REO (also known as real estate owned, bank owned real estate, lender owned properties as a result of foreclosures) investments is where many investors and groups hedge their potential to purchase properties at a discounted price and capitalize on “higher than industry standard” returns. Individuals, pooled groups of investors and hedge funds are beginning to realize that without direct connections with established inner-banking relations, their abilities to truly maximize on REO product usually is lost in a juxtaposition of half-truths and meandering promises.

If you’re involved in the REO industry for some time, you will hear hear, on a daily basis, the frustration in the voices of brokers as well as clients who have been sitting, continually stirring a pot which has nothing inside of it. Recently, it has become our job to be more of an educator to these clients, investors and brokers. The truth of the matter is that while we provide many of our clients with REO packages, for the most part, those looking for $100M dollar packages to a billion dollars, are usually disillusioned. It is important to understand how the REO marketplace really works.

Here is some reality:

The total expected sub-prime related losses through 2009 are about $500B. The majority of that is by way of write downs, discounted sales of whole loan pools and securities, legal and servicing, foreclosure and workout costs, holding costs, auction fees, and Wall Street brokerage fees and on and on. A small fraction of those losses are actual REO’s while even a smaller fraction is related to bulk REO sales at major fire sale prices.

This was the bulk of the sub-prime related losses through January of 2008:

MAIN SUB-PRIME LOSSES SO FAR:

Merrill Lynch: $22.1B
Citigroup: $18B
UBS: $13.5B
Morgan Stanley $9.4B
HSBC: $3.4B
Bear Stearns: $3.2B
Deutsche Bank: $3.2B
Bank of America: $3B
Barclays: $2.6B
Royal Bank of Scotland: $2.6B
Freddie Mac: $2B
JP Morgan Chase: $3.2B
Credit Suisse: $1B
Wachovia: $1.1B
IKB: $2.6B
Paribas: $197M
Source: Company reports

So, this equates to a total of about $280B sub-prime “related losses” of which heavily discounted bulk REO’s would account for 6% (at best case scenario) through January, 2008. Deutsche is JUST NOW putting $40B out to “bid” and NOT to bozo broker chains, but to Blackrock and similar firms. Citi is JUST NOW putting $12B out to “bid.” The MAJORITY of those are loan pools and mortgage related securities, NOT bulk REOs.

So, when you hear of all these “phantom” REO pools that are out there that investors are directed to at 33% of market value, we caution you to be more pessimistic than optimistic. It would be inaccurate to state that there aren’t any smaller pools that are being sold, just not in the large volume or price points that so many believe are available…

Now, for the good news out of this:

While there appears to be a strong “attraction” to REO’s as well as the builder closeout that are being offered out there, many buyers who were purchasing bulk closeouts as well as REO’s are now more interested in what is referred to as High-Yield Private Investment Programs. Here are some of the reasons certain individuals have converted over to the lucrative world of HYPIP’s:

1. The returns generated are astronomical when comparing REO’s and builder closeouts to private investment. Imagine buying a bulk builder closeout purchase for 50 cents on the dollar. First of all, these are few and far between currently in the marketplace, though they do exist. After the cost of money, the rehab work needed on any of the properties, the price structure for liquidating those homes in a timely fashion and all the other added holding costs of purchasing that portfolio, a Buyer is hard pressed to earn a 30% return total.

2. The ability to link up correctly with someone who really, truly has the sources to supply those bulk closeouts from Seller’s and banks is next to impossible for most “brokers”. Builders typically go direct to their sources already in the Matrix or those lucky few who have the relations already established with those builders. There are no more than roughly a couple dozen verified and legitimate groups out there (that we know of) who know how to close these transactions, understand the dynamics behind them and know how the system works from fruition to completion.

3. Builder closeouts as well as REO’s do not stand a leg against Private Investments. Become an REO investor for a minute. Would you rather realize a return of 20% annually with an immense amount of due diligence, implementation, eradication and hassle of a bulk closeout/REO buy; or, would you prefer a return that guarantees a monthly 5 to 13% return that’s on auto pilot once engaged?

Your investment is secure since it is never taken out of your control or current bank account.

This is what is referred to as the High-yield Private Investment Program. Many investors are looking for these types of programs. There is a Fraternity of Opportunity and it would behoove you to start looking for sources that are aware of these programs and offerings.

To your investing success.

Many investors know the value of a Bulk REO Portfolio while others may need or desire direct access to Bulk REO Portfolio Acquisitions for investment. Buying foreclosure properties presents a huge investment opportunity for agents, home buyers and real estate investors seeking pre-foreclosures, foreclosure auctions and bank-owned properties.

REO properties are great homes for investors to buy because they are generally paying below market for the home, and there is a lot of inventory and selection. Property acquired by a lender through foreclosure and held in inventory is commonly referred to as REO. Real estate owned or REO is a class of property owned by a lender, typically a bank, after an unsuccessful sale at a foreclosure auction.

Real Estate Owned Properties are properties that either were not sold at auction or were properties that the bank or lender accepted the deed of trust in lieu of foreclosing on the home. Bank Owned foreclosures and real estate auctions offer great deals on distressed properties throughout the United States and beyond.

However, banks are in the business of lending, not in owning homes so banks want to get rid of these properties so they sell them as REO Homes. Banks, themselves, hate being the owner of the property because it serves them with the additional expense and burden of paying all of the taxes and for being responsible for the upkeep and maintenance of the property.

