Company Tackles Termites, Mold and Radon Gas
Health concerns around the topic of randon gas, toxic mold and pesky termites found in REO homes across the country are a growing concern for many in the housing industry. Property managers, owners and sellers are looking for help to conduct inspections and to treat these problems.
In order to help preserve the value of real estate-owned assets and the quality of health for homeowners, Steve Smith, whose background is in both the insurance and pest control business, is bringing his company, ServiceAccess, to the REO industry. ServiceAccess provides a service agreement through the real estate industry to individuals who are selling their homes. It covers termites, mold and radon gas.
“Those three things are not covered by insurance policies,” Mr. Smith tells Managing REO. “And they are also not covered by home warranties. It’s kind of a unique service agreement. It’s not a warranty. It’s a pledge to service the property should they become infested with any of those three things.” The company, based in Orange Beach, Ala., places the service agreement on all property listings at no charge to the seller during the listing period.
“Should an inspection determine an infestation we will provide the service after a $500 deductible. When the property sells, either the seller has agreed to pay the first-year fee or the buyer has the option to renew the coverage,” Mr. Smith said.
“The service agreement sells for $299 without an inspection and $224 with an inspection. We do not provide the inspections. For the broker marketing our service agreement to their clients we pay a 15% commission for both new and renewal.”
While his operation is small, the business provides national coverage for service and is able to issue the agreement in all states. “We are not considered a settlement service, therefore we are in compliance with the RESPA regulations. We are not an insurance contract although we may be sold by insurance agents to their customers. All of our service providers are licensed and insured to provide the services required,” he said.
Most of the people who have lost their homes did not keep their contracts in place. They didn’t renew their termite agreements while they were losing their homes, according to Mr. Smith. “Most of these houses that are REO or foreclosed homes, they don’t have any type of coverage for termites, no matter where they are — in the North or South or wherever. I see a need for the service agreement in that regard.”
His experience so far in dealing with REO banks is that they have very little interest in doing anything “that they don’t have to do.
“They sell houses ‘as is’ and they don’t want to put a dime up, even though I tell them, ‘you don’t have to put pay anything.’ I get directed a lot to asset management companies. They have a certain directive from the bank about what they can and can’t do.”
Most mortgage companies that he has talked with so far will accept the service agreement in lieu of an inspection.
"My goal is to talk with more people in the REO industry and with the high level of decision makers that will OK the approval to buy the service agreement. The important point is we cover the property at no charge during the listing period and transfer to the buyer as a renewal at closing. There is no cost to the seller unless an inspection determines there is an infestation and then we cap their costs for treatment on a national basis."
Standard termite inspections are only good for the day of the inspection and the inspector can only see 30% of the structure, according to Mr. Smith. “The fact is termites and mold spores may develop after the sale and ServiceAccess coverage can minimize the costly upfront expense associated with protection against termites alone,” he said.
“The liability exposure to the seller, agent and broker is reduced if not eliminated for termites and mold by offering the coverage provided by this agreement. Only ServiceAccess agreement provides both termite and mold coverage. Coverage for mold in addition to termites is an added value to clients.”
In recent years, mold litigation has been on the rise and more and more lawyers are handling cases relating to mold exposure. Because of this landlords must ensure that reasonable means have been taken to avoid harmful mold growth.