No checks, no balances for 'property preservation' firms



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Posted on April 28, 2010 at 10:05 PM

Updated Wednesday, Apr 28 at 11:55 PM


Imagine that  on your next payday, no check came. Your boss refused to pay you, for unstated or unknown reasons.

That is what's happening every week to thousands of small business owners who are literally trying to help corporate America clean up the mortgage crisis.

They cut the lawns, replace the locks, and clean out the junk from houses that have been foreclosed on by banks and mortgage service companies.

With thousands of these empty, foreclosed homes across the country, the "property preservation" business is booming. There are roughly 20 companies nationwide that sell property management services to major banks, mortgage and mortgage service companies which have foreclosed homes to maintain.

The national companies, in turn, hire regional companies to manage properties in parts of the U.S. And the regionals hire local mom-and-pop operations to actually do the mowing, lock changes, and clean-outs of repossessed properties.

The business is largely unregulated. In many cases, the mom-and-pop firms find their work on the craigslist Web site; in some cases they never even meet their supervisors face-to-face.

They are asked to bid to perform repairs on damaged properties, and sometimes are assigned work without bids.

Formal contracts between the regionals and the field hands often do not exist. The whole system works on trust: The regionals trust the mom-and-pops to do the work. The mom-and-pops trust the regionals to pay them.

The system can break down on both ends, but mom-and-pop operations regularly say they're driven to financial ruin by the companies above them.

"I would never have proceeded forward had I known that the business was fraught with dishonesty," said Susan Carothers, who owns North Texas Property Preservation in McKinney. "Never would I have taken it on. Never in my life did I think I would encounter this type of greed."

Carothers has had payment issues with three regionals.

Steve Tiedeman, another mom-and-pop owner, lost so much money in his business he had to quit.

"When they started shorting us thousands of dollars, I got irate," he said.

The anger didn't do any good; nor did being nice.

Contractors simply refuse to pay, and dare their subcontractors to take legal action. Most don't have the legal resources to fight.

The key issue is the "charge back."

Field workers take digital photos of their work, e-mail them to the regionals, and expect to be paid. The regionals often arbitrarily say the photo documentation is inadequate, and deduct money from the field workers' paychecks, according to many mom-and-pops like Carothers and Tiedeman.

"All of a sudden, no paychecks come," Carothers said. "If they come, they're half of what they thought they were going to be."

She was working for a company called Real Estate Solutions,  Resaz, near Phoenix. She said her crew went out and boarded up a window at a property as they had done on jobs with other companies.

Carothers said Resaz told her that was incorrect, and levied a charge-back to her for brand new windows in the house.

Resaz was working for MCS, a national property preservation company with an office in Plano, and headquarters in Tampa, Florida.

After calling MCS, we were contacted by a public relations firm in Atlanta, which said the MCS charge-back system is "proprietary." The PR said says all MCS field workers have contracts.

Susan Carothers said she had no contract.

Regionals also often blame pay problems on the banks that are supposed to pay them.

Steve Tiedeman said he is owed thousands by Priority Field Services in Austin. Tiedeman said Priority told him it had not been paid by Bank of America.

We called Priority's founder, Jack Millar, who offered no comment.

Carothers has a solution of her own. She's placing liens on the properties for which she has not been paid.

"They don't get to sell the house until they clear the lien," she said. Lien by lien, she may get some cooperation.