The Olympian – Lemonade From Foreclosure Lemons
Lemonade from foreclosure lemons
ROLF BOONE; The Olympian
A higher rate of residential foreclosures throughout South Sound has become a growth industry for an Olympia business that cleans up and maintains such property.
The goal: Maintain the property to better improve its chances for a sale.
The business, BnE LLC, was launched by the husband-and-wife team of Matt and Jenifer Gault in 2007. Named for their two sons Brendan and Ethan, the business started slowly but has picked up steam as the residential real estate market has slowed. Today, they operate two trucks, three trailers and have three full-time employees. And when that?s not enough people, the business hires day laborers from staffing companies, Matt Gault, 33, said.
The Gaults and their business are riding a wave of new foreclosures in the South Sound. Although the region doesn?t have a serious foreclosure problem when compared with California and other parts of the country, the number of foreclosures are higher here than last year, according to regional data.
One measure of the foreclosure problem is through notice of trustee?s sales, a document issued when the homeowner has fallen behind on their mortgage payments and an auction has been scheduled.
Through the first six months of 2009 in Thurston County, those notices rose nearly 80 percent to 826 from 467 in the same six-month period in 2008, Thurston County Auditor data show.
That increase in foreclosures means more business for the Gaults, who work on a house before, during and after it has gone into default. The work can include taking a visual inventory of the property documented with pictures, winterizing the house, cleaning out any furnishings left behind by the owner and maintaining the property, such as lawn care.
For larger issues, such as structural problems to the house, they will bid to do the work. The fees they receive for their work were not disclosed, Matt said. Although business income wasn?t disclosed, one of their biggest expenses is traveling to county dump sites to unload household furnishings, sometimes spending as much as $100 a day, he said.
The Gaults get their work from mortgage field service businesses, companies that work directly with lenders BnE LLC. The Gaults have received most of their work from Spectrum Field Services of Salt Lake City, Matt said. A spokesman for Spectrum could not be reached, but one of the country?s largest mortgage field service companies is Safeguard Properties near Cleveland, Ohio.
A national company such as Safeguard has been the beneficiary of the nation?s slower housing market, a market that peaked in 2006 and slowed in 2007 and 2008. Especially hard hit were housing markets in Florida, for example, although the national housing market has shown signs of improvement in 2009.
In business for nearly 20 years, Safeguard works with thousands of independent contractors, similar to the Gaults, who are hired to take pictures, clean up, or maintain residential property in foreclosure. In one month, the company will issue 250,000 work orders and request 800,000 visual inspections of property in default throughout the country, spokeswoman Diane Fusco said.
?The lender wants to know if someone is in the house,? she said, adding that they are looking for ?signs of life.?
Business is booming at Safeguard, she said. Year-over-year growth was strong before the national housing market slowed, but in recent years the company has experienced 30 percent to 40 percent year-over-year growth, Fusco estimated. Much of that growth has come from struggling housing markets in the ?sand states,? she said, such as Nevada, Arizona and California.
In Olympia, South Sound real estate agent Polly Barber of Prudential Olympia Realtors has worked with BnE LLC, having them change locks or clean out a house. Barber, a real estate agent for the past five years, has witnessed the incredible boom in housing and subsequent downturn, she said. Today, Barber estimates that 70 percent of her business is trying to sell bank-owned properties.
?People just need to live within their means,? she said. ?We are back to basics.?
Meanwhile, BnE LLC has expanded beyond Thurston County and works throughout Western Washington, including Pierce County, Matt said. About 20 percent of the foreclosed property he sees is the result of death and divorce, while 80 percent is because of some financial problem, he said. Sometimes Matt finds household bills left behind, giving him a glimpse of financial trouble. The condition of the house also can leave clues about the reason the owners lost the house.
One of the worst examples was a house that was filled with almost knee-high garbage and debris in every room. The water also had been shut off and yet the occupants had been using bottled water to refill the toilet so it could be flushed. On the opposite end of the spectrum, some houses are left in good condition, he said.
?It almost looks like they (the homeowners) went on vacation and didn?t come back,? Matt said.
Matt added that Pierce County has a more serious foreclosure problem than Thurston County, although that could change once state agency layoffs take effect here, he said.