Property preservation work can be a great way to round out your handyman services business and hedge against economic downturns. But entering a new line of work may seem overwhelming at first. Here are a few key concepts to understand about the industry so you’re ready to dive in and feel set up for success.
Unlike other industries, property preservation doesn’t require ideal economic conditions for you to have opportunities. As a property preservation vendor, you could have the opportunity to build your client base and earn revenue even if the economy takes a negative turn. When the economy is strong, we typically see a lot of new single-family, multifamily and commercial construction and maintenance needs. Conversely, when it dips into a recession, builders may pull back. But often that’s when volume in the default mortgage servicing world increases—and along with it the demand for services from different trades that you can help meet.
There are a variety of property preservation services to get familiar with but the common overall goal for them is the same: to ensure a property is secure, well-maintained and cared for when vacant pending foreclosure sale and disposition to a new homeowner. Standard property preservation services include changing locks on a property, debris removal, lawn maintenance, snow removal and winterization. Additional services may also be requested, like insurance claim repairs, pool securing and maintenance, discoloration remediation, roof repair and eviction services.
An allowable is essentially the maximum amount a mortgage company’s pricing guidelines say they will reimburse for property preservation work. A maximum rate is set per task, and it’s important that mortgage servicers complete only the work that has been agreed upon at the allowed price.
A default is a breach of non-performance of the terms of a note or mortgage, or failure to do what is required by law or contract. Foreclosure, which is the process by which the bank/lender retakes ownership of a home due to non-payment by the owner, is different depending on the type of loan the property is under. Initiation of the foreclosure process typically follows these actions:
Work orders are the lifeblood of a property preservation vendor, and paying attention to the details is key to not only ensuring you complete the work as directed but also to protecting yourself and your business. Remember that you aren’t required to take on every work order that comes your way, but if you do, you’ll want to be sure you have a thorough understanding of exactly what is required—what your responsibilities are and the timeline you’ll need to complete the work in.
Why is the FHA conveyance deadline so critical? When this deadline is missed, no expenses are claimable thereafter—not even something as minor as a grass cut—so a delay in putting a property into conveyance condition and completing the work order in a timely manner could result in future expenses.
The Federal Housing Administration (FHA) is a department that operates under Housing and Urban Development, typically referred to as HUD. When an FHA-insured mortgage is in default, the property is conveyed to HUD, and they put it on the market. But before it can be sold, certain conditions must be met to get the property into conveyance condition via property preservation services.
Handbook 4000.1 is where all of the regulations for servicing FHA loans can be found. It’s a great resource to review and help you understand how the property preservation process ties together. You can visit www.HUD.gov for:
For quick reference when using the handbook, the information related to property preservation and default servicing can be found in the sections listed below. You can also reference it for filing a claim and review the full list of allowables via an appendix.
Chapter lll. Servicing and Loss Mitigation
A. Title ll Insured Housing Programs Forward Mortgages
2. Default Servicing
Chapter IV. Claims and Disposition
A. Title ll Claims
2. Claim Types
a. Claim Type 01 – Conveyances
Chapter V. Quality Control, Oversight and Compliance
Appendix 6.0 – Property Preservation Allowances and Schedules
Property preservation is a specialized industry, but understanding these key concepts will help you get a better feel for the industry so you can expand your business. You can also check out our handy Property Preservation Glossary to learn more about the language of the industry. And if you’re looking to build your portfolio in property preservation, consider working with the MCS team.