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If you’re looking to start your own business, there are many opportunities and options out there, but property preservation can be a lucrative, reliable, and excellent business to be in. Beginning as a Property Preservation Vendor is usually the best way to get a foot in the door, followed by the creation of your own property preservation business. In the following article, we’ll take a look at the ins and outs of the property preservation business, and give you a good idea of whether it’s a business you’d like to be in. Read on!
Property preservation is the process of caring for the inside and outside of a foreclosed property, be it vacant or occupied. Property preservation businesses work with banks and asset management companies to provide services such as repair, inspection, insurance claim management, and maintenance. Property preservation is also called “mortgage field services,” and getting involved with completing REO rehabs and property preservation repairs directly for national servicing companies will help your business succeed. Another great option is to work as a subcontractor for a company who also works with national servicing companies. In order to do this, you should become a Property Preservation Repair Vendor or an REO (real estate owned) Repair Vendor.
Some of the major U.S. government agencies you may end up working with include:
NOTE Throughout the real estate industry literature/publications, you may find terms like: property preservation business, foreclosure cleanup, foreclosure clean-outs, foreclosure cleaning, mortgage field services, REO trash outs, field asset services, property field services and field services used interchangeably. The main thing to know is foreclosure cleaning and foreclosure cleanup generally refer to smaller entities while property preservation generally refers to larger entities.
REO, as you may know, stands for “real estate owned,” and is a real estate and property preservation term that organizations in the United States use to describe a certain class of real estate, or property. REO properties are properties owned by a lending organization such as:
These properties are usually bank-owned properties that have been seized by the banks or lenders from residents who were unable to pay their mortgages. The banks or lending agencies were counting on the interest on the loans for their own revenue, and so must salvage their investments when homeowners default their loans or can’t pay their mortgages. Their first move is to try and sell the properties at foreclosure auctions.
If you’re serious about getting into this great industry, the best thing you can do is educate yourself. The Education & Training page of this website has numerous areas and links to information that can help you succeed. You can learn about:
And that’s just the beginning. There is a lot to learn, but you can do it – and if you want a stable, reliable business for many years to come, you should start right away.
Within the property preservation world, there are broadly three different areas you can specialize in: You can conduct short physical inspections of foreclosure properties for your bank client(s), you can focus on larger repair jobs by being a repair contractor, or you can work as a maintenance contractor. These three fields of work are detailed below:
As a property preservation inspector or REO inspector, you will be responsible for weekly or monthly inspections of the bank’s foreclosure properties. This is to determine things such as the occupancy status of the property, the current physical condition of the property and if there are any new damages to report, and to check the progress of current repairs that the bank or field service company has hired another independent contractor to carry out. It is not necessary to have a construction background to complete inspections, but this type of experience would be helpful.
As a repair contractor, you will have to give a repair estimate and, if your bid is approved, either complete yourself or arrange to have someone else complete the various repairs required at residential properties. These repairs could include but are not limited to: roof repair or replacement; repairing damages caused by theft, water ingress, vandalism, or other disasters; and total refurbishment. In certain areas repairs to damage caused by water and mold such as drywall and carpeting, are some of the most common repair requests.
Many banks are trying to reduce the market time (the length of time a house is for sale) by renovating their housing stock in the better neighborhoods. As a repair contractor, you will need to know how to use basic estimating software; be able to give accurate start and finish dates; and have access to all the necessary equipment, workers, and subcontractors you might need to complete these repairs as quickly as possible. Construction knowledge is therefore essential if you want to be a successful repair contractor.
Unlike a repair contractor, a maintenance contractor will be completing mostly smaller jobs and will not need a specialized construction background. Typical property preservation maintenance jobs include boarding up broken windows, winterizing properties, trash outs (which involves the removal of debris), maid services (basic cleaning), and lawn maintenance (grass cutting and weed control). A maintenance contractor will also have to complete inspection tasks such as noting the current condition of the property and estimating the cost of minor property repairs. Although you do not need extensive construction experience to complete these basic property maintenance jobs, if you want to combine them with larger repair jobs, any experience or knowledge in the field would be useful.
Most people get into the property preservation business as a Property Preservation Vendor, and then move up to create their own businesses which employ other Property Preservation Vendors in turn. By creating your own business down the line, you are helping others who want to succeed in this industry, as well. One of the first steps to becoming a Property Preservation Vendor (or PP Vendor) is to sign up with some of the nation’s leading National Property Preservation companies as a Repair Vendor (not as a Maintenance Vendor, as that is an entirely different position).
By the way, you technically only need a high school diploma to get into this business, but property preservation certifications and programs are available and may give you an edge over competitors. You will have to complete “bids” or itemized repair estimates using estimating software, so you have to know how. A good place to become certified is the National Association of Mortgage Field Services (NAMFS). This organization has been around for 25+ years and provides training in:
Certification tests are based on these courses, and you can take whichever courses you need for your business. Once you complete the courses, your business’ information will be put into the NAMFS Membership Directory and you will receive an ID card with a photo and a QR code to verify your qualification. The courses cost anywhere from $240 to $330 for non-NAMFS members; you can get a discount code if you become a member.
