Module 1 – Introduction & Purpose
Chapter 1: Purpose & Challenges
Property preservation and maintenance are performed for both pre-foreclosure and post-foreclosure properties. Even though the basic preservation or maintenance tasks are the same, services performed at a post-sale or REO property can differ significantly from services completed at a pre-foreclosure property.
Purpose
An REO property is Real Estate Owned and therefore the end goal is to place the property in marketable condition rather than conveyance condition. The word marketable can be defined as, fit to be offered for sale. This means that the home must be in a condition which will allow it to be sold within the current real estate market in which it is located.
The majority of properties that are serviced post-sale were maintained previously to pre-sale property preservation standards. For the most part, this will mean that the property has been secured, safety concerns have been addressed and violations have been abated. Since the purpose of property preservation and maintenance services at a post-foreclosure property is to improve the marketability of the asset, added attention is necessary to maximize the sale price while simultaneously minimizing the asset’s time on the market. This maximization can be achieved through cost effective repairs, targeted cosmetic upgrades and exceptional cleaning services.
The following modules will provide an overview of the basic services for post-sale or REO properties.
Challenges of Post-Sale Property Preservation
Properties in the post-sale stage provide a different set of challenges than those faced when performing inspections or pre-sale property preservation. During the post-sale preservation process, the field service professional will work with the real estate broker to determine the services that should be performed to bring the property up to the standards of its neighbors while continuing maintenance to prevent violations and safety concerns. The broker perspective is extremely important to the success of the field service professional servicing the property as they will ultimately determine the sale price of the property and the amount recouped by the lender.
The spending philosophy of the Servicer for post-sale properties will often vary greatly from the approach taken during the pre-sale stage. Servicers will often approve the completion of services that add value to the property in an effort to maximize the sale price of the property. These improvements are often included within the broker’s sales plan for the property adding extra encouragement for what can be lucrative bid approvals. While margins may be higher for these services, field service professionals must be sure that they are completed with the utmost attention to detail and quality. A vocal, unsatisfied broker can cause strain on the relationship between the client and the contractor and in some cases the client and Servicer potentially jeopardizing the work volume for hundreds of contractors.
Post-sale property preservation is largely without standardized guidelines for service. Service and timeline expectations vary depending upon the Servicer’s philosophy for divesting themselves of the asset. Generally, timeline expectations for post-sale properties will be much more stringent than their pre-sale counterparts. Properties in this stage typically have no legal reason for remaining vacant and their carrying costs represent an avoidable loss for the Servicer. Every day the property remains on the market decreases the amount that will be recovered.
As with inspections and pre-sale property preservation, professionals providing post-sale property preservation services must also remain vigilant of concerns from Code Enforcement Officials and home owners associations. The focus of these entities on blighted properties has increased the number of costly violations for Servicers and has created new requirements related to property registration and management. Many code officials have become frustrated with the lack of response related to abating violation concerns. NAMFS, through ALLIANCE, and others in the industry have stepped in to increase the level of communication between field service companies and code officials. While these programs have helped to alleviate some of the concerns, it is always a best practice to clearly communicate any posted violations as well as the potential for violation issues to the client as quickly as possible. Knowing local codes and ordinances is crucial to this effort. NAMFS has also made the ALLIANCE database accessible for its members to research properties being serviced in the case that violations have become illegible.
One of the largest challenges for professionals providing post-sale property preservation lies in the attention paid to detail while completing trash outs and sales cleans. Dirty and cluttered properties can raise red flags for buyers regarding deferred maintenance. This can result in fewer and lower priced offers. Alternatively, clean and inviting properties can create the illusion that the property was always maintained properly and result in more and higher dollar offers.