While it doesn’t seem as grossly belied as six months to a year ago, prospective buyers of bulk REO (known as real estate owned, bank owned or foreclosed properties) portfolios are still experiencing immense frustration in finding product with the aftermath of “intermediaries” operating on the Internet.
Over the last eighteen months, a depressed real estate market, coupled by ever increasing foreclosure rates and a severe downward spiral of fresh mortgages, is only fueling many imploded mortgage brokers to parlay their attempts into linking buyers with banks distressed assets. These internet “brokers” with minimalistic experiences in the workings of liquidating distressed assets, create lengthy chains of “intermediary brokers” between supposed buyers and supposed sellers in their eternal search for product. The end result is they are ill-equipped in delivering product, are ineffective in collaborating with the client’s requests, and do not fully understand the protocol that needs to be followed. Oftentimes, a buyer’s assets are floated in cyber-space filtered from one intermediary source to another. Dissuasion begins to form in the buyer’s mind, he is told he can readily purchase REOs in the low 20 to 30% LTV and gets the false illusion that such packages readily exist.
Another seen result of these “broker chains” is the nefarious plot towards luring prospective clients towards “available REO packages” which emanates from some obscure place and is leaked to several of these “intermediary brokers” who cross-pollinate these packages amongst the “broker chains”. The sad part of this is that many times it ultimately ends up with potential buyers who have the means and the wherewithal to consummate the transaction and end up finding that there is no true platform selling the assets, their time is wasted and confidence in the system eroded.
As a burned child is carried out of a burning house, buyers often find themselves entering another furnace the more they look. We have spoken to several clients who have been searching for REO packages for over a year with no success.
Daniel Bruckner emphasizes that it is important to answer the following questions:
Has anyone explained to those looking to get into the REO bulk buying pool specific questions on the matter? Have these “brokers” ever seen a banks “addendum” for REO buys? Do they even realize that even in a “small” trade of $40M (U.S) in REOs that there are MAJOR title issues, an immense amount of legal work, analytical costs, very complicated contracts, compliance issues and on and on? There is also a plethora of work to secure, insure and deal with the properties let alone liquidating them as well. We have seen several different law firms and countless man hours go into just the due diligence phase.
Since late 2006 to present, there have been 267 major U.S. lending institutions that have imploded. Out of these, the most recent are Wachovia Mortgage, (FSB Wholesale), Lehman Brothers (SBF), IndyMac Bancorp, Mortgages, Ltd and Wilmington Finance (Wholesale).
So, what is the necessitous buyer to do?
“Become educated on the capital markets,” Bruckner remarks. “This is where InvestorEarth’s gregariousness comes into play and gives us the opportunity to further educate those individuals’ expectations.
In a declining global market, many buyers are wrought in difficulty in their pursuit to secure an appropriate ROI. In the declining global market, the preferred investment vehicles of today include REOs, CMOs (Collateralized Mortgage Obligations), BGs (Bank Guarantees), MTNs (Medium Term Notes) and HYPIPs (High Yielding Private Investment Programs) – all which achieve above average returns during a recession. While you may be well-versed on REO’s, the mass of incoming interests lies upon MTNs, CMOs and most excitably HYPIPs. Many, possibly all of these vehicles, may appear unfamiliar to you, Once they are explained and the ROIs realized, the intoxication gravitating towards these programs becomes overwhelming for our clients and they generally want little to do with bulk REOs are they invest forward.
InvestorEarth.com plays a much broader and sophisticated role to high net worth investors and investment groups by educating those who come to us wanting to profit in the dynamic capital markets of REOs, CMOs, BGs, MTNs, HIPIPs and other popular investment commodities.
