Why Bank Failures Can Mean Subvending Contracts For Foreclosure Cleanup Businesses

Did you know that just 60 days or so into 2010, over 20 banks had already failed? In 2009, hundreds of banks across the United States failed. While no one likes to hear of banks failing in communities across the country, it can be good news for foreclosure cleanup business owners and others who operate real estate service businesses (eg, plumbers, general contractors, electricians, etc.). Why?

Because these failed banks are often acquired by larger and/or more solvent financial institutions, which means they need the services your company can offer.

To explain, when a bank fails, it falls in the hands of the Federal Deposit Insurance Corporation (aka the FDIC). This is the initial step. Failed banks go on to be acquired by other banks, as mentioned above, because they have customers that still need to be serviced. This is, in part, why you see the FDIC seal in every bank. They protect the everyday consumer in case a bank fails.

Understanding What Happens When a Bank Fails & Why It Helps Real Estate Services Businesses

Oftentimes, once a failed bank falls into the hands of the FDIC, they contract with larger property preservation companies to handle the maintenance of the failed bank’s real estate assets (eg, foreclosed homes, foreclosed commercial properties, etc.).

And this is where it gets interesting for you, the little to mid-sized foreclosure cleanup business owner. You see, these large property preservation companies are, in many cases, simply taking too long to handle all the requests for foreclosure cleanup work because they are just overwhelmed with the number of properties on their roster.

These properties can’t sit idle just because the bank that owned them failed. They need inspections, yard maintenance, winterization, boarding up, lock changes, etc. And, these larger companies simply can’t keep up.

Add to this – the more banks that fail, the more properties fall into the big guys’ laps. So what do they do? The contract with small to mid-sized foreclosure cleaning companies (like yours!) to help them at least try to keep up.

If you’re one of the lucky ones to be properly set up as a foreclosure clean up business – ie, licensed and insured — you can target those handling failed banks to get foreclosure cleaning jobs.

Who to Target When a Bank Fails to Get Ongoing Foreclosure Cleanup Jobs

As a foreclosure cleanup business owner, you would contact the REO asset managers within acquiring institutions (ie, the FDIC or whichever institution took over the assets of the failed bank).

While it may take some elbow grease to get through to them, getting an “in” with just one of these companies can provide you with all the foreclosure cleaning jobs you will ever need. So it’s definitely worth it to put in the time it takes.

How to Add "Commercial Trashouts" to Your Foreclosure Cleanup Business

According to an article from DS News, an in formative real estate publication that focuses on foreclosure trends and other aspects of the mortgage default servicing industry, $23 billion dollars in commercial mortgages will come due this year. This translates into the fact that right at two thousand commercial mortgage loans are set to mature over the next year.

Of those, over thirty percent will likely NOT pass their refinancing tests, according to Fitch Ratings, a global rating agency that focuses on data, research and credit opinions for the world’s credit market and investors.

Commercial Business for the Trashout Industry

What does this mean for the cleaning foreclosures industry? In a word, PROFIT!

A foreclosure cleanup business provides services ranging from interior and exterior repairs, to maintenance, debris removal, securing properties via the boarding of windows and doors and changing locks, to occupancy and vacancy inspections, painting and more. Much of the banter around the foreclosure cleaning industry focuses on residential trashouts and maintenance; however, with the unfortunate dose of commercial mortgages scheduled to head for trouble this year, foreclosures cleaning on the commercial front can be a solid outlet for business contracts for new and existing foreclosure cleaning enterprises.

Commercial trashout and cleanup accounts can stem from office buildings, daycare centers, gas stations, retail stores, restaurants, multi-unit apartment buildings, and similar real estate.

Less Competition in Commercial Foreclosure Clean-outs

Commercial foreclosure cleaning accounts will have less competition because most businesses in the industry focus on residential trashouts.

Simple to Add Service to Existing Business

A foreclosure cleanup business owner can add commercial foreclosure clear outs to their list of services easily by simply ramping up on equipment and supplies and targeting professionals who handle commercial foreclosures.

For example, as a trashout business owner, start by compiling a list of commercial real estate brokers in your geographical area and reach out to them. Also, do a little digging and create a list of commercial lenders in your city and contact them about your cleaning foreclosures business. Use the term, “Commercial Foreclosure Cleanup” in your literature and conversations with the professionals you contact.

