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Bulk REO Buyers Shift Gears

FEB 5, 2014 12:23pm ET
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Some institutional investors have stopped buying distressed properties but others are moving into lower-priced markets to buy single-family properties that they can rent profitably.

The conventional thinking is that the flow of REO into the market is slowing and prices are too high to generate the kind of returns institutional investors expect.

But institutional investors are “changing their business model,” according to Auction.com executive vice president Rick Sharga.

They are buying single-family properties between $85,000 to $150,000, Sharga said. And they are also starting to offer financing to smaller investors that buy and rent those single-family homes.

“What you are seeing is that a lot of slack that you would expect to see with the big guys moving away is being taken up by individual investors,” Sharga said Tuesday at a National Association of Hispanic Real Estate Professionals conference in Washington.

Auction.com sold 40,000 properties in 2013 via its online auction platform. The Irvine, Calif., company is also offering bridge loans of $500,000 to $1 million to small investors that buy distressed properties.

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