How to Pass a Property Preservation Quiz For Foreclosure Cleanup Subcontracting Work

As a smaller foreclosure cleanup business, your company can sign up for subcontracting work with larger property preservation companies. You can offer your services on a subcontracting basis for work such as inspections, repairs, lock changes and window boarding, lawn maintenance, winterization, interior trash-outs, exterior debris removal, etc.

Many of the larger companies are increasingly requiring the smaller subcontractor to complete a quiz to be considered for foreclosure cleanup subcontracting work with their companies. These quizzes are simple “weeding out” tactics so the larger companies can get the most qualified subcontractors.

Are You Familiar with HUD Guidelines?

Many of these mini-exams are designed to determine your level of understanding of HUD guidelines for property preservation work. Many of the larger companies get a great deal of their properties directly from HUD Management and Marketing (M&M) Contractors.

The M&M Contractors literally market and manage single-family properties owned by, or in the custody of HUD. (These are homes that had an FHA-insured mortgage where the homeowners defaulted on the payments. The lender or mortgage company that suffered as a result of the default ultimately deeds the home to HUD in exchange for an insurance claim payment.)

A property preservation quiz can range from the very simple to the ultra-complex. Check out some sample questions and answers below.

Sample Questions and Answers

Many quizzes contain common real estate industry definition-type questions as they relate to the Department of Housing and Urban Development. For example, a quiz may ask the following:

Question: What is the definition of Conveyance Condition as it relates to a HUD property?

Answer: You could state something very simple, such as the following: For a property to be in Conveyance Condition, as it relates to foreclosure cleanup, the property must be undamaged (undamaged by flood, fire, hurricane/tornado, boiler, etc.); the grass must be cut; the property must be sufficiently winterized; all debris and hazardous and unhealthy materials must be removed; and the property must be efficiently boarded and secured, including all pools and hot tubs, at minimum.

Another sample question you may come across on a test may be the following:

Question: Please describe in detail the steps you must take when you winterize a property with a dry heat system.

Answer: Dry Heat Systems. The hot water heater and all domestic water supply and distribution piping must be drained in a manner sufficient to prevent freezing and other damage. All valves and faucets are to remain open during process. (After draining has been completed, they should be closed.) An appropriate amount of antifreeze should be placed in all fixture traps, including in toilet bowls and tanks.

To set yourself apart as a potential foreclosure cleaning subcontractor, you could go into greater detail in your answer. For example, using the above winterization question, you could elaborate on the answer by describing winterization requirements in greater detail by pulling information from HUD guidelines (which can be found pretty easily by scouring the internet).

For example, you could include the following in your answer:

Answer — Generally properties are to be winterized once between October 1 and March 31, though there can be exceptions based on local requirements. Unless otherwise specified, winterization should include cleaning toilets and draining of all heating systems and plumbing in a manner sufficient to prevent damage and freezing. Air pressure, or in some cases antifreeze, can be used to clear system and prevent freezing.

All tasks should be performed taking local and state codes and regulations into account. Before and after photos, along with other supporting documentation, must be submitted for reimbursement.

More Sample Questions

Here are a few more sample questions you my come across when taking a foreclosure cleanup subcontractor quiz (see if you can find the answers online yourself):

During a trash-out you notice there is a motorcycle in very good condition in a detached garage. What should you do?

When does grass cutting season start and end in your geographic coverage area?

Describe services performed during a formal trash-out?

What steps should you take if you arrive at what is supposed to be an empty property with an order to secure it and you find out it is occupied by someone?

All of the above answers can be found in the HUD Guidelines, which, again, can be found pretty easily online.

Don’t Let a Quiz Deter You

Though many of the larger, more formalized, companies require completion of a quiz to register your foreclosure cleanup business with their companies, many do not. So search around the internet, and if a company seems to be a fit for your business service-wise and geographically, don’t let a quiz prevent you from signing up as a potential subcontractor with their company.

Forging Alliances is the Key to Growing Your Business

Do your research and attack the quiz with fervor. As a smaller foreclosure cleanup company, getting subcontracting work via the larger preservation companies that service your area can add exponentially to your bottom-line.

Many of these larger companies often service hundreds of properties at one time, across several states. Forging an alliance with the larger property preservation company is the key to really growing your foreclosure cleanup business.

Many wishes of success with your foreclosure cleanup business.

Foreclosure Process: The 3 Stages Real Estate Investors Need To Know

If you’re investing in real estate properties, then you have likely looked into the foreclosure process. The foreclosure market is teeming with incredible deals, and knowing the right stage to buy at will help you get make the most of your investment. Depending on your local economy, each stage will offer a different type of potential for your investment portfolio.

The Pre-foreclosure Stage

Pre-foreclosures are known as short sales in the real estate world. This is likely the most advantageous stage of the foreclosure process of investors because lenders are willing to work out better deals. Pre-foreclosures occur after the borrower has missed mortgage payments, but before the home goes to an auction sale. There are actually two stages of a short sale. The first is when the home owner defaults on his mortgage, or is more than 30 days late on his payment. The second part is when the home owner actually receives a legal letter known as a Notice of Default.

As a property investor, you want to find sellers who have actually received a Notice of Default on their mortgage because they are more than 3 months behind on payments and will likely work with you on a purchase. Before they receive this notice, sellers have ample opportunity to catch up their payments and cure their loans.

