Today I received an email from yet another individual who has found my blog, looking for “Direct REO Bulk Sellers”. Meaning individuals at a bank or mortgage company who are willing to sell their properties in bulk packages of dozens, hundreds or even thousands of properties all at once.
I’ve spent quite a few hours of research into this topic, as it was quite interesting due to the sheer number of inquiries I have people who “Have a buyer and is looking for $100,000,000 Worth of REOs”. It could certainly be a great way to make money , even at 1/2% of the total sum, that’s $500,000 for hopefully not alot of work.
Now , I don’t know about your neck of the woods, but $500,000 in my pocket equates to about around the next 10-15 years of my life. Why wouldn’t I want a part of something THIS spectacular and BIG?
So, I started digging in a GREAT network that of (BiggerPockets) that has alot of actual real estate investors that share experiences in every avenue of real estate. From foreclosures to raw land deals, to even Bulk REO Portfolios, there’s a dedicated section to it.
I was inundated with the sheer number of people who had “Actual Buyers” and “Actual Sellers” of bulk REO portfolios up to 5 BILLION Dollars (Yes, that’s a 5 with 9 zeroes behind it) in REO properties that are sitting somewhere in the US and the seller just absolutely has to sell them at 40% of the market value…who knows why they want to sell at a loss of 60% from the market value, but they just want to do it.
So, after finding all these individuals who had information , I tried to find out who actually sells these bulk REO Packages, as it seemed they were everywhere.
I tried around a dozen or so sources to find a package for a individual who had contacted me through one of my websites/blogs about buying a REO Package. After a week or so , I was quite tired of using every possible keyword on Google to try and find these sellers.
I eventually found ONE GUY who I felt was legitimate, and attempted to set the buyer up with him.
I realized that this whole Bulk REO deal thing was starting to seem shady, so I started doing research in to actually how many dollars and cents have been transferred in non NPN (Non Performing Note) sales, but bulk REO Portfolios. As NPNs are transfer all the time and it’s not that major of a thing to get NPN deals or the like.
Well ,after I did all my research , I was amazed to find that fewer than 5 TOTAL DEALS have been closed in the USA with Bulk REO Sales. As of my last checking, the total was around 250 million or so between all these deals. Finding this odd, I contacted EVERY SINGLE PERSON that I had come in to contact through this process and asked them the simple question of “How many have you closed as of today, and how many do you have pending” and the answer was an astonishing ZERO. Several told me they were under contract, but even then the deal was shaky at best.
I did research these deals that had closed, and found out one thing…They weren’t from people using on-line services, they were people who knew other people at large banking/mortgage firms, and had the ability to fly across the US to set up these deals. They put alot of work, and none of them had any involvement with on-line services, finders, buyer mandates or the like, but good ol ground pounding financial work.
Sad but true in my case…….
Thanks for letting people know about BiggerPockets, Brandon! We’ll see you back on the site soon.
Brandon,
I will say that I agree with a lot of what you say, however I’d like to know where you got the fewer than 5 REO deals have closed? I know a buyer personally and locally who has purchased 2 REO tapes and I doubt that he is basically half of the people who have done these transactions. Honestly, I don’t think anybody knows how REO deals have been closed nor a public record of it. Maybe you know better and love to know.
I personally know a private investor who is doing quite well closing REO deals. His name is Simon Volkov and his website is http://www.SimonVolkov.com. I will be interviewing him next week for a special edition real estate article next week. I’ll definitely ask him how many deals he’s closed. I’m pretty confident it’s well past the total of 5 you have suggested.
Brandon,
Great post! What you say is very, very true. The only thing not in short supply in the REO bulk game is HYPE.
To everyone else,
Ponder this data point, when B of A was purchasing Countrywide (who supposedly had billions upon billions of REOs), B of A was picking them up for $4 billion. Does that make any sense if all those REOs were available?
Most recently Wachovia Bank, the fourth largest bank in the US (!) took a knee after poor 08Q1 results. “Wachovia Corp. is seeking to raise $7 billion in capital via a stock offering and has slashed its dividend.” Do you honestly believe Wachovia has $500B in REOs to sell each month or whatever absurd numbers a buyer claims they can take down month after month. It is laughable and totally unrealistic. Just look in the real estate and financial news pages. The data and stories there don’t support the purported “joker broker” hype on the Net.
Yes, “joker broker” is what the people in the know call these internet cowboys running around with their LOIs, POFs, NCNDs, Master Fee Agreements (MFAs) and Sub-Fee Agreements. I was formerly one of those cowboys and now know far better.
I had the privilege of speaking with a securities buyer for one of the largest trusts in the world and this guy deals in the primary markets. Bulk REO (whatever that is) and NPN fall under the secondary markets. It was his guidance among others that lead me to conclude chasing bulk REOs was as productive as chasing the wind.
If you are considering getting involved in the industry, let me simply say go do something else. The game isn’t played like it is portrayed on the net. People with Wall St. connections bear out the same story Brandon shares in his post. Introductions are handled VERY carefully and corp attorney to corp attorney. People do get on planes and fly in to meet face to face before any real business is conducted. It is all part of due diligence when hundreds of thousands and millions of dollars are on the line.
You’ve been warned.