If you are looking to invest in bulk REO tapes then it is very important that you understand the bulk REO process. Yes, it is true that anyone can get involved in bulk REO investing. You don’t have to be a millionaire but you do need to know what you are doing. This means understanding the bulk REO process.
The first thing you need to know is what a bulk REO tape is. REO tape is basically a list, or portfolio of REO properties that the owner (be it another investor or a bank) is trying to sell. In either case, the seller is looking to get the most he or she can. If it is bank you have to understand the bank obtained those properties after a foreclosure auction was unsuccessful. Though they don’t want the property on the books, they aren’t going to take lowball offers. You might have better hope of getting a better offer from another investor that is looking to unload a tape that he or she has.
Bulk REO sellers and bulk REO investors can often be one in the same. As you acquire REO properties you are an investor who at some point will be selling off those properties. You can sell them one by one or in a group. A group of REO properties is called bulk REO tape. This tape can hold 3 to 30 REOs. Banks can have even more that they may try to package and sell at one time. This is often the best way to make a good deal with a bulk REO seller.
There is a process that goes into buying and selling bulk REO tapes. It is important to you if you are the buyer/investor that you get a look at the property you are considering buying. If at all possible do a walk through. Remember that in most cases these properties were acquired from a bank, after an unsuccessful foreclosure auction. They could have had people living in them, during the eviction process those people may have decided to trash the place. Banks sell REO tapes “as is.”They may make some repairs, but not many and the chances are pretty low that after you have had inspections done that they will pay to fix what was found.
When you are getting ready to buy a bulk REO tape, for a seller to take you seriously you need two things. First you need the funds, either you have cash in hand or you have a letter to present to the seller verifying that you have the proof of funds. This can be from another bank stating that you have secured a loan in the amount you are offering, or a bank statement showing your current balance. You also need to make a serious offer. Yes, the seller will counter offer, that is part of the bulk REO process. You can’t walk in and offer the seller .02 on the dollar and expect that they will sell. Unless they are incredibly desperate, they will also counter your offer.
Expect the counter offer. Your first offer should be the dream price you want and can afford. Your counter offer should be the middle spot between what you want (the lowest) and the most you are willing to pay (the highest). It is rare that you will have to go to either extreme, but it is good to know range.
You should also try to deal directly with the seller. Brokers or real estate agents are great, just remember the more people you have in the middle the more you are going to have to pay to close the deal because everyone wants their cut.