How to Start a Foreclosure Cleaning Business With No Experience [2023]

When a lender forecloses on a mortgage loan, it takes physical possession of the home. Any belongings in the house must be removed from the property.

Did you know that banks don’t clean out foreclosed homes? Nope, they contract with foreclosure cleaning businesses to do the work.

If you’re interested in learning more about the foