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Do You Need to Be Licensed and Insured to Start a Foreclosure Cleanup Business?

I get this question a lot as the owner of a foreclosure cleanup company. New business owners are pumped with energy and excitement about getting into the hot new industry of foreclosure cleanup. The more formalized property preservation label for large contractors that in the past have primarily handled this type of work has been "casualized" to the foreclosure cleanup phrase. This new crop of business owners has become the right arm to larger HUD M&M (management and marketing) contractors.

The reality is often new foreclosure cleanup entrepreneurs are short on cash and look for ways to lessen the initial dollar outlay in an effort to just get the doors of their new business open. Many of the new foreclosure cleanup entrepreneurs have been in similar businesses for years on a grassroots level (lawn care, painting, debris removal, etc.), but the overwhelming demand for foreclosure cleanup services via larger contractors has demanded they formalize their credentials to get work on a subcontracting level.

There are many areas in which new entrepreneurs can reign themselves in on spending when opening a new business, but licensing and insurance ain't one of 'em.

Do you need to be licensed and insured to start a foreclosure cleanup business? The answer is a resounding yes, yes, yes. Absolutely! You need licensing and insurance to be taken seriously in the foreclosure cleanup industry. Competition is growing each day by leaps and bounds. Getting your ducks in a row credentials-wise will set you apart immediately from the competition.

Why do you need the license and insurance when you can just start? New foreclosure cleaning business owners should realize they will be pitching professionals (realtors, brokers, lenders, larger contractors) with their foreclosure cleanup services. These professionals, especially realtors, have taken the time to get licensed and insured and will have little patience with business owners who are not.

When a realtor or broker asks a business owner to provide proof of their license and insurance so they can consider their bid on a job, they are submitting that paperwork on to the bank. In almost all scenarios, the powers that be at the bank are looking at not just the one estimate, but often several estimates. As a new foreclosure cleanup business owner, you won't even be in the drawing if you don't have the proper credentials. Not having the proper license and insurance in this industry can cripple a new business before they even get started. When they ask for it, have it, simple. If you want to set yourself apart from the masses and be looked upon as a professional, viable business, you simply cannot bypass this step. What type of license? The type of business license you get will really depend on the type of services you choose to offer in your foreclosure cleanup business. Services can run the gamut, from basic cleaning, to painting, repairs, trashouts and more. If you are offering extensive repairs (i.e., electrical work and the like), you will need the proper certifications and licensing. If you are offering just janitorial-type services, an occupational business license may do, depending on your county.

What type of insurance, how much coverage? At minimum, you will need liability insurance coverage for your business and you will need coverage for your automobile(s). If you have employees, you will need to carry workmen's compensation. But each area of the country is different, each county has its own policies and procedures, so make some calls to your county clerk's office, your local Small Business Administration ("SBA") and insurance agencies that service your area to make ensure you are amply covered with insurance and properly licensed. When starting your foreclosure cleaning business, you DON'T have to run out and buy a big shiny truck or fancy equipment for hauling; you DON'T have to buy a 16K dumpster for your backyard; you DON'T have to purchase a bush hog for clearing properties; but you DO need be properly licensed and insured to be taken seriously, and to protect you, your workers, your property, and to grow your business.

Go to the Small Business Administration's (http://www.SBA.gov) website to get more information on business licensing. Visit websites like the Insurance Information Institute (http://www.iii.org) to get answers to basic business insurance questions.

Continued success with your foreclosure cleanup business.

NOTE TO KEEP IN MIND: Throughout the internet/web and in real estate industry literature, you may see the names mortgage field services, property preservation business, foreclosure cleanup, foreclosure cleaning, foreclosure clean-outs, foreclosure clean, clean foreclosures, cleaning foreclosures, REO trashout, REO trashouts, field asset services, property field services, field service, and field services used interchangeable. The main thing to remember is foreclosure cleaning and foreclosure cleanup generally refer to smaller entities; while property preservation generally refers to larger companies.

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Article by Cassandra Black, Author of How to Start a Foreclosure Cleanup Business and several foreclosure cleanup industry Guides, Reports and Forms. Sign up as a Premium Newsletter Subscriber. You will periodically receive foreclosure clean-up job leads and consultative advice to help you grow your foreclosure cleanup business!

For more industry information, visit the foreclosure cleanup blog and the foreclosure cleaning newsletter archive.

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