BULK REO PROCESS RED FLAGS

[Rick Meyers]

I 1. Current State of The Bulk REO Industry

If you're an intermediary, the Bulk REO sector is a minefield.

These are large dollar transactions. You will run into unscrupulous players on the buyers side, sellers side and intermediary side. In addition, the profits to be made from these securitized packages is tremendous. The economy is stagnating, banks are being forced to unload inventory, and the stock market is in a trading range. It is easy to see why so many hedge funds and institutional buyers see quick money in bulk reos.

There is a lack of trust in the industry. Unfortunately there are many players that are on the sellers side that claim they can deliver but never do. There are just as many false buyers that are looking for opportunity but don't have the inclination or the resources.

Many buyers are jaded. They are burnt out, they have pursued the elusive REO packages for weeks, months. What follows below are some red flags that the buyer/seller or intermediary you are dealing with is not playing by the rules.

B1. Buyer Is Unwilling to Sign An NCNDA

If the buyer is unwilling to sign an NCND with you, they WILL circumvent you.

You should always have a Irrevocable Master Fee Agreement with the Buyer that the Buyer must notarize the IMFA as an private individual.

If the Buyer sees you as an asset, he/she will not have any problem signing and notarizing a IMFA.

Also, if the Buyer sees you as a liability, he will attempt to lead you on under the guise as an honest buyer with too much money at stake.

B2. Walk Away from the Intimidation Ploy

Buyer(s) will call and tell you they represent billions in buying power and will convince you they are real and grill you. They are interested in putting you on the spot and extracting valuable information from you. If a buyer is not willing to deal with you fairly, they will run circles around you the rest of the way and most likely undervalue your services and not be willing to pay you.

B3. Buyer Wants Proof Of LOA

No major seller that is delivering is going to provide an LOA. Currently, demand far outweighs supply and compilers have multiple buyers for legitimate product. They don't need to pursue buyers. A number of buyers will ask for this because they have been burnt, have experienced frustration; unfortunately, sellers are not providing LOAs and it is not likely to change unless the market changes.

S1. Seller Advertises Portfolio Available In Escrow Immediately

Most of these are wild goose chases. This is likely just a ploy to get them to contact you. There is no product. If product is real, it will be sold to existing relationships. In most cases, this type of seller will insist on being given your buyer or buyer mandate contact information so they can contact them directly in a few days. Provide a generic LOI and see if they are willing to deal attorney to attorney, bank to bank, escrow to escrow and willing to verify tape exists.

A follow up ploy - they will tell you the tape was verified but sold to another buyer and ask for your LOI.

B4. Buyer Deploys Existing Relationship Caveat

You may be working with a buyer as a seller rep and the buyer will ask for the name of the seller. The moment you provide the name of the seller, he will indicate that he has an existing relationship and circumvent you. The fact is that the buyer would never have known about the product because he is obviously not communicating with his existing relationships.

S2. Seller Wants to Contact Buyer Directly or Vice Versa

This is okay as long as you are part of the conversation. Arrange a conference call and the seller is okay to have you on the call. If the seller wants to contact the buyer, make sure you have a trusted relationship with the seller, or you are likely just providing the seller with the buyers contact information.

Suggestions.

I will offer two and hope that the members will add to the list as they comment. So to help, and gradually develop a well aware community that will be an aid to our society.

Although this should not be expected from Banks and similar institutions:

1). The Private Seller or Seller's "mandate" should not be reluctant to provide an Affidavit that expresses that the Seller owns, clear Title to the property in question under the penalty of perjury. The basis of this..is that the relationship is new. It was commonly known as an " Affidavit of Sale" or "Affidavit of Right to Sale."

( sometimes things are better left alone...the good old days)

2). The IMFA with the Buyer should have a pre-existing relationship clause in it.

Because if the buyer does have an established relationship with the seller and it was a good one, the buyer should be aware of the Property in question prior to your approach to the Buyer, or the Buyer's own approach.

I got most of this information from the web...great huh?

[Rick Meyers]

Hey, thanks a lot Bill.

[Bill Evans, CREPIG Advisor]

Thank you Rick for taking the time to spell it out. Very useful and good of you.

[Rick Meyers]

Thank you Catharine for reading and you're welcome.

[Rick Meyers]

Vernon,
Thanks much and I agree.

[Vernon Tryon]

I think you did a great job explaining the Bulk Process and on this site and off I have ran into the very same Red Flags you have mention here. Everyone should be reading this post if they are in the process of doing Bulk Reo deals.

[Rick Meyers]

Thank you JW.

[JW Najarian]

Wonderful article Rick. Thank you.