In February of 2012, Wells Fargo implemented a new policy of Post and Store for all property contained within foreclosed homes in the United States. Prior to February, the normal procedure regarding disposal of debris within their control was to properly dispose of all non personal property according to local regulations. This disposal paid a flat fee based upon cubic yards removed. Presumably, this shift in policy is to address their liability for removal of what could be characterized as personal property from dwellings which are perceived as abandoned.
Industry wide, the common procedure has been to conduct an Initial Inspection of foreclosed properties and based upon certain criteria determine whether or not there is probable cause for a financial institution to take appropriate steps to safeguard their investment. If it is determined that the property is falling into disrepair, contractors submit bids to address, among other items, the removal of debris which may or may not be personal in nature. Prior to February, the standard operating procedure was to simply declare virtually anything other than big ticket items as debris and dispose of it accordingly. Even though the vast majority of these properties never had Writs of Possession issued, most homeowners either did not care or were simply too weary to protest. This, in turn, allowed the foreclosure process to move forward and either the property could eventually sell or be transferred into the US Department of Housing and Urban Development’s inventory.
Several of Wells Fargo’s Post and Store criteria include, but are not limited to:
- Items valued at $400 or over by the Goodwill pricing index
- Declaration of everything as personal property if photos, trophies and personal papers are present
- Military and/or service connected items
- When there is doubt, store the items
A gesture of good faith? We are unsure at this time. Novel as the idea may seem, the reality is that this policy is not being implemented Nationwide. The order seems to follow along judicial rulings in certain states. It would appear that the move is more based upon an actuary’s calculations. The moral question aside, from the contractor’s point-of-view, the price of business has now increased by the ratio of liability times overhead. End result? Fewer contractors, more foreclosures and a new spot on the unemployment line.
Who Really Foots the Bill? At the end of the day the contractors hired to do the work will pay the ultimate price. The contractor used to simply submit a bid, have that bid cut by several middlemen and the bank and then finally haul the debris to the dump. S/he would then wait 45 days or so to receive a check. Now, the contractor will be forced to rent a storage locker, without advance pay, transport the debris there and then remove it free of charge! Wells Fargo will pay a maximum of $200 for the rental of the locker. Bear in mind that a month-to-month rental agreement is generallyfar more expensive! Simple math will show to what lengths this will cripple both the contractors whom remain in business and congest the already clogged arteries of the foreclosure market:
If a contractor does 10 orders per month that would be 120 orders in a given year. These numbers are actually far lower that what we do. 120 orders times $200 equals $24,000 per year that a small business owner will tote, interest free, on behalf of Wells Fargo. The true irony in this is that the contractor looses either way as s/he is the last one on the liability totem pole.
Paul Williams has been in the Property Preservation industry for the past decade and a half. He is the Chief Operations Officer of Foreclosurepedia.