What you should know about “Bulk REO Portfolios for Sale”

Today I received an email from yet another individual who has found my blog, looking for “Direct REO Bulk Sellers”. Meaning individuals at a bank or mortgage company who are willing to sell their properties in bulk packages of dozens, hundreds or even thousands of properties all at once.

I’ve spent quite a few hours of research into this topic, as it was quite interesting due to the sheer number of inquiries I have people who “Have a buyer and is looking for $100,000,000 Worth of REOs”. It could certainly be a great way to make money, even at 1/2% of the total sum, that’s $500,000 for hopefully not alot of work.

Now, I don’t know about your neck of the woods, but $500,000 in my pocket equates to about around the next 10-15 years of my life. Why wouldn’t I want a part of something THIS spectacular and BIG?

So, I started digging in a GREAT network that of (BiggerPockets) that has alot of actual real estate investors that share experiences in every avenue of real estate. From foreclosures to raw land deals, to even Bulk REO Portfolios, there’s a dedicated section to it.

I was inundated with the sheer number of people who had “Actual Buyers” and “Actual Sellers” of bulk REO portfolios up to 5 BILLION Dollars (Yes, that’s a 5 with 9 zeroes behind it) in REO properties that are sitting somewhere in the US and the seller just absolutely has to sell them at 40% of the market value…who knows why they want to sell at a loss of 60% from the market value, but they just want to do it.

So, after finding all these individuals who had information, I tried to find out who actually sells these bulk REO Packages, as it seemed they were everywhere.

I tried around a dozen or so sources to find a package for a individual who had contacted me through one of my websites/blogs about buying a REO Package. After a week or so, I was quite tired of using every possible keyword on Google to try and find these sellers.

I eventually found ONE GUY who I felt was legitimate, and attempted to set the buyer up with him.

I realized that this whole Bulk REO deal thing was starting to seem shady, so I started doing research in to actually how many dollars and cents have been transferred in non NPN (Non Performing Note) sales, but bulk REO Portfolios. As NPNs are transfer all the time and it’s not that major of a thing to get NPN deals or the like.

Well, after I did all my research, I was amazed to find that fewer than 5 TOTAL DEALS have been closed in the USA with Bulk REO Sales. As of my last checking, the total was around 250 million or so between all these deals. Finding this odd, I contacted EVERY SINGLE PERSON that I had come in to contact through this process and asked them the simple question of “How many have you closed as of today, and how many do you have pending” and the answer was an astonishing ZERO. Several told me they were under contract, but even then the deal was shaky at best.

I did research these deals that had closed, and found out one thing…They weren’t from people using on-line services, they were people who knew other people at large banking/mortgage firms, and had the ability to fly across the US to set up these deals. They put a lot of work, and none of them had any involvement with on-line services, finders, buyer mandates or the like, but good old ground pounding financial work.

Sad but true in my case…….

Bulk REO Update

Well, After talking to something around a hundred individuals about bulk REO sales, and what’s going on the market I’ve learned quite a few things about bulk REOs.

Unlike what I’ve said earlier, deals have closed, quite a few have closed but they’ve been much different that what you’ve been reading on line. Plenty of deals UNDER 5 MILLION have closed, I’ve talked to a few people who have bought properties at a severe discount. Surprisingly enough, you won’t get to pick where the properties are or what they’re like (Surprise, surprise). In fact, I PERSONALLY just picked up a home in Dayton for $2,000 from a servicer who is liquidating their portfolio. I’ll be blogging on it once I close and process it. I’ve already had a agent perform a BPO on it, and behold, my purchase price was 25 cents on the dollar. It’s in an awful part of town, but I still bought it.

I could buy more like this one, which I think I will.

In addition, brokers and actual sellers of bulk REO packages know one simple thing, and all you buyers and mandates should take heed….YOU HAVE TO HAVE MONEY TO BUY! If you’re considering a package, you better have a title company, attorney and a bank onhand to perform on your end, or you’ll get a lot of slammed phones from sellers. There are so many liars in this field it boggles the mind, but we ARE IN REAL ESTATE.

The GOLDEN RULE of real estate applies to bulk REO Sales too and those rules are:

#1 Buyers Are Liars

#2 Sellers are Story Tellers

I don’t know exactly why there’s so many people in this field that have no idea what they’re talking about, but they’re here and will stay around for quite some time.

Most people who are wanting to buy bulk portfolios greatly need to re-evaluate what they’re doing. Sure, $100,000,000 in real estate sounds like a good investment, but when it comes down to it, you most likely can’t handle it.

Brokers need to re-evaluate too, there are plenty of deals under $5 million that are closing, and you’re missing out on the action trying to get the mytical $5,000,000,000 deal done as your first closing.

I’ve finally decided to update my bulk REO database, over the course of the past 3 years, I’ve managed to talk to all sorts of wonderful people who are dealing with bulk REOs. From bank vice presidents to the CEOs of medium cap hedge funds, I’ve managed to get a sizable database of buyers and sellers of bulk REO. Needless to say, the great adage of real estate proves true quite often “Buyers are liars and sellers are storytellers”, and that leaves a agent like myself in the middle of both parties.

So, I’ve formulated my plans, goals and the like to be more realistic about bulk REO practices and what’s going on. Intermediaries don’t make a whole lot on the transaction, and usually end up killing a deal, even though that’s really what I’m looking to be in most transactions.