If you’re looking to start your own business, there are many opportunities and options out there, but I’ve found property preservation to be a lucrative, reliable, and excellent business to be in. I have years of experience in property preservation, and highly recommend becoming a part of it. 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!
What is Property Preservation?
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:
- Department of Housing and Urban Development (HUD)
- Federal Housing Administration (FHA)
- Veterans Administration (VA)
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.
What is REO?
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:
- A bank
- A government agency
- A government loan insurer
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.
How Can I Learn About Property Preservation?
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:
- The U.S. foreclosure market and how it works
- How to bid on and estimate property preservation repairs
- How to build a property preservation team
- How to obtain insurance prior to beginning work
- How to manage your finances
- How and when to use boarding to secure properties
- How to properly conduct debris removal
- How to handle property inspections
- How to maintain property lawns and conduct snow removal
- How to properly clean the entirety of the inside of a property
- How to repair a property
- How to secure and winterize a property
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.
Three Main Streams of Property Preservation Income
Within the property preservation world, there are 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. Lately, I have been doing quite a few repairs to damage caused by water and mold such as drywall and carpeting.
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.
How Can I Become a Property Preservation Repair Vendor?
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. DO NOT SIGN UP AS A MAINTENANCE VENDOR – that is an entirely different position.
By the way, you 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:
- Pre-Sale Property Preservation
- Post-Sale Property Preservation
- Recurring Services
- General Industry
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:
- Changing locks
- Boarding up windows
- Landscape maintenance
- Trash and debris removal
- Handyman duties
- Repair plumbing
- Repair fences
- Repair damaged walls
- Trim lawns
- Perform inspections
How Can I Start a Property Preservation Business?
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.
The Basics of Starting a Property Preservation Business
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:
- Decide on the best business structure for you (proprietorship, LLC, or Corporation)
- Write up your business plan (there is plenty of online help for this)
- Hire enough employees or independent contractors to handle the work you plan to have
- Take out insurance; there is a high risk of injury in home repair and maintenance
- Get the right business license
- Get a licensed and insured vehicle like a van or truck to haul your tools and equipment
- Purchase necessary tools and equipment for the work
- Ability to self-manage your business and your time
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:
- Atlanta, Georgia
- Denver, Colorado
- Philadelphia, Pennsylvania
- Santa Ana, California
Here’s a list of the most active National Property Preservation Servicing Companies in the United States in alphabetical order:
- A2Z Field Services
- Cyprexx Services
- Laudan Properties
- Mortgage Contracting Services
- Sentinel Field Services
- Spectrum Field Services
- US Best Repair Service, Inc.
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:
- Practical experience
- Financial stability
- Coursework or certifications
- Passing exam grade
Some examples of licenses needed in the four states where main homeownership centers are located are as follows:
- Business license
- Contractor’s license
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):
- HUD, FHA, and VA guidelines
- How to determine property vacancy status
- Identification of health hazards
- Difference between debris and personal property
- Steps contractors must take to perform specific types of repairs
- Winterizing homes
- Job bidding process
- REO trash out experience
How Can I Become a Property Preservation Business with Banks?
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
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:
- Business cards
- Promotion materials like brochures with the services you offer
- A basic website with a contact page (you can make one free on Wix)
- Social media accounts (LinkedIn, Facebook, and Angie’s List are great ones)
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.
Getting More Work for Your Property Preservation Company
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:
- Hire more employees
- Hire contractors
- Buy more equipment
- Bid on more jobs
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:
- Visit the property before submitting your bid
- Take photographs
- Take detailed notes describing the property
- Go back to your office and break down your pricing
This extra attention to detail will be rewarded when you are selected for the job.
HUD Guidelines for Property Preservation in the United States
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:
- High winds
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:
- Property preservation and protection action and definitions
- List of neglectful actions that you must not allow to happen such as:
Failure to verify whether people are still living in the property
Failure to complete the property inspections on time
Failure to properly secure and preserve the properties
- Taking before and after photos and uploading them to P260
- Keeping copies of all paid invoices, receipts, and other documentation
- Keeping a list of all the actions you took on the property during your work
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.
I hope 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. I’ve tried to provide as many resources for information here as I can. This is 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 as successful as mine, and that you now have the tools to establish it and keep it running smoothly for years.
If you have questions, please leave a comment below.
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or explore other Property Preservation Education and Training Articles!