Also, by browsing business sections of newspapers to see what’s going on in the industry in your own town and keeping an eye on real estate multiple listing services online, you can fast become familiar with commercial foreclosures coming down the pipeline.

Win Mind Share and Ask for “the Sale”

Stay in touch with the listing brokers and agents of these properties. Win “mind share” by reaching out to them consistently with professional material and following up with a phone call to see if they have any questions about your services — and to see if they need you to give an estimate on a commercial property. Always ask if they have a property needing an estimate. Ask for “the sale” every time, at the end of every conversation.

Network for Consistent Business with Larger Payouts

Also, consider networking at Chamber meetings, business breakfast meetings, realtor gatherings, etc., and announce this new commercial division of your cleaning foreclosures company.

Commercial transactions usually have a bigger payout, are more formalized, and can lead to consistent work once you’re in good with a broker or lender.

How Commercial Differs

Note that commercial cleanouts will differ from residential cleanouts in that you will likely be dealing with larger spaces, smaller timeframes, and likely addendums to any contract you may present for signature. Also, you may have to work around security systems (i.e., a business being foreclosed on may be housed in a large commercial building, and your entry and exit may have to coordinate with front lobby security).

Further, you may have to clean industrial-sized equipment. For example, in cleaning a residential home, you’ll be accustomed to cleaning standard-sized stoves, dishwashers and refrigerators. However, in handling cleaning and trashout duties for say, a restaurant, you’ll be working with restaurant-sized freezers, refrigerators, stoves, hoods, and the like. This means your cleaning solutions will need to be stronger and you’ll need more of them.

Be Aware of Environmental Rules

Also, in handling commercial cleanouts, you may have to dispose of materials you won’t necessarily come across in a single family home. For example, with restaurants, you may have to dispose of tubs of cooking grease. Simply review environmental rules to ensure you’re following proper procedures in disposing of materials that may be hazardous to the environment.

Roll-off Container vs. Vehicle

Another factor in working with commercial trashouts is the sheer amount of furniture and materials that may need to be removed from a unit. For example, if you’re cleaning out a daycare center, you may have desks, chairs, books, file cabinets full of papers, toys, mats, etc. to dump. Ensure your vehicle is large enough to handle the job, or consider renting a roll-off container for the yard.

Lucrative Aspect of Your Business

There are several factors to consider if you decide to venture into commercial foreclosure cleanup. But with billions of dollars in commercial mortgages maturing this year alone, it can be a lucrative aspect of your foreclosure trashout enterprise.

Much success to you on the commercial front of the mortgage services industry!

Foreclosure Cleanup Industry – White-Glove Versus Broom-Swept Cleaning

Foreclosure cleanup companies handle the maintenance, securing, and cleanup of homes after they have gone through foreclosure. This low-cost startup industry is burgeoning as more and more homes are being foreclosed upon. And, with the next wave of adjustable rate mortgages destined to hit the market soon, there is no end to the foreclosure crisis in the immediate future.

A big part of the foreclosure cleanup industry’s services focuses on, quite naturally, cleaning. There are two distinct types of cleaning in the foreclosure cleanup industry: White-glove and broom-swept. Not knowing the difference can cost a company cleaning foreclosures dearly in time, money and reputation. Let’s visit the two types of cleaning.

White-glove Cleaning

White-glove cleaning will include washing windows inside and out (including window sills), cleaning baseboards, appliances (including pulling out appliances and cleaning underneath), clearing spider webs from ceilings and closet interiors, scrubbing bathroom tile, mirrors, pulling out drawers and wiping them down, wiping all exterior surfaces, shampooing carpet, waxing floors, cleaning ceiling and floor vents, washing ceiling fans, meticulous corner-to-corner details, and on and on and on. There are so many details when it comes to white-glove cleaning; a checklist is a must for new staff so they know what you expect as the foreclosure cleaning business owner.

Hire Pros for White-glove Cleaning

A white-glove cleaning job really requires cleaning professionals. You really can’t just send anyone to a site when you get a call for a detailed job such as this. As a foreclosure cleanup company, you will also charge considerably more when you’re cleaning a foreclosure under the white-glove services heading.

Who will Purchase White-glove Cleaning?

In many instances, a foreclosure home being purchased by a buyer will require a white-glove cleaning, because someone is likely getting ready to live in it. Rarely will a foreclosure just sitting in a bank’s inventory of foreclosed properties call for this type of detailed cleaning — unless it’s a high-end property with lots of buyer interest.

