Many REO portfolios are available only for a limited |
| potential, and who purchase them in groups from the | | | | time and then are released individually to potential |
| bank or mortgage company in the form of REO | | | | buyers on the regular real estate market. Because of |
| portfolios. These portfolios are funded through private | | | | this it is vitally important for anyone hoping to invest in |
| investment. | | | | such an opportunity to understand the screening |
| Even though most banks are viewing all REO | | | | process used by the purchasing group to determine |
| properties as assets and not as liabilities, when it | | | | the viability of the properties and their overall profit |
| comes down to maintaining solvency or holding too | | | | potential. |
| many costly assets, they will tend to become more | | | | For example, the group should have a plan for |
| flexible about the price of a home. For example, if a | | | | rehabilitating, marketing and selling the properties as |
| single property is listed on their REO accounts and a | | | | well as the potential earnings from each investment. |
| single buyer comes forward with a bid that is | | | | They should be able to do this because they will |
| well-below market value it is more than likely that such | | | | understand that the homes in the REO portfolios are |
| a bid will be declined by the bank. | | | | worth more than their sales prices at the time of the |
| Although the bank is charged with paying the taxes on | | | | bulk purchase, and this is where the profits can be |
| and maintaining each and every property that they | | | | found. |