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Bulk REOs |
WIKI ANALYSIS|
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This article describes a concept which could impact a variety of companies, countries or industries. To see what companies and articles reference this concept page, click here. |
Bulk REOs
The term "REO" comes from the world of accounting and means Real Estate Owned. This term is usually found on the company financial statement known as a Balance Sheet. All companies are concerned with the status of their assets such as the amount of Real Estate Owned by the company.
Banks commonly own real estate, for example where their branches or corporate offices are located. But, banks are not in the real estate business itself, at least under normal market conditions. Banks don't "like" to have real estate on their balance sheet from foreclosures due to customers defaulting on their loans.
Bulk REOs refers to the case where Banks make an administrative decision to attempt to sell off real estate that is being carried on their balance sheet but is not currently generating cash flow from customers making loan payments. The banks will "bundle" a group of properties and sell them in "bulk." Sometimes the banks will distribute large amounts electronic information about the "REOs" being offered for sale by means of "bank tapes."
Bulk REOs are an incredibly lucrative investment opportunity for real estate investors because the banks will normally choose to offer a large discount on the bulk package and the investor can then utilize a wholesale strategy and sell off the properties individually for more than they were acquired, thus realizing a large gain.
The large quantities of REOs being sold in the US and other markets in 2009 puts additional pressure on other parts of the real estate industry, such as REITs.--PGSanalyst 13:40, January 29, 2009 (PST)
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