Financial institutions have realized that selling both performing and non-performing loans is preferable to maintaining the physical assets. Many banks have been forced to liquidate their entire portfolios.

This has created a huge disconnect between the market value of a real estate note and the amount a bank is willing to sell the note for. This is a wonderful opportunity for investors who have cash available because they can buy these notes at a deep discount.

Lending companies have exhausted their credit lines due to the “Sub-Prime Meltdown”. Major sectors of the mortgage industry, especially the stated loan and sub-prime lenders have completely disappeared. Most of the loans those sectors generated are being sold at greatly discounted prices.

Today, banks all across the U.S. have huge portfolios of REOs and defaulted loans and they are under pressure from federal regulators to get them off of their books.
When a borrower defaults on their mortgage, the bank starts the foreclosure process. That mortgage note is now considered non-performing and becomes a liability on the bank’s balance sheets. The bank must hold a reserve to cover their loss and their lending power is decreased because they cannot lend those funds out to make money.

Aside from the loss of income, the bank must also pay attorney’s fees; keep up the insurance policy, pay the property taxes and maintain the property. At this point the bank just wants to sell the loan and get rid of the property before it sucks them dry. That is why an investor who offers cash can practically name his price.