There are several clearly defined processes that occur with a bulk REO transaction. In general, the processes occur on two levels, one affecting the mortgaged home owner, and on the other hand, the buyer who intends to acquire the bulk REO as investment. The first parts of the process begin with the homeowner. What happens is that a real estate property is placed under mortgage by a homeowner in order to increase the credit limit he has and to take in more loans. Once the payments fail to come, the bank will be able to issue foreclosure orders which will end up with the real estate owned by the bank.
On the other hand, the transaction is only beginning for the investor looking for bulk REOs. On this other side of the coin, the process begins with sourcing. One of the basic rules for bulk REO investments is to look for the best sources that will provide the least middlemen to lessen the cost of the investment. There are several source options to consider, among which are real estate agents who could have connections to a bank are. The short sale is another option for sourcing out the best bulk REO deals. In the short sale, the investor goes directly to the homeowner and purchases the property while still on the pre-foreclosure stage. Lastly, one of the best options is to check out the foreclosure auctions where banks attempt to get rid of REOs at low prices. Wherever you may find your REO source, one of the basic reminders to always keep in mind is to ensure that your REO source is nearby since this will provide you with the best deals and the deals which are also most manageable.
Once you have found out your source, the next step is to provide a letter of intent or LOI. This is the official letter that you will forward to the bank and which will contain all of the parameters for the bulk REO investment that you wish to make. Included in the letter is the price range that you can accommodate, as well as the types of property that you wish to purchase, and the location that you want your investments to be in.
The next step in the bulk REO transaction is the vetting process. This is otherwise known as the critical examination which the bank will implement on the prospective bulk REO investor in order to assess whether the person or parties in question are capable of actually proceeding with the transaction. This is the bank’s way of ensuring some sort of safety, since bulk REO packaging involves its fair share of money. Here, the POF or proof of funds is also considered, since one of the most important parts of the bulk REO transaction is the ability of the prospective investor to provide proof of the capital that he will use to proceed with the transaction.
Once these steps are accomplished and the necessary papers signed, sealed, and delivered, the process of the bulk REO transactions is finished and the person can proceed to manage his bulk REO properties.