Property preservation is a critical aspect of the real estate and property management industry, ensuring that properties maintain their value, integrity, and compliance with industry standards. In this comprehensive guide, we will explore the intricacies of property preservation, its services, and industry standards for property preservation professionals.
What is Property Preservation?
Property preservation is the act of sustaining the condition of a property, encompassing both its internal and external aspects, regardless of whether it is presently occupied or unoccupied. The core aim of property preservation is to maintain an unoccupied or afflicted property in excellent condition.
Property preservation services aimed to maintain, protect, and enhance the condition of a property. This includes residential and commercial properties, with the primary goal of preserving their value and ensuring they meet safety and aesthetic standards. In essence, property preservation involves a combination of preventive measures, inspections, and necessary repairs to keep properties in optimal condition.
Property preservation term refers to the mortgage field service industry. “Mortgage field services” and “property preservation services” are often used interchangeably, but there are some subtle differences. Both involve caring for distressed properties during the loan default and foreclosure process, but with distinct focuses. Mortgage field services encompass a broader range of activities, including property inspections, securing vacant homes, coordinating repairs, and even managing REO (real estate owned) properties after foreclosure. Property preservation, on the other hand, is primarily concerned with maintaining the condition of the property to prevent further damage while it’s vacant. Think of it as safeguarding the asset until it can be sold. So, while mortgage field services handle the bigger picture, property preservation tackles the essential upkeep to keep the value protected.
What is REO in Property Preservation?
REO, or Real Estate Owned, is a term commonly used in property preservation. It refers to properties that have been repossessed by the lending institution, usually a bank or mortgage lender, after an unsuccessful foreclosure auction. Property preservation plays a crucial role in maintaining and preparing REO properties for resale.
A property is considered “foreclosed” when a loan lending organization legally repossesses it from the homeowner. This typically happens when the homeowner, who initially took out a mortgage loan to fund the home purchase, becomes unable to make the required interest and principal payments. The entire process is known as foreclosure and involves six phases, lasting up to six months or more.
Once the ownership transfers to the bank, the foreclosed property becomes an REO (Real Estate Owned). The ultimate goal of mortgage lending companies is to sell the property. Foreclosed homes are generally listed on the market in as-is condition. This is why mortgage companies require REO property preservation services – to maintain the foreclosed property’s condition, prevent degradation, and safeguard it from any current or potential violations.
What Activities Does Property Preservation Include?
Property preservation services offer a full range of field services that can be combined into custom packages, enabling clients to choose the precise package required for a specific foreclosure.
One of the foundational elements of property preservation is inspections. This involves a thorough assessment of the property to identify potential issues, damages, or areas requiring attention. Inspection services may include:
- Occupancy inspections
- Initial property inspections
- Ongoing property inspections
- Hazard inspections
- Condition assessments
Inspection plays a crucial role in developing a comprehensive preservation plan. Inspection plays a crucial role in developing a comprehensive preservation plan. Inspectors conduct an in-depth examination of the utilities, safety, additions/changes, structural components, grounds, and rooms of a foreclosed property. Beautiful wall colors and the neat first appearance of a home may be elusive for a buyer but not for a professional inspector.
Certified inspectors possess technical knowledge and skills about the construction of walls, ceilings, floors, roofs, and foundations that a first-time home buyer may not have. The examination of safety factors is one of the main reasons for hiring a certified inspector. Possible safety concerns, such as radon, carbon monoxide, and mold, can be tested and uncovered by inspectors.
Inspectors will detect changes done without permission, which may eventually become the financial responsibility of the new owner.
Repair and Maintenance
Repair and maintenance services encompass a broad spectrum of tasks aimed at addressing identified issues during inspections. This may include fixing plumbing issues, repairing structural damage, and ensuring that all systems within the property are functioning correctly.
Repair and maintenance services can include:
- Roof repairs and replacements
- Plumbing repairs
- Electrical repairs
- HVAC system repairs and maintenance
- Structural repairs
- Window and door repairs
- Flooring repairs and replacements
- Drywall repairs
- Foundation repairs
Rehabilitation and Renovation
In most cases for foreclosed properties, there is a need for remodeling and renovating because of damages caused by previous occupants before the eviction. Rehab and renovation as a category of services for REO, includes the following list of subcategories: maid and cleaning services, cabinet installation and cabinet repair, electrical, estimation services, plumbers, flooring, roofing, bath and kitchen repairs, concrete, masonry additions/repairs, and mold removal.
