As vacant properties rise across the country, code compliance is an ongoing challenge within the housing industry that servicers, property preservation companies and Realtors have to battle on a daily basis.
Some of the most common types of problems that property preservation firms are required to fix during both the pre- and post-foreclosure process so they are not issued fines from municipalities or homeowners associations include mowing the lawn, removal of garbage from the yard and making sure loose wires that could result in a fire are not evident at the home.
“We’re certainly seeing challenges with the extended timelines to be able to keep these properties in the condition that they are marketable as well as kept off of code enforcement radar and remain compliant within the city requirements that are out there,” said Steve Meyer, AVP of high risk and hazard claims for Safeguard Properties.
Meyer said that most of these problems are handled because of complaints that come from community members living near the vacant properties. He added that Safeguard’s Valley View, Ohio office receives more than 1,000 calls a week regarding issues that don’t comply with municipality rules.
“On the maintenance side, it’s important if we could take action and keep people from calling in saying the grass is high, the property is not secured or that there is debris in the yard by making sure we have the best practices to keep it off of code enforcements radar and keep us from having problems,” Meyer said during a general session at the REOMAC spring summit in Palm Desert, Calif.
Meyer stressed that cities continue to be aggressive with their own inspection processes now because there are so many foreclosed properties on the market. Also, because of the struggling economy and many municipalities throughout the nation dealing with budget issues, more ordinances have been created to generate additional money for the municipalities.
In the past, code violation fines were minimal, sometimes less than $100, resulting in clients ignoring the issues apparent at the properties. This is not the case anymore.
“When it first started three or four years ago, I thought there were good intentions by the cities and their goal was to build a database that if there was a problem at the property, they just wanted to know who to call,” Meyer said. “It has now become a revenue source for these cities so when they do have problem properties, they have funds to resolve them.”
Denise Hammond, first vice president of asset management and disposition service for ServiceLink, Pittsburgh, Pa., said during the session that real estate agents are currently responsible to manage more tasks for a vacant property than ever before. For example, Realtors may be asked to re-register the property every six months so municipalities know the home is still vacant.
“It certainly seems that once you are registered, then it’s much easier for them to put you on a schedule and keep an eye on that property,” Hammond said. “So the two kind of go hand-in-hand if you’re registered as a foreclosure or vacant property, there’s certain inspection activities by the city that increases your chances of a code violation.”
As an REO outsourcer, ServiceLink has “aggressively” conducted their own property inspections to make sure the preservation companies and agents they work with remain in compliance with municipality regulations, Hammond expressed.
“Our clients want us to make sure they not only don’t have code violations because of the expense and title issues, but because of their reputation in that community, too,” she said.
Communication between a Realtor and servicer is key when it comes to avoiding any type of fine, said Joe Cutrona, senior director of REO services at Santa Ana, Calif.-based CoreLogic. According to Cutrona, agents and servicers need to establish a relationship to know who is responsible for preserving the property during this “delicate situation.”
“To tackle all of these regulatory and compliance issues, it’s the experience of the agents and their knowledge of the local market that helps prevent code violations,” Cutrona said as a member of the panel. “Health and safety is critical in whatever you have to do to prevent immediate risk in the best interest of the client, and obviously a volatile situation requires instant communication between all the stakeholders to handle the matter.”
Meyer agreed that having some type of open line of communication is important to prevent any code violation from taking place, especially between a code enforcement official, a Realtor and property preservation firm.
One of the best practices servicers should consider is to designate an individual or a department towards code enforcement, according to Meyer. This provides code enforcement officials with a direct contact so that when they see your listing, they know there is someone to get in touch with to handle the problem.
“Nothing frustrates them more than getting into a situation when they’re talking to somebody who doesn’t understand who they are and then having to be transferred all over the place, then they get to the point where they don’t care anymore,” Meyer added. “Once they don’t care, that’s when you have to start to pay lots of money to get things corrected. So if they can get a quick, timely response and have conversations with them about whether there is an occupant, there are limited things we could do.”
