REOs Explained


Properties owned by mortgage lenders as a result of foreclosures are packaged into groups and sold in bundles. They are sold at a stated percentage of their market value, as determined by recent appraisal or written Broker Price Opinion letter. The banks are not selling these properties to retail customers, but rather to qualified real estate investors, investor groups, hedge funds and institutional investors with available liquid assets sufficient to quickly close without mortgage financing.

Investors may be tempted to turn this investment vehicle into an opportunity to turn a quick profit by flipping the properties before the closing of title. This is not permitted.

After the closing of title, however, mortgage financing, resale and other investment and exit strategies are all possible.

Sellers of bulk REOs are banks and financial institutions which need to move large real estate holdings off their balance sheets. These institutional sellers are liquidating large portfolios of foreclosed real estate at deep discounts in order to convert these assets into cash. The sellers are serious and ready to do business. They will only deal with buyers who are of like mind and similar intent. Serious REO investors understand that they must comply with the procedures established by the sellers. In our experience, these qualified investors will close on bulk REO properties.

Please note that the banks and institutional mortgage lenders selling bulk foreclosed real estate will not entertain requests to review lists of available properties before the purchaser signs all required Non-Circumvention Non-Disclosure Agreements, and provides a Letter of Intent and Proof of Funds. Think of this requirement as showing your membership card before being admitted to a private club. Cash may be king, but you still need to prove you are a member. Unfortunately, there are no free tours. Please understand the need for these safeguards. We do not make the rules. The procedures and protocol are established by the banks and other institutional sellers for the protection of all parties.

We cannot deal with investors who will not accept and follow these procedures. In our opinion, the inconvenience of complying with the seller’s protocol is a small sacrifice in relation to the quality and value of the investment opportunities that are offered. We believe that once you provide the required documentation, you will be extremely satisfied with our REO portfolios. We sincerely believe that you will close the first REO package we provide, and you will return regularly for additional bulk real estate investments. Often the banks sell to repeat buyers. If the value was not there, we do not believe that sophisticated real estate investors would return.