An appraisal is an unbiased and accurate estimation of a price a buyer might expect to pay or a seller receive for real estate. An appraiser is responsible to make sure that the value of the property is in line with the price being paid. For foreclosed properties, it is important to consider the difference between the “fair market” value and the “quick disposition” value. Our local vendor partners are ready to serve you and handle the specificities of a foreclosure appraisal.
Regular upkeep is essential for any property. General maintenance services in property preservation cover routine tasks such as lawn care, cleaning, and pest control. These services contribute to the overall aesthetics and functionality of the property.
Maintenance services may include securing, debris removal/trash out, winterization, mold remediation, lawn maintenance, etc.
General maintenance activities can include:
- Lawn care and landscaping
- Snow removal
- Gutter cleaning and maintenance
- Pressure washing
- Trash and debris removal
- Pool maintenance
- Pest control services
Any type of debris left by the previous homeowners inside or outside the house, get removed. This process also requires a professional approach, such as some debris that may be hazardous and cause health issues.
Debris removal can include:
- Interior and exterior debris removal
- Hauling away unwanted items
- Cleaning out abandoned properties
To avoid damages from freeze temperatures there is a need to take the necessary steps to winterize plumbing. Correctly handled winterization can save plumbing and heating systems. Otherwise, it can cause damages in systems, and flooding may occur.
Winterization services can include:
- Draining water systems
- Adding antifreeze to plumbing fixtures
- HVAC system winterization
- Insulation installation
- Protecting the property from winter-related damages
Securing services deter potential vandalism, theft, or other forms of damage. It ensures that the property remains intact and complies with safety standards during its vacancy, contributing to the overall preservation efforts aimed at maintaining the property’s condition and value. Property preservation professionals offering securing services are crucial partners in preserving the integrity and security of properties within the real estate landscape.
Securing services can include:
- Lock changes and rekeying
- Window and door boarding
- Securing entry points
- Installation of security devices
How Property Preservation Contractors Get Income?
Property preservation professionals can tap into various income streams within the industry. These may include inspection fees, repair and maintenance charges, and ongoing maintenance contracts. Diversifying income streams can provide stability and sustainability for individuals and companies engaged in property preservation.
How to Get Into Property Preservation?
Property preservation offers a diverse and dynamic career path. Here are key steps to help you establish yourself in this dynamic industry and build a thriving business.
Explore licensing requirements: can vary depending on the state and local regulations, making it Licensing requirements can vary depending on the state and local regulations, making it imperative for vendors to conduct thorough research on the specific mandates in their operating areas.
Get certifications: While formal education isn’t always mandatory, certifications in home inspection, construction, carpentry, or plumbing add a shine to your resume and equip you with vital knowledge. Look for reputable training programs offered by trade schools or industry associations.
Think about networking: Connect with established property preservation companies, utilize LinkedIn, attend industry events, and build connections with potential clients and partners.
Explore vendor networks: Don’t underestimate the power of joining a property preservation company’s vendor network. Partnering with established property preservation companies to handle specific tasks within their contracts is a fantastic way to build your reputation and client base. Research company websites in your area and apply to their vendor networks.
Build your toolkit: Invest in a well-stocked toolbox, safety gear, a reliable vehicle, and communication devices. Remember, preparation is half the battle!
Starting a property preservation company requires careful planning and adherence to industry standards. Key steps include conducting market research, developing a business plan, securing necessary licenses and insurance, and establishing relationships with clients and financial institutions. Additionally, investing in the right tools and technology is crucial for efficient operations.
Industry Standards: Licenses and Guidelines
Licensing requirements can vary depending on the state and local regulations, making it imperative for vendors to conduct thorough research on the specific mandates in their operating areas.
General Contractor License
Many property preservation vendors need to obtain a general contractor license, which demonstrates their competence in overseeing and executing various tasks related to property maintenance and restoration. This license typically involves meeting specific experience and examination criteria, ensuring that vendors possess the necessary skills to handle a wide array of preservation services.
In addition to a general contractor license, property preservation vendors may need specialized licenses based on the nature of their services. For example, vendors offering pest control services might require a pest control license, while those dealing with electrical work would need an electrician’s license. Understanding the specific licensing requirements for each facet of property preservation is crucial to operate legally and ethically.
HUD, FHA, and VA Guidelines
Government entities such as the Department of Housing and Urban Development (HUD), the Federal Housing Administration (FHA), and the Veterans Administration (VA) often set guidelines for property preservation vendors. Compliance with these guidelines is essential for vendors participating in government-backed property preservation projects.
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