Claims associated with REO properties are often complicated and sometimes denied due to the inability of an insurance adjuster to validate, with confidence, a true date of loss. In effort to improve the outcomes of such claims, our carries have stated that documentation and due diligence are key factors.
Based on the guidelines and expectations of national mortgage loan servicers and property preservation firms, the following guidelines demonstrate proper due diligence for REO properties.
- Occupancy checks should be performed weekly
- Photo documentation (including date on photo) including proof of address, evidence of occupancy and exterior condition should be included with the weekly occupancy report.
- Within 24 hrs. of determination of vacancy, the property should be secured and rekeyed.
- Within 24 hrs. of determination of vacancy, full photo report (including dates on photos) should be provided to asset manager or loan servicing representative. Photo report to include:
- Exterior: front, rear, 2 sides, out buildings including detached garage
- Interior: minimum 2 pictures of each room (from 2 different angles), minimum 4 pictures of basement (if applicable)
- Full damage documentation interior and exterior: broken drywall; evidence of leaks; missing or broken pipes; broken windows/doors; broken steps or missing steps and/or handrails; cracks in walls, ceilings or floors; missing aluminum siding, gutters, wood; etc.
- We find quite often the property preservation first vacancy report is focused on them documenting the work they need to do (such as cleaning, trash out, etc.) and they do not understand the importance of taking the time and photographs necessary to give you a full accounting of the condition of the property overall. They should be photographing up close the furnace, hot water heater, copper plumbing, exterior AC units, and other major mechanicals.
- Winterization: all properties should be winterized between October 1 and March 31. In the states of AK, CT, IA,IL, IN, MA, ME, MI, MN, MT, ND, NE, NH, NY, OH , PA, RI, SD, VT, and WI, winterizations should be completed any month of the year. In these states, Winterization should occur within 48 hours between October 1 and March 31. Winterizations should include shutting off the source of water either at the curb or at the main interior water supply if it is not possible to shut it off at the curb. Winterization also includes a complete draining of all plumbing and heating systems. For properties where water services and utilities are shared with other units, such as condominiums, the utilities should be maintained. The water service should also be maintained if needed for wet winterizations. A winterization report should be provided to you for future reference including dated photographs showing the work completed.
- Sump pumps: When there is an existing sump pump used to keep basements or crawl spaces dry, the electricity must remain on to ensure that the property is not damaged by flooding. Check to make sure that the sump pump works. If the sump pump is inoperable, the servicer should submit a bid to replace it. Even if your policy contains some coverage for water back up, the policy will require electricity be maintained to the sump pump for such coverage to apply.
Ongoing property inspections should be completed every 2-3 weeks once the property is vacant and secure. The property inspection should include photo documentation (including dates on photos) that demonstrates that the property remains secure. Photos of any damage not known or documented with the vacancy notification must be brought to the asset manager’s attention