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Investors beating banks at REO game

Red tape, rehab standards only some of the reasons for discrepancy

After millions of dollars in investments, adding thousands of new staff positions and even contracting to third-party brokers, the large banks still can't sell foreclosed properties fast enough to ease the vast overhang of REOs bedeviling their books. Meanwhile, on the dusty streets of places like Glendale, Ariz.; San Bernardino, Calif.; and Henderson, Nev., independent investors have been buying up defaulted properties, rehabbing them and putting them back into the market at a pace that makes the banks look geriatric in comparison. "Third-party investors are much faster at reselling foreclosures than banks, though the difference varies by area," said Sean O'Toole, founder and CEO of ForeclosureRadar. ForeclosureRadar, based in Discovery Bay, Calif., focuses only on Western states, but its research is still very relevant and predicative. According to ForeclosureRadar data, Oregon banks took 156 days longer to sell foreclosure inventory than third parties; Califor...

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