Buying from Bulk REOs for Wholesale or Rehab? Do your homework!
There has been some buzz for a couple of years now about buying from bulk REO packages for wholesaling or rehab. Having done both, I can tell you both strategies work and can work quite nicely. Bulk REO packages from credible Seller (key word being "Credible") can be quick and lucrative.
However, they can also be a trap for the unprepared investor looking for a quick and easy property. Title issues run rampant in many of these 'deals'. Especially if you buy them via Quit Claim which is not uncommon for buying properties from a bulk package. Some things to watch out for:
Unpaid utility bills. Always triple check this. It is amazing how many things get 'missed' on the first pass of title.
HOA issues if buying into a community with an HOA.
Tax liens issues that are not necessarily visible online.
Title companies who will not insure a property because it was bought on a Quit Claim Deed.
This is by no means an exhaustive list but some of the more common things we have seen. Always have an investor friendly title company on hand who not only has experience but experience dealing with Bulk REO's if possible. They will be familiar with some of the 'special' things that tend to come up with these deals.
Also, it is always worthwhile to see the property in person if you plan to rehab. There are several bulk deals with houses that couldn't be given away if they were free. War zone properties are also not uncommon. If you are interested in these, make sure you are prepared to work with these rougher areas as tons of investors shy away from such areas. I found a bulk deal once which had a property on a street so rough, it looked like it was straight out of a WWII movie. If the houses were teardowns, that would have been an upgrade. Stay clear of these (unless you plan to buy the whole area).
There are great opportunities in Bulk REO purchases today but due diligence is critical. Fast closes are great but never sacrifice your end goal to get a cheap house or not do your homework. As we all know, some things are worth exactly what we pay for them!