Posted in REOs



REO (“Real Estate Owned”) is a banking industry term that refers to property that has reverted back to the ownership of the lending bank, typically through the foreclosure process.  This is problematic to banks because they are not in the business of owning houses, but rather of lending money.  The lender is adversely impacted in its ability to perform its core function – lending money – when the bank must carry REO assets as “non-performing assets” on its balance sheet.  For every dollar of non-performing assets held, the bank becomes further constrained by the total amount of loans that it is legally allowed to make – it is a downward multiplier effect due to the fractional reserve banking system used in this country.  Consequently, banks need to sell those nonperforming assets – quickly – even if it generates a book loss – just so they can “free up” capital and be able to start relending dollars again.  In order to liquefy and boost their capital reserves, the banks are highly motivated today to discount those assets for immediate sale.  Consequently, the bank will create bulk packages and heavily discount the price to move them quickly.

This creates a dynamic opportunity for extraordinary profit potential for private investors through buying real estate for investment purposes.  It is a bank’s goal to dispose of REOs quickly (primary goal) and as profitably as possible (secondary goal).  In previous favorable economic environments, the system they employed often resulted in full payment of the underlying mortgage debt.  However, in the tight economy of today, the multitude of mortgage defaults has generated an avalanche of REOs that has overwhelmed the banking industry’s capability to dispose of them under the traditional system.  In view of the daunting task of selling hundreds of thousands of houses within a very short timeframe, the stage is set to buy these properties in bulk quantities for cents on the dollar.

Yet, most individual investors are constrained in their ability to purchase REO properties from the bank for several reasons:  (1) the banks are overwhelmed and simply do not have the personnel to deal with the “one-at-a-time” private investor, (2) the banks need “all cash” and they need it quickly, so deep pockets are required to generate the extraordinary deep discounts that make this a viable investment program, (3) quantity – unless you are able to purchase 100 or more homes in a very short period of time, all cash, you simply cannot get the banker’s attention in today’s market, and (4) track record – once you have proven that you can take down a tape of 100, 200, maybe 500 homes or more, all cash, in a very short period of time, then the banker will return your phone call since you will have already established your credibility via past performance.  It is that capability that (BCFP) brings to the table … the ability of moving large quantities of REO homes as a bulk wholesaler.  This gives us the ability, then, of reselling those highly-discounted properties to you – the individual private investor – at “near wholesale” prices.  We make our profit on volume.

Due to our familiarity with investors and real estate related companies nationwide, is able to find opportunities and carefully select the best houses with the greatest upside.  We won’t buy the junk, and we will pay a premium to cherry pick for our clients – at prices still well beneath current market value.

Let BCFP be your Strategic Vendor for your REO acquisition needs.  We handle it all, including property inspections, negotiations, clearance of liens, market analysis, IRA coordination and rehab if needed.

Our combined effort with a property administrator and credit restoration company gives us an exit plan with each property.

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