How to Start A REO Foreclosed Home Cleaning Business

Are you wondering if you can or should start a REO foreclosed home cleaning business? If so, there are some things you’ll want to be aware of. I’ve been involved in this business in the Phoenix Arizona area since 2008. There are 3 things I’ll cover in this article that I wished I had known about when I decided to get started: 1) Insurance requirements, 2) photo requirements, and 3) the timeframe on payouts.Insurance Coverage RequirementsIf you decide to move ahead and start a REO foreclosed home cleaning, or Property Preservation business, you’ll need to be aware of insurance requirements and costs. There are three forms of insurance that you will be required to carry by most clients who hire you. Your clients will require you to carry any combination of either one or all of these types of insurances.1) General Liability insurance: This is basic “business insurance” that most services businesses are required to carry. It protects your business assets when it is being held liable for damage to property or injury.2) Errors & Omissions insurance: This is a more specific type of insurance usually held by real estate agents and inspectors. It is required if you start an REO foreclosed home cleaning business so that your business will be covered for liabilities that result from misinforming another party about a property’s condition that results in financial harm. When you do property preservation work for a client, you are in effect telling any of your clients, “I will be your eyes and ears onsite at these properties. I’ll report to you and provide documentation of their condition, any damages, and any work I perform there.” If some financial harm results from an error you made or your omission of a vital detail about the property, you may be sued by the company that hired you. E & O insurance will protect your business’s assets in this instance.3) Workman’s Compensation insurance: This is a type of insurance that pays medical expenses for you and your employees and compensation for wages lost due to injuries suffered while doing work for your business. Insurance Costs are a monthly overhead expense you’ll need to consider immediately upon securing clients and one that will be a constant. These can cost you $100 – $200 /mo for each insurance type.Photo DocumentationStarting an REO foreclosed home cleaning business doesn’t mean you will just be cleaning foreclosed homes, submitting invoices, and getting paid. There is an often overlooked variable when people are evaluating whether or not to start a REO foreclosed home cleaning business: photo documentation. In many cases, you will be servicing properties for out of town clients, but even locally based clients will sometimes require photos. All of my clients (local and national) required photo documentation of the work I performed. This means you have to shoot photos with a digital camera of the work you performed at a property. Specific photo requirements vary by the client however, as a general rule they will want you to shoot photos of the property your servicing before and after you’ve performed the agreed upon work. The majority of clients I’ve had have also required during, or ‘action’ shots showing the actually being done. Actually shooting the photos is one part of photo documentation.When we discussed the types of insurance policies you’ll need, I said you act as the “eyes and ears” of your client. These photos you take and submit are their “eyes” into the property. These photos are how you prove you did the work you agreed to and to their specifications. If your photos do not meet their standards, you risk not getting paid. You may be sent out to redo work and shoot photos again in order to have your invoice approved. But taking the required photos is not the only challenge, submitting them in a format, sizing and naming convention they require is another matter entirely. For example, most clients have a requirement that all pictures have a date stamp to ensure when your work was completed. They also have picture sizing requirements (usually 640×480), and yet others require you to label them with a given naming convention. For example B4Lawncare042611 – 123 Abc St. Organizing, labeling, resizing, and sending photos to your clients can easily add 1 -3 hours to every work day after your work in the field is completed depending on how many jobs you completed that day. Which brings me to my next point: different companies have different methods for submitting photos. Some want you to email photos and others will have specific areas of their websites that will allow you to upload photos using their custom uploading application. You’ll need to learn each of your client’s systems and processes for submitting photos and invoicing and follow those for each job you complete.When Do I Get Paid?If this is not your first services business venture, you may already be covered here and have realistic expectations. For me, this was my first foray into the services arena, as well as the business to business services arena. What I mean by that is your clients will always be institutions, not general consumers. When I got started, I thought I would do the work and get paid within a couple days or weeks of completion. That is not how it works. These institutions all have internal processes for approving and paying on invoices. What this means for you and your business is that you will have to wait a minimum of 30 days, sometimes over 60 days from the day you complete the work and submit your photos and invoice until you receive payment on the work. If you are coming from the 9 to 5 world this can sound like a bit of a shock, but it is an industry norm. Rest assured that it is something you can manage and be successful in spite of, but I think it is important to know this upfront.Do not despair! The point of this article is not to discourage you, but rather to inform you. I’ve made good money in this business, and I believe you can too.