Wednesday, October 26, 2011

Getting Started With Bulk REO Packages

In today's real estate market plagued with high foreclosure rates and a large inventory of bank owned properties, buying REOs (Real Estate Owned) in bulk is receiving increased attention. Often these are packages of single family homes that range anywhere from $1 Million dollars to more than $1 Billion dollars and will often contain hundreds of homes. The packages will usually be focused on a geographic area such as a metro area or a region of a state. The bulk REO market has its own rules and its own vocabulary both of which you will need to become familiar with if you are interested in this market.

Buying Bulk REO packages follows a set of rules called the protocol and it must be followed to the letter. This usually isn't a place for applying your creativity but rather your attention to detail. The protocol will define everyone's role in the transaction. The buyer is usually represented by the Buyer's Representative or Buyer's Mandate, the seller is usually represented by the Sellers Representative or Seller's Mandate. There are often one or more third parties are called Intermediaries. You do not need to be an agent or broker to participate in one of these roles. Once all the parties are identified they will enter into NCNDA (Non Compete Non Disclosure Agreement) and a MFA (Master Fee Agreement). These agreements will ensure everybody is protected and define what everyone will get in terms of fees. A typical deal may pay three points (3% of the sale price) with one to the Seller's Rep, one to the Buyer's Rep, and the remaining point split among the Intermediaries. Once these protective agreements are in place the Buyer will submit criteria to the seller in the form of a Letter of Intent (LOI) that defines what they want to buy and what they are willing to pay. The letter of intent may define the type of property (i.e. single family detached), the area (city, state, or zip codes), the price ranges, and the BPO percent. The BPO is refers to a Brokers Price Opinion which is a current estimate of value usually done by a real estate agent for the bank before they list or packages the properties for sale, so the LOI may specify 50-60% of BPO as the price. The Buyer will also need to submit a Proof of Funds (POF). In the case of bulk REOs packages this refers to actual cash in the bank that can be verified, not a pre-approval for financing. This is a cash business and it needs to be real money. After the POF is verified, the seller will provide the buyer a tape (list of properties in the package) and the buyer will usually have 24-72 hours to accept the tape and put a deposit in escrow (maybe 10%). The buyer will have a short period, maybe a week or two to perform due diligence on the package and complete the sale.

In the Bulk REO market the numbers are large and the payouts can be big, but to play you must be able to speak the language to be taken seriously. It is also a cash business so if you don't have $1 million or more that is liquid and verifiable then perhaps you can represent someone who can meet those criteria or act as an intermediate.

Ed is based in metro Atlanta and has been an entrepreneur and real estate investor for over a decade. He has been involved in numerous types of real estate investing including property management, vacant land, single family homes, multi-family apartments, commercial office, and retail. Ed has been involved with land lording, rehabbing, new construction, and creative finance. If you would like to learn more about the Bulk REO market then visit where you can learn more about Bulk REO terminology and protocols. Bulk REO packages are also posted there on a regular basis.


  1. Bulk REO is among the best options that those, as you have said, having that kind of money and finance can choose to get. It's really a big market and the profit you can get is really big too. Just imagine the big picture when you are able to succeed on it, right?

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  2. I don't have much knowledge about it that's why I can't take a risk.

    If you want to create a blog than u blog is the best option for you.

  3. Your post are really impressive and I had a great time with your post. Thank you for sharing.

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