It All Boils Down to Choosing the Best To Knock on Doors
In mortgage field services and property preservation it all boils down to choosing right those who will walk up to a borrower's front door.
A good door-knocker has a very specific profile, says Andrew Layland of Retreat Capital Management Group, Lake Forest, Calif.. It is someone who is very professional, very friendly, with a big smile, easy to talk to, one who pays attention to detail, is very comfortable in any environment, and has a great sense of awareness for safety.
Neighborhoods are different. So-called high-risk properties in run-down areas with incidences of vandalism for example require more frequent inspections and upkeeping.This job requires someone who knows about real estate financing and is street-smart.
"It is an interesting position that also is very important. It has to do with responsibility, accountability and trust in property preservation. You need good people."
Unless property preservation companies hire such people to do the job, they cannot be very accountable. "We're in the front lines, we need to make sure that at the end of the day that [distressed] property is safe, secured, maintained and looking good."
RCM's strategic response to property preservation entails a highly selective process of inspectors, who preferably have a background in construction and housing repairs.
They are hands-on people who can complete basic repairs and understand all the issues related to residential property. "We hire people who go there to do the inspection and work on the property if necessary, as opposed to just report back their findings," says Layland.
Is that a promise hard to keep in times when the volume of distressed properties is up following a temporary depression during the period when the Home Affordable Modification Program moved many loans into the loan modification process?
Volume is why now it is more important than ever to have higher efficiencies and to be able to do everything very fast, says Layland.
A positive development that is having a counter-effect to inventory buildup is a higher turnaround as the time foreclosed properties are up for sale in the market is decreasing. "And that compresses" the amount of time field servicers have available to conduct property preservation as needed requiring fast and efficient execution of services like painting, carpeting, or other improvements. "We're seeing property preservation companies moving quickly, very aggressively. It is not unusual to have a property cleaned, painted and so on in just seven days."
Market changes include servicer demand for property maintenance and tenant management in cases where companies are leasing more properties back to their occupants, which have turned banks into part-time landlords. Hence, property preservation companies continue to face the challenge of coordinating communication with both their servicer clients and current tenants on a foreclosed property and conduct all the repairs a typical landlord would do, says Layland. "Sometimes we have people on the phone all day trying to get in touch with the occupants and working with the asset manager to inspect the property. It is something we see more and more."
RCM is expanding its services to provide end-to-end solutions beyond its main focus on third-party arbitration that helps bring delinquent loans back to re-performing status. Recently the company added property preservation services to its loss mitigation and portfolio management process offering lenders, servicers, asset managers and investors a single-source solution. In partnership with Elevate Property Services, RCM is now offering standardized property preservation services that include inspections, initial securing services such as lock changes and removal of debris, code violation abatement, ongoing maintenance and full renovation such as paint, flooring and repairs in customized packages.
"Also, it is important to offer preset design packages and flat-fee pricing for property preservation since not everybody has the same needs," says Layland. "You can reduce cost by being proactive vs. reactive when you have an issue. It is important to do property enhancements and obviously you have to be pretty aggressive with the pricing to make it affordable, especially in the lower end of the market."
Because property preservation encompasses such a wide range of services, says RCM managing partner Jim Orth, lenders' REO departments are faced with the burden to deal with large numbers of vendors, which "can appreciably delay" disposition. "It often doesn't take much for a vacant foreclosed property to fall into disrepair."