If you have previously had experience in real estate owned property, you will have a leg up on other property preservation businesses, for instance:
Once you’ve educated yourself about the property preservation business enough that you know what you’re doing, it’s time to find a few companies in your state, and fill out their online vendor applications. We have a comprehensive list of Property Preservation companies listed on our site.
Starting a property preservation business is similar to starting any other type of business. You will need to take the following steps in order to begin:
Keep in mind that banks are serious businesses – you want your company to appear steady and reliable, so take all the usual precautions and they will want to work with you. You have to register online with the banks and other companies as they will not work with companies who have not.
Here’s a link to the law about inspection and preservation of properties in the U.S., should you need it. Here is a link to the HUD government website with tons of information on the property preservation industry, including job descriptions and contractors by state. HUD also has homeownership centers in:
Here’s a list of the most active National Property Preservation Servicing Companies in the United States in alphabetical order:
There are many more of these companies, and you can apply as a PP Vendor with online applications on my website here (just scroll down to the “List of Other Property Preservation Companies With Links”).
Types of Licenses You May Need to Become a Property Preservation Vendor
Every state has its own laws related to the licensing you need to become a PP Vendor. In addition, the National Association of Home Builders notes that PP Vendors may need the following:
Some examples of licenses needed in the four states where main homeownership centers are located are as follows:
Some companies may also require that a PP Vendor pass a short quiz, known as “Property Preservation Company Testing” in order to demonstrate their knowledge and ability to perform the work. The following information may be covered in these tests (so make sure you know about them):
Now that you know you want to be a part of this lucrative business, and once you’ve established yourself as a Property Preservation Vendor (PPV) in your area, the next move is to start your own business. The best position for a property preservation business to be in is connected with banks. Banks will pay people to take care of foreclosed properties, which no one else is usually caring for. Even if the original homeowners are still in the property, they may not be caring for it, and the bank needs businesses to do this – otherwise, the property may be difficult to resell in the future. This is where your property preservation company comes in.
Marketing Your Property Preservation Company
We have an entire section on marketing a property preservation business, but here are some highlights:
In order to get this work from banks, your company will have to actively market itself to the banks and the local property preservation companies in your state or area. This requires that your company and employees have all the skills and licenses necessary to perform property preservation – so make sure you get those. In general, if you have more skills and more licenses stating that you are qualified to perform those skills, banks will be more interested in you, and send more work your way.
Marketing materials are also necessary for any business, including one in the property preservation industry. You will need:
If you’re not comfortable calling people or speaking to them about your business, get comfortable. Some of the best recommendations in this business can come from word-of-mouth. If you’re already in the construction or repair business, you probably have some connections that can help you get started; if not, the banks and property preservation companies in your area can help you get started.
When you first start out in the property preservation business, you should only take the jobs you can handle with limited personnel, doing them well and rapidly to make a name for yourself. As your business grows, and word-of-mouth or marketing does its job, you may want to take on larger jobs. To do this, you may have to:
Google search property preservation in your states or counties and find out what the most-needed services are; gear your business toward those particular services and banks will be knocking on your door to give you business for their foreclosed properties. Make sense? Bidding on jobs is an excellent way to get more business. The best way to do this is to:
This extra attention to detail will be rewarded when you are selected for the job.
HUD handles property preservation for properties that have been foreclosed on and will soon be foreclosed on – they also handle the property inspections, renovation permit, and access restrictions that they will pass on to you if you work with them. Always keep in mind while you are performing your work that part of your job is to make the properties look attractive to prospective buyers once the bank or management company is ready to resell them. Some people call this “curb-appeal,” and it’s a basic tenet of this business.
HUD guidelines include property “accessories,” meaning swimming pools and spas and outbuildings like garages and sheds that may be on the property. There is also a registration fee that property preservation companies must pay on each property they want to care for – this fee may be reimbursed if the company owner completes the proper forms and submits them to HUD. Next, you need to meet at the property with your contractors (if you have them) and determine which repairs are necessary, and that the property can sit without much maintenance for a long period of time. Preparation for inclement weather is a large part of this step. Some inclement weather that may occur during the property foreclosure and resale process includes:
You may also want to read this recent HUD Mortgagee Letter from 2016; it includes more information that you might need to perform property preservation for the U.S. government, such as:
In general, $5,000 is the Maximum Property Preservation Allowance, and you can find more information about HUD homes that may need property preservation care here.
While it’s true that many small property preservation businesses have a hard time getting off the ground and staying afloat, my best advice to you is to treat your business like your lifeblood, not like your side job. When you start a business, you want it to succeed, so it should be one of the most important things in your life. Don’t give up just because the going gets rough, and always provide the absolute best service to your clients and companies that you are capable of. Complete the work the way you were asked to, and take photos or write down issues you have for proof later. Remember, your clients need you, and your business will provide years of stability if you run it correctly.
Hopefully this information has given you a basic overview of the property preservation industry and what your role or the role of your new business will be within it. This can be an excellent business to be in, and can help you become an independent business owner, while making a great living. Here’s hoping your business will be successful, and that you now have the tools to establish it and keep it running smoothly for years.
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or explore other Property Preservation Education and Training Articles!
