The weakness of the U.S. economy has given rise to the largest epidemic of foreclosures in American history. However, opportunistic real estate investment professionals are turning the recession into great profits with a bit of creativity.

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

The basis of the Bulk REO business is foreclosures, so let’s analyze the foreclosure process now.

Understanding of the foreclosure process is central to understanding Bulk REO investing.

As a home owner misses a payment or two, the lender sends the predictable barage of threatening letters and warnings. The formal process of foreclosure begins at the lender’s discretion. From that time through public auction is called ‘preforeclosure’.

Foreclosure is completed when the defaulted property is auctioned. The lender regains ownership of the property if there are no buyers at auction. Such a property is then classified as an ‘REO’ (Real Estate Owned) by the lender.

Lenders usually try to unload their REO properties at close to retail price by listing their REO’s with a real estate broker. But as a consequence of the weak economy, lenders are frequently selling their REO properties far below their actual value. However, the purchase of a ‘package’ (or group) or REO properties is the trade-off for receiving such great prices.

The REO investment packages available today have provided a way to profitably capitalize on the U.S. recession. REO packages are easiest to buy and sell with a well regarded source of financing in place. There are many sources of funding for these transasactions including: hard money and commercial financing, as well as non conventional sources such as hedge funds and private investors. 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.