Banks have a mind set up to sell the property at the best available price. Bank officials have properly preserved lists detailing the REO properties under their possession. Therefore, properties that match your search will typically feature exterior and interior photographs, an in-depth description and the address as well.

Banks typically like to sell these properties to investors that buy million dollar portfolios of REO properties at one time. This way they can move hundreds of properties at a time saving them time and money; as banks generally don’t like to show such properties on their books and try to liquidate them as soon as possible.

Lenders usually sell their REO properties “as is” and without warranties, meaning they are not going to guarantee the plumbing, heating, cooling, water heater, sprinklers, etc. However, lenders do generally expunge all second and third liens, as well as delinquent taxes, HOA and mechanics’ liens.

REOs will often include appliances. While in hot markets, you may not see a difference in price between an REO and a typical property, during slower markets, you can pick up an REO at discounts to the property’s actual value. REO homes are usually sold below market value.

Theses properties can represent an investment opportunity when the property is worth more than the sales price and are divided into two kinds, program properties and non-program properties.

Real Estate Owned Property provides lenders with either the Peril, and responsibility of home ownership, as the lenders All Risk incurring the expenses of physical damage for any portion of their portfolio of owned properties, foreclosed properties, and properties in the process of foreclosure.

REO Management works closely with REO Portfolio Acquisition Specialist, who assist the banks in finding investors to acquire their excess REO inventory. If you are interested in investing in Bulk REO Portfolios, it is recommended that you contact an REO Portfolio Acquisition Specialist, who can provide direct-source access to REO bulk packages, and a list of REO properties, which are usually exclusive, and available for a limited time period, before they are released to the open market.

A knowledgeable REO Portfolio Acquisition Specialist will guide you through the maze of acquiring your Bulk REO Property Acquisitions. Most Bulk REO Portfolio packages can usually be acquired for as low as 29 cents on the dollar.

Once you have provided the appropriate documents, the REO Portfolio Acquisition Specialist can have a tailored Bulk REO package in front of you within 48-72 hours from the receipt, and verification review of the required documents.

The required documents usually consist of a Letter Of Intent (LOI) from you, the buyer/investor, Proof Of Funds (POF) to acquire the real estate portfolio, and a Master Fee Agreement for final acquisition.

Once documentation, and proof of funds (POF) have been verified, the Master Fee Agreement (MFA) will be drafted for signature by the buyer/investor. The REO Portfolio Acquisition Specialist fee for services is usually approximately 3% of the acquisition price of the REO Portfolio.

Once the REO Portfolio Acquisition Specialist has received the signed MFA, the buyer/investor request will be submitted directly to the bank. The bank will compile, and prepare the requested REO Portfolio Tape for delivery directly to the buyer/investor within 72 hrs.

Once the REO Portfolio Tape is delivered, the buyer/investor will decide which properties he/she is interested in acquiring, and be put in direct contact with the issuing bank for final negotiation of the portfolio acquisition.

The REO Portfolio Acquisition Specialist will require direct access to the buyer/investor prior to delivery of the REO Portfolio Tape, as opposed to an agent of the buyer/investor.

It is a surprisingly simple process when you have an experienced REO Portfolio Acquisition Specialist to assist you with your acquisitions.

This is one of the best times in the history of America to take advantage of the foreclosure real estate market. The banks are overloaded with toxic loans that they need to unload, and you are doing them a favor with your real estate acquisition. So take full advantage of this once in a lifetime opportunity to create your wealth, and financial freedom. Talk to your REO Portfolio Acquisition Specialist today!

If you’re a preforeclosure investor, with the tightening credit markets, you have no doubt noticed how much more difficult it is these days to close short sale deals.

In the past, plenty of hard money options, along with double closings and simultaneous closings made closing short sales a breeze.? However, with the credit crunch, mortgage fraud, and tighter restrictions with lenders and title companies, closing short sales isn’t as easy as it used to be.

However, there is still one very simple and easy way to close your short sale transactions without using double closings, hard money, simultaneous closings, or even the over complex land trusts.

That method is using back-to-back closings to get all of your short sale deals closed and funded on time.? Back to back closings take a short sale deal and turn it into two separate and distinct transactions.? The first transaction is the homeowner facing foreclosure selling to the preforeclosure investor.? The second transaction is the real estate investor then selling the property to the end retail buyer.

However, even if you are using a back to back closing, and your end retails buyer has secured their funds, what makes this work is that you need to secure your own funding, as the real estate investor.

So where do you get this funding of your deals?? This is often called transactional funding, and today, there are many lenders making these types of loans.? Lenders love transactional funding, because they are only lending for a period of a few hours.

With the end buyer’s loan already approved and in place, two separate and distinct transactions take place on the closing day.? The first is the investor purchasing the short sale deal from the distressed homeowner.? This is funded by the transactional funding company.? Immediately after this transaction has closed, the investor is then turning around and immediately selling the property to the end buyer.

The end buyer is using funds obtained by him through a traditional loan, or cash.? Most conventional lenders today won’t have any issue funding these loans.? The only such exception are FHA loans, which at the time of writing this article, have a 90 day seasoning requirement.? However, as the real estate market changes, and the housing market remains volatile, it is very possible that the FHA might change its guidelines.

Transactional funding is the perfect way for preforeclosure investors to fund their short sale deals in today’s foreclosure ridden market.? There are plenty of choices for funding companies, all willing to fund these simple, easy short sale transactions.