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Bulk REO Sales are Better for Banks than Short Sales

By Duncan Wierman

Republish: EasyPublish™ Published: 28Jan2010 Word count: 505 Viewed: 205 time(s) Get Free Content For Your Site

Both investors and individuals know that the REO is still a good way to make money and be financially stable in these trying times. Banks prefer to sell bulk REO's rather than selling them one at a time, which is great news for investors. The question that many people have is why exactly the banks choose to do it this way. Why not just sell those investments one at a time? Well first we will have to understand a bit about the REO process in general.

How it Works

REO's are actually foreclosures. That's right, they are the homes you hear about being foreclosed on every single day. A home is a great asset for a person to have. Not only does it provide them a place to sleep at night, it gives them something to use as collateral. When they use it as collateral for a loan however, they need to pay the loan back, otherwise they risk losing the house. This is bad news for both the individual and the bank though. But why? Doesn't the bank make more money?

The Problem

Many people believe that banks are actively trying to foreclose on homes. The problem with this is that it would be inefficient. The purpose of a bank is to collect the fees from an individual that has borrowed. Collecting the property of the individual is a step in the right direction, but it is nowhere near the profit that they actually want to make. Having the REO on their accounts is NOT a substitute for money, but it is a POTENTIAL for money, meaning that investors are going to have a hay day.

The Solution

The bank will look everywhere, trying to find buyers for these REO's, and if you are an investor, then you need to pay close attention. When the bank decides to sell these assets, they will sell them in bulk. Chances are, they will contact you as an investor. But what if your bank doesn't have anything? Well, you're in luck because other banks might contact them in the event they have REO's they are having trouble selling. The REO's will be sold cheap, and as an investor you can sell it at a higher price. It's a win win situation for everyone. The bank could take it's time, selling them one at a time and milking them as much as possible, but getting the properties off of their accounts as quickly as possible is the preferred way to do it.

So there you have it, REO's are virtually useless to banks because they simply do not make any money, and they sell them in bulk to get rid of them as quickly as possible, while salvaging as much money as possible from the failed loans. If you or your company feels that REO's would be a good investment, you can always make a deal with a local or national bank. Remember, they want to liquidate their REO's just as much as you want to buy them.

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