The foreclosure crisis isn’t bad for everyone

The foreclosure crisis is bad news for some. But for at least a few Charlotte-area contractors, it’s salvation.

Despite a housing slump, some contractors in Charlotte are keeping their businesses afloat repairing and maintaining foreclosed homes, which angry owners often trash before they lose them to the banks.

Tim Feeney is among contractors making money from repairing foreclosed homes. In fact, his company, Charlotte-based T.D. Feeney Construction, has made thousands of dollars on a
single job.

“Some people move out and leave it spotless,” he said, “and others move out and tear the doors out, punch holes, take the light fixtures and steal the appliances. We come in and clean that up.”

David Benham, co-owner of Concord-based Benham Real Estate Group, said the repair work has been a godsend for contractors.

“We have kept some of those guys alive and sent them a lot of business,” said Benham, whose company manages hundreds of Mecklenburg County properties that are usually bank-owned.

There’s certainly no shortage of foreclosed homes in the Charlotte area.

According to the North Carolina Administrative Office of the Courts, Mecklenburg County has seen a steady rise in foreclosures over the past three years. In 2008, the county had 8,335 foreclosed homes. The number rose to 9,724 in 2009 and 10,779 last year. Through May of this year, the most recent month for which data are available, the county has had 3,777.

While foreclosures are up, home construction is down, making it tough for builders to earn a living. In the Charlotte/Gastonia/Concord area, there were about 240 private-housing starts in January, according to the U.S. Department of Commerce. That figure rose to more than 417 in May. That’s up from 393 in May of 2010 but way down from 1,970 in May of 2006.

There are two main types of contract work for foreclosed homes — preservation services and rehabilitation work — and each has its own players, rules and regulations, Benham said.

Preservation services involve physical and immediate concerns for foreclosure properties: securing and boarding up entrances, rekeying locks, the initial cleaning of carpets and other premises and maintaining lawns.

Three national vendors — Florida-based Cyprexx, Ohio-based SafeGuard and Texas-based Field Asset Services — largely handle preservation services, Benham said. Those three don’t have offices in Charlotte but work with local affiliates like Benham.

Benham said Cyprexx, SafeGuard and FAS have contracts with Fannie Mae and Freddie Mac and most of the major lenders, like Bank of America and Wells Fargo.

When Benham’s company takes over property management for BofA or Wells Fargo and physical damage is found, like a kicked-in front door, the bank is alerted and one of the three preservation companies takes care of it.

If the home has damage or wear and tear that might take away from the property’s attractiveness to a potential buyer, the companies start looking for contractors to do the work. Benham said that for most property-management groups the workload is split 50/50 between a local contractor and one from a national network.

If the property is owned by a government-sponsored enterprise, like Fannie or Freddie, only certain contractors are allowed to do the work: those that are certified as single-family acquired asset management system, or SAMS, companies.

Property management companies, like Benham’s, refer to a list of local SAMS-certified businesses when homes owned by Fannie or Freddie need repairs.

There are only six SAMS-certified businesses that work in Mecklenburg County, Benham said: Property Masters, Griffin Homes, Half Moon Construction, Kindberg Contract Services, Old Towne Development and T.D. Feeney Construction.

“We have probably worked on close to 150 homes for Fannie Mae,” said Michael Foess, owner of Charlotte-based Half Moon Construction. “We didn’t do much residential at all before the work on the foreclosed homes.”

If a company does not want to get SAMS-certified, they can still repair bank-owned foreclosed properties. Property management groups are free to hire the contractor of their choice for such properties.

Benham said getting the SAMS certification is a hit-or-miss proposition.

“You really almost need a referral to get on that list,” he said. “You kind of have to apply to Fannie Mae, get your name on the list and then just wait for them to get back to you.”

For Half Moon, getting SAMS certification was a lifesaver, Foess said.

“Once we got approved by Fannie they sent a list out to all their approved brokers that we were now an
approved vendor,” he said. “It is the majority of what we do now as contractors.”

Now, Half Moon sees jobs ranging from $5,000 to $10,000 to do repair and rehabilitation work on foreclosed homes, with the banks footing the bill. Foess said it was good news for the five full-time employees he has and his four part-timers, but getting set up as a vendor with the GSEs took
diligence.

The company’s largest project for a GSE to date was a $20,000 job for what Foess described as an upscale home in a more affluent area of Charlotte. He declined to state specifically where. He said the company has also done repair work for foreclosed homes on Lake Norman, Lake Wylie in Asheville and the Triad.

A few months ago, Benham estimated, his company managed about 750 bank-owned properties, but the number is now down to about 400. But he begrudgingly admitted that it probably wasn’t because of a lot of sales of foreclosed homes.

“The robo-signing glitch has delayed a lot of the foreclosures that would be coming down the pipe to fill our inventory again,” he said. “We’re moving properties. The inventory isn’t on the market, but it will be.”

Benham predicted that while there might not be another wave of foreclosures soon, there will be a steady trickle for years to come, which means more work for those contractors who are SAMS-certified and ready to go.

Feeney said he noticed the slowdown because of all the robo-signing.

“That (glitch) has impacted our work load a lot,” he said. “We’ve worked on quite a lot of (foreclosed homes) over the last 12 months. We do work for other companies like Benham, and a majority of our work is for Fannie Mae.”

For Feeney Construction, the foreclosure-repair jobs bid anywhere from $100 up to $40,000, with $5,000 being the average. Feeney said he hopes the banks get their paperwork straightened out soon so he and his company can get back to work.

“It is about the only part of our business right now, and it is really big over the last few years,” he said. “There aren’t a whole lot of houses being built anymore.”

Scott Baughman can be reached at [email protected].