The weakness of the U.S. economy has given rise to the largest epidemic of foreclosures in American history. But challenge always gives rise to opportunity, and opportunistic real estate investors are rising to the challenge.

This new opportunity - known as ‘Bulk REO Investing’ - is so huge it’s captured attention from wealthy investors and private investment funds alike.

Let’s take a moment to analyze the basics of this incredibly lucrative business.

Understanding the notion of Bulk REO’s requires understanding of the foreclosure process.

A home owner who misses one or more mortgage payments is faced with an ever-increasing volume of threatening correspondence from their lender. Following a period of time determined by the lender, formal foreclosure proceedings begin. The name for this period is ‘preforeclosure’.

When a defaulted property is placed up for auction, the foreclosure process is completed. If there are no buyers for the property at auction, the property is returned to the lender. The property then receives the designation of being an ‘REO’ or the more formal name, ‘Real Estate Owned’.

Lenders have no interest in owning property, and thus usually opt to list their REO properties with a local real estate broker in hopes of a retail sale. But as a consequence of the weak economy, lenders are frequently selling their REO properties far below their actual value. But the price of receiving such great pricing is the need to purchase multiple REO properties (a ‘package’) rather than individual properties.

These REO packages represent the potential to acquire huge amounts of equity for savvy real estate investors. REO packages are easiest to buy and sell with a well regarded source of financing in place. Some sources of funding for these transactions are: personal funds, hard money lenders, commercial lenders and non-conventional sources such as private investors and hedge funds. Additionally, one man is becoming very well known in the field of bulk REO investing, and his name is Sal Buscemi of Dandrew Partners, a hedge fund in New York.