REO Repair Cost Challenges
Repairs are increasing in the residential REO market.
Marshall & Swift, a supplier of residential and commercial cost data, based in Los Angeles, has come out with a Web-based repair cost program specifically for use by Realtors, appraisers, lenders and others in the mortgage servicing industry.
Repair Cost Express responds to the need to estimate repairs on the growing number of residential properties now in or entering the foreclosure market. The program provides a useful product for establishing repair costs to increase the speed of marketing time for all transactions.
To date, many say the real estate industry has faced a lack of standardization for repair costs and has been challenged to generate reliable estimates in determining value for properties in “as-is” condition vs. “as-repaired.”
The goal of RCX is to give lenders reliable and trusted industry-standard tools for understanding and validating repair costs at a time when troubled assets in disrepair are driving billions of dollars of expenses. In the U.S., foreclosures are predicted to rise to a record 2.5 million in 2009. Lenders and appraisers now rely on generic square foot costs or hire contractors to estimate repair work, leading to subjective values that cannot be backed by a nationally recognized source.
“With RCX, for the first time, banks and lenders are assured of a consistent standard from a recognized leader in building costs. Banks can now generate accurate and faster repair estimates, shortening marketing times and increasing overall asset values,” says M&S president Peter Wells.
The company wants to assist in offering repair cost data from an independent third party to the many banks and servicing companies dealing with large quantities of REO assets. “Banks and REO servicing organizations have realized the payout on repairs needs to be verified and Marshall & Swift can provide that verification,” he said. “It eliminates the guesswork and inconsistent quotes.”
RCX uses the same M&S cost component database, the same database used by national insurance carriers and claims adjusters who must account for all possible residential damage scenarios. In fact, it is the same data used by the federal government and nearly every state.
The program provides pricing for more than 23,500 repair operations. These repair tasks are organized into 13 general operations (clean, finish, paint, prep, refinish, repair, remove, remove and reset, replace, seal, special combinations of operations, stain and tear-out) and 70 subcategories, among which are appliances, cabinet, doors, fence, foundation, heat, air and plumbing.
Additionally, larger organizations can use RCX to manage national repair costs across any geographic footprint. The system allows for file management of repair estimates, providing a single platform to manage assets.
Users pay an annual license fee and can generate unlimited online repair reports for a low transaction fee. An administrator's version of RCX can be made available for managers who wish to track agents' work in the field. Companies that adopt the administrators version can expect to save as much as 28% on their current cost of repairs for their inventories.