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How To Buy Bulk REO
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How To Buy Bulk REO

The Bulk REO market is a fascinating world where the numbers can be huge and possible paydays can be big as well. However, to buy Bulk REO packages and play in this world you need to be able to speak the language and follow the rules. That means learning about Bulk REO terminology and Bulk REO protocols is critical. Here we will focus on the protocol. These are the rules of the Bulk REO game. They must be followed closely or else the deals will not close. Unfortunately in this market there are no shortcuts. There may be some variations in protocol from seller to seller but the basic protocol will be similar. For this to work the buyer, which may be you or someone you represent will need to have liquid cash available. Once started the process will move quickly. Often the process takes only 2-4 weeks from start to finish. Below is an example of a protocol that involves the seller compiling a Bulk REO tape to the buyer's specification.

1. The buyer will be given a packet of documents that they will need to complete. This packet will include an NCNDA (Non-Compete Non-Disclosure Agreement) to protect all parties, a MFA (Master Fee Agreement) that defines compensation for all parties, a LOI (Letter of Intent) that will define the criteria and the price of the properties that the buyer wants, and a soft POF (Proof of Funds) where the buyer gives the contact information of their bank representative that can verify the liquid funds are available. The buyer will need to complete all the documents and return them to the seller representative before the next step.

2. The seller assembles the custom tape tailored to the buyer's LOI criteria. These criteria include: the size of the package (many have a $5 Million minimum), the type of property (single family, multi-family, commercial, non-performing notes, or performing notes), the geographic area (which could be as general as Southern CA or as specific as a list of zip codes), the condition of the property, and the acceptable price range of the property (based on broker price opnion). The package pricing is usually expressed as a percent of BPO value (i.e. 50-60% of BPO).

3. Assembling the custom tape by the seller can take from a day or two to a week or two depending on the seller, the size of the package, and how strict the criteria are. Often a seller will require a hard POF prior to tape delivery. A hard proof of funds means actual verification of funds in a bank account or escrow account.

4. The buyer will have some period of time to accept the tape which may be as little as 24 hours. This means the buyer will review the list of properties to see if on quick review they appear to meet their criteria. Some sellers may require a deposit at this point to proceed to the due diligence stage.

5. The buyer will then have a due diligence period to do a detailed review of the properties. The buyer has an opportunity to remove specific properties that do not reasonably meet the criteria. This period is typically 7-10 days but may vary based on package size and the seller.

6. The Buyer then wires remaining balance to the seller to complete transaction. All participating parties are paid according to the MFA. The details of the protocol may vary some from seller to seller but this should give a good overview of what Bulk REO Protocol looks like.

Learning how a Bulk REO protocol works and the roles involved is a key part of learning how to buy Bulk REO.


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