Hello Business Owners,
I hope your weekend was great -- and, I hope you're looking forward to a super holiday weekend. Below is a piece on property inspections that highlights the different types of inspections you may be asked to perform by a larger property preservation company. (These are some of the most common inspections. The list for the different types of inspections, and their various labels, is endless.)
The below breakdown (extensive editorial this time) is based on HUD's guidelines and directly parallels what HUD requires when it comes to these inspections.
This is an excerpt from The Pricing Guide for Foreclosure Cleaning & Real-Estate Service Businesses: How to Price Jobs for Profit
Many wishes for a profitable week!
What are HUD required inspections? Quite simply, before a home is foreclosed upon, someone needs to go by the home to make sure that it is, first and foremost, vacant. Then, they need to evaluate whether or not any damage has been done and document the extent of the damage.
There are several different types, phases and levels of inspections when it comes to property preservation, and many smaller foreclosure cleanup companies will not perform all of these inspections. There are formal procedures for each inspection, but we will only gloss over them so you get a peek at the various types.
If you're performing inspections in bulk, you've got a winning, profit-yielding service for your foreclosure cleanup business.
Speaking of bulk, I previously met a gentleman who had been contracted by the FDIC
to handle initial inspections to determine whether or not properties were vacant. The number of properties he was in charge of -- 1,200! He hopped off his truck, took a few snapshots of the home, filled out a quick form that he showed me, and was on to the next.
THAT kind of bulk leads to good profits in inspections... one or two may not be worth your time, unless they are part of a larger contract.
After reading the below, you will be able to speak knowledgeably about the inspecting service if you have to provide inspections to get another slice of a bigger foreclosure cleanup job
or to get your foot in the door with a larger contractor
There are also varying required submittal forms that must be used during the specific inspections, so if you are called upon to perform inspections by a bank, an M&M*, or a larger contractor, ask specific questions about what is required to ensure you are performing the inspection properly and make ensure that you are using the correct form. *NOTE: HUD has arms in the form of M&M Contractors ("Management and Marketing" Contractors). These M&M Contractors market and manage single-family properties owned by, or in the custody of, HUD.
The contractor will point you in the right direction or will give you a HUD form name and number so you can download the correct ones from the internet.
Five Types of Primary Property Inspections
There are five types of property inspections:
Initial Vacant Property Inspections
Vacant Property Inspections
Voluntary Pre-Conveyance Inspections
As mentioned above, HUD has specific "Property Inspection Report" forms you must use. Before and after photographs are required on all property visits and all inspections must be documented.
I. Occupancy Inspections
The Occupancy Inspection may determine that the property is (i) occupied; (ii) vacant, but "obviously" being maintained (e.g., doors and windows secured, lawn is cut, "For Sale" sign on the property, etc.); or, (iii) vacant and abandoned.
If the Occupancy Inspection establishes that the property is vacant but obviously being maintained, on-going Occupancy Inspections should be conducted every 25-35 days following certain telephone steps. Documentation should be provided as to how the property is being maintained to justify that the property is occupied by the mortgagor.
If the Occupancy Inspection establishes that the property is vacant and abandoned, the mortgagee (bank) should thoroughly document the property damage, initiate preservation and protection actions and the related measures required to secure the property beginning with an Initial Inspection.
The Occupancy Inspection report should, at a minimum include the following:
--Date of the Occupancy Inspection.
--Identity of the inspector.
--Is the property occupied? If so, how was this determined?
--Identity and status (i.e., Mortgagor, renter, etc.) of occupants, if ascertainable.
--A valid telephone number for the occupant, if ascertainable.
--Is the house locked or secured?
--Is there a For Sale sign on the property? If so, provide the Broker name and contact number.
--Is the grass mowed and/or shrubs trimmed?
--Is there any damage apparent from the exterior? Describe.
--Is any exterior glass broken? Describe.
--Are any doors or windows boarded? Describe.
--Does the house appear to contain personal property and/or debris?
--If the inspection indicates that a property is occupied, the bank or its agent should attempt to verify the identity of the occupant(s).
If it is not clear whether a property is occupied, the bank should review such occupancy indicators such as (i) checking utility meters to determine if they are on (ii) contacting the listing broker if there is a for sale or rent sign on the property (iii) observing general maintenance and (iv) speaking to neighbors.