Overview of Broom-swept Cleaning

Most cleaning of foreclosure properties will call for broom-swept type cleaning. This type of cleaning is what I like to call “dry-rag” cleaning (not a literal dry rag, but you get the point). With broom-swept cleaning, you simply complete a surface clean, wipe and scoop: the floors are swept; the kitchen, bath, and living areas are wiped down, and the home or unit is left free of debris. Generally, broom-swept cleaning is a lite clean, wipe and scoop service.

However, note that many of the larger REO-type contractors have very detailed expectations when it comes to cleaning a home. So if you’re a subcontractor, you will be given specific details on what a particular larger contractor expects when it comes to broom-swept cleaning. Some companies expect more detail in this type of cleaning than others, so be sure to ask for checklists if you’re working for a primary contractor.

Clarify What the Client Wants

When a foreclosure cleanup clients calls and asks for a cleanup estimate, make sure you clarify what they’re asking for before you head to the property to give the estimate. Do they really want white-glove cleaning; or do they mean broom-swept?

Take the time to clarify what the potential client is asking for so you don’t do two things:

1. Clarify so you don’t overprice a job. For example, the client may simply want a quick broom-swept job and you could give an estimate for white glove because you have not asked them specifically what type of cleaning they require.

2. Clarify so you don’t under price and under deliver. For example, if the potential client is a buyer, they likely want white-glove, but they will love your low price if you misunderstand and quote them for a broom-swept job. By the same token, that same buyer will be disappointed at the finished product if you give them broom-swept service when they expect white-glove.

Many times your clients won’t know what’s entailed in each type of cleaning. Explain to them so they have full knowledge and you all are on the same page when it comes to service and pricing.

Review Your Company’s Policies

Review your foreclosure cleanup company’s policies, procedures, marketing materials, website, and pricing structure as it relates to cleaning services. Are your services as it relates to foreclosure “cleaning” clear? If not, change them so you move forward delivering what the client expects and getting the price you deserve.

Good luck with your foreclosure cleanup business!

How to Price Foreclosure Cleanup Jobs For Profit Using HUD’s Guidelines

A foreclosure cleanup business does everything from lawn maintenance, to trashouts, to cleaning, pressure washing, gutter cleaning, repairs and more.

The foreclosure trashout industry is proving to be a lucrative business option for hardworking entrepreneurs. With one in every 25 homes in foreclosure, per Michael Williams, Fannie Mae CEO, and with millions of adjustable-rate mortgages poised to reset in the coming years (creating the prospect of a new round of foreclosures), foreclosure cleaning startups are perfectly situated to have evergreen enterprises for years to come.

Though foreclosure cleaning is a burgeoning industry, due to the sheer number of jobs available, foreclosure cleanup can be a business with thin profit margins if entrepreneurs aren’t pricing their services for profit.

Pricing for profit can be tricky for new property preservation business owner who don’t know the ins and outs of how contracts are won, who gets paid first, where they are on the totem pole in getting paid, etc.

A good tool to use in pricing foreclosure and trashout type jobs is HUD’s pricing guidelines for property preservation type companies — BUT, to use this tool alone can be a grave mistake.

When using HUD’s guidelines to price jobs, business owners should be aware that the tables list the maximum amount HUD will generally pay the PRIMARY contractor of a foreclosure cleaning job.

As a smaller company, business owners should know where they are on the totem pole in actually getting paid to know how to charge using the tables. They should also learn how to figure out whether they are the primary subcontractor, number two in line, number three, etc. This will not only help them figure out how to price, but will also guide them in figuring out the best strategy to use in winning jobs.

Foreclosure cleanup business owners cannot simply look at the HUD pricing charts and use those figures for bidding, or they’ll certainly overbid a job and lose out. The tables have to be dissected effectively

Remember, the HUD pricing guidelines for foreclosure cleaning are what HUD will pay, maximum, for a service (though certain scenarios will permit them to go higher with substantiating information). The amounts listed in the charts are really for that primary contractor.

Anybody can price, but pricing “for profit” in the burgeoning foreclosure cleaning industry is an art. New foreclosure cleanup businesses should plan to do their research so they can learn how to dissect the HUD charts and price effectively for profit to win more cleanup business.