The Foreclosure Stage

The foreclosure stage begins after the home owner receives a notice of default and the lender takes legal action against them. They will be evicted from the home and the lender will seize the property. When this happens, the lender must place the home on the foreclosure auction. In some states this is known as a trustee sale.

Trustee sales are great because they give you a lot of bargaining power. Foreclosure notices are placed in the newspaper, allowing you plenty of time to research properties before you decide to bid on a house. Once you find a property you want to bid on, you can go the auction and place your bid.

The foreclosure auction does have many pitfalls, but if you do your research and understand the market, you can score really great homes in good neighborhoods. Many real estate investors use bidding services that will bid on homes for them. If you choose this route, all you need to provide is your requirements for a home and the bidding service will do the research for you.

The Post-foreclosure stage

After a home goes through the short sale and foreclosure auction stage, it ends up as a post-foreclosure property. This is known as a bank owned property or real estate owned REO. These homes end up back on the original lenders books as a non-performing asset. This essentially means they bank owns the home again, but isn’t making any money on it.

At this point the lender has spent a good deal of money going through foreclosure and they may actually try to recover fees and monies lost during foreclosure by taking them onto the sales price. At this stage, the home is selling for the highest price in the entire process.

One advantage to purchasing REO is that banks are highly motivated to get the property off their books. They are likely more willing to negotiate at this stage as the property is costing them money.

Pros and Cons of Using a Forbearance Agreement to Prevent Foreclosure

A forbearance agreement is sometimes offered to borrowers struggling to meet their home loan obligation and those entering into preforeclosure. When lenders enter into a real estate forbearance contract they agree not to proceed with foreclosure action as long as mortgagors remain in compliance with the terms.

The forbearance agreement allows borrowers to obtain special financing terms for a specific period of time. The average duration of mortgage forbearance contracts is usually 2 or 3 months. However, banks can extend the terms for up to 12 months when extenuating circumstances exist.

While a mortgage forbearance contract can assist borrowers in getting their finances in order to meet future loan obligations, there are risks with this type of agreement. Using the forbearance agreement, banks temporarily reduce or suspend mortgage payments. Once the agreement expires, borrowers must be financially capable of repaying the amount of missed or reduced payments.

For example, if a borrower’s monthly home loan installment is $1200 and their lender reduces the payment to $600 for 4 months, they must be able to repay $2400 at the end of the forbearance contract. If unable to pay the full amount, the lender can proceed with foreclosure action.

Additionally, home loan payments are reported to the three major credit bureaus of Equifax, Experian, and TransUnion. Deferred payments are often reported as delinquent, which can have an adverse effect on borrowers’ credit scores.

Those who are already in a low credit bracket can quickly slide into the high-risk category, which can limit their ability to obtain credit in the future. Bad credit can prohibit borrowers from qualifying for other types of foreclosure prevention strategies such as loan modifications and mortgage refinance.

Another concern of real estate forbearance is the effect deferred payments have on escrow. Home mortgage loans incorporate required funds for homeowners insurance and property taxes. A portion of each installment is placed into escrow to cover annual expenses.

If insurance premiums or property taxes become due during the forbearance plan the escrow account may come up short. Mortgagors are responsible for paying these expenses out of pocket. If property insurance and taxes are not paid, banks can void the forbearance agreement and initiate foreclosure proceedings.

With that being said, mortgage forbearance can be a good option for those facing temporary financial setbacks. Borrowers must be extremely proactive in getting financial affairs in order during the contract period to ensure they can afford deferred payments once the plan expires.

Borrowers facing chronic financial problems due to long-term unemployment, health problems, divorce, or death of a spouse should contact their lender’s loss mitigation department to discuss foreclosure prevention strategies.

Mortgagors must obtain authorization to enter into mortgage forbearance from their lender. Most banks require borrowers to submit financial documents and a letter of hardship.

Hardship letters provide borrowers with the opportunity to provide details of events that caused their financial crisis. Lenders typically require mortgagors to provide a chronological timeline and summary of hardships, along with any action taken to improve finances.

Borrowers must contact their mortgage provider at the first sign of financial hardship. Banks are usually more willing to work with mortgagors who are proactive in finding solutions. If lenders are unwilling to provide assistance, borrowers may need to retain the services of a real estate attorney.

Mortgage Modifications – The Dirt the Mortgage Loan Mod Companies Would Like to Hide

So here you are. You are in a sticky financial situation and due to recent hardships; you would like to change the terms or your loan. What do you do, you call or do a search for a mortgage modification company.

Guess what the rep tells you when you contact them! You have to pay anywhere from $1500 – $5000 for them to go to bat for you. Guess what else! Many of them do not even have a guarantee of the end result NOR will they give you your money back if they cannot perform on your behalf. Garbage I say!

 

Here is what they do not want you to know.

 

Just a mere two to three years ago, they had no idea how to modify a loan. Beyond that, they were probably working as a loan officer and were instructed to tell customers that asked about a mod that the bank did not offer that service.  

 

So how did all the people that are doing mortgage mods learn how to do it?

 

1.       They were either coached personally how to do it by someone that had a good working knowledge on the successful execution of a change in terms on a home loan.

 

OR

 

2.       They learned from a book or training manual. Basically, if you can follow instructions, you have as good a chance of succeeding as any of these companies do. Seriously, 6 months ago or a year or two ago many of these folks had no idea how to do it. 

 

The bottom line is this; you do not need to pay thousands of dollars to modify your mortgage loan. You CAN do it yourself.