Mandated winterization of homes has always been a part of the management of foreclosed properties. However, in today's economy, the length of time a home may sit vacant and the sheer volume of foreclosed homes create a staggering potential for loss.
Done in a timely manner and executed properly, the typical winterization may cost between $75 and $500; however, should pipes freeze and rupture, toilets and faucets crack, or a water heater burst, the damages to these systems, adjacent walls, floors and basements or crawl spaces can cost thousands of dollars to repair.
This reality is necessitating timely winterization and management of the process where property preservation specialists work hand in hand with servicers to minimize real estate owned (REO) expense and maximize asset value. Remember, even in milder climates, many homes are sitting vacant through two winters or more, thus steeply increasing the potential for freeze damage and overall deterioration in property condition and market value.
Regulatory complianceÂ
Winterization is addressed by multiple sets of guidelines – federal, state and local. Although the standards from the Department of Housing and Urban Development are comprehensive, those guidelines are always superseded by local regulations. In practice, mandated calendar dates; minimal temperatures (if heat is to be on); water and electrical service requirements; and furnace, boiler or plumbing maintenance can all vary greatly by location, and even by the elevation of a property.
In Florida, for example, most properties need not be winterized. There are exceptions, however, such as the area stretching north from Jacksonville to the Georgia state line. In these communities, local regulations require full winterization of properties from Sept.1 through April 30. Similarly, in California, properties are generally not winterized, but those properties that are 2,000 feet above sea level must be winterized from Oct. 1 through March 31.
Winterization specialists must not only be conversant with applicable guidelines, but also a host of other issues, including property types, HVAC systems in place, variations in plumbing systems, and local plumbing, heating and electrical codes, especially if repairs must be accomplished prior to "setting" a property. For example, single-family homes, multifamily homes and condominiums all have distinct requirements, as do different heating systems, which may include dry, wet, radiant, hydronic or hot water baseboard heating.Â
If servicers or their field service contractors are winterizing a condominium or another attached dwelling, issues of shared walls and utilities come into play. More times than not, homeowners' associations issue specific regulations regarding water services and detailed requirements concerning party walls.
Property preservation specialists must also be adept at managing the winterization assignment, which includes surveying a property to ensure that all systems are functional and in good repair; the assignment and training of field teams; and all necessary repairs, both initial and ongoing. The party performing the winterization will also be responsible for periodic inspections of a property's condition and all required documentation and/or audits.
Mortgage companies and their assigned servicers are faced with the responsibility and task of ensuring that all of their vacant properties are winterized to prevent freeze damage. With tens and tens of thousands of homes in REO status, the savings from proactive and highly skilled winterization services can be huge. In this way, property protection specialists stand ready to assist the mortgage lending industry in protecting and enhancing the asset value of the homes under their jurisdiction.
Joe Bada is CEO of Five Brothers, a Michigan-based company that provides property preservation, inspections and rehabilitation, as well as loss mitigation software programs, imaging services, and automation services related to management of default properties. Bada can be reached at (586) 772-7600 or joe@fiveonline.com.