A drive-by inspection alone is not acceptable evidence of occupancy or vacancy.
Documentation to support the occupancy determination must be provided along with a copy of the inspection report.
II. Initial Vacant Property Inspection
An Initial Vacant Property Inspection, also called the "Initial Inspection," is performed on the date a bank or management company first takes physical possession of a property by securing it.
Securing should take place as soon as reasonably practical, but no more than five calendar days following the determination that the property is vacant and/or abandoned post foreclosure or 15 business days following the determination that the property is vacant and/or abandoned, pre-foreclosure.
If the Initial Inspection identifies an imminent source of property damage or a health and safety hazard (e.g., flowing water, collapsed roof, gas leak), the bank or management company must take immediate action to remediate the damage/hazard.
In some instances the Initial Inspection will take place on the same date as the Occupancy Inspection. The Initial Inspection report establishes the condition in which the bank or management company first found the property.
Report Contents for Initial Vacant Property Inspection
At a minimum the Initial Inspection report should include:
- Date of the initial vacant property inspection.
- Identity of the inspector.
- Date of last Occupancy Inspection.
- Is the house locked or secured?
- Is the grass mowed and/or shrubs trimmed?
- Is there any apparent damage? Describe.
- Is any exterior glass broken? Describe.
- Are there any apparent roof leaks? Describe.
- Does the house contain personal property and/or debris? List all and document with photographs.
- Are any doors or windows boarded? Describe.
- Is the house winterized? If not, when and where applicable, initiate winterization.
- Are there any repairs necessary to adequately preserve and protect the property? Describe.
- Which appliances are present?
- Describe any P&P actions completed during initial securing.
- Describe any additional P&P actions required.
During the Initial Inspection, the bank or management company should post a small sign no larger than 8.5" x 11" on an interior window or the front door of a property. The sign should not include information about pending foreclosure or the M&M Contractor, but should contain the bank's or management company's toll free telephone number to contact in case of emergency.
III. On-Going Vacant Property Inspections
On-going Vacant Property Inspections are performed after the Initial Inspection and securing have occurred. The bank or management company should inspect a vacant or abandoned property every 25-35 days following an Initial Inspection, or more frequently as prescribed in local variations, to determine whether any subsequent or additional preservation and protection action is necessary. Vacant Property Inspections should include both interior and exterior assessments of property condition.
At a minimum the Vacant Property Inspection report should include the items listed in the bulleted points immediately above.
IV. Voluntary Pre-Conveyance Inspections
Pre-conveyance inspections are joint property inspections with pre-determined M&M Contractors prior to conveyance of the property to HUD.
Pre-Conveyance Inspections may significantly reduce post-conveyance disputes between bank and M&M Contractors (remember, the M&Ms oversee procedures and price caps for HUD) by allowing each party to agree that properties are in conveyance condition (or identify requirements that need to be met prior to the conveyance). This is beneficial when properties will be conveyed with damage.
Pre-Conveyance Inspections should be scheduled no earlier than five calendar days prior to the scheduled conveyance date.
Banks should contact the appropriate M&M Contractor directly for more information on procedures regarding voluntary Pre-Conveyance Inspections in their contract areas. The M&M Contractor, using HUD's inspection form, will perform voluntary Pre-Conveyance Inspections.
At a minimum, the Pre-Conveyance Inspection report should include the items listed in the bulleted points immediately above.
V. Pre-Eviction Inspections
Banks are required to perform a Pre-Eviction Inspection within 72 hours of a scheduled eviction, whenever there is any doubt that a property is still occupied. At a minimum, the Pre-Eviction Inspection report should include the items included in the Occupancy Inspection discussed above.
Inspection costs, frequency and reimbursable cost limits are discussed in detail in Chapter 4 of the Pricing Guide referenced above.
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I hope the above provides some basic insight to those of you considering adding inspections to your cache of foreclosure cleanup services. Much success to you!
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Link to All Previous Newsletter Issues: As always, don't forget to peruse previous issues of the foreclosure cleanup industry newsletter (especially if you're a new newsletter subscriber) at http://www.aweber.com/archive/fcbizowners for tons of solid advice and guidance to grow your business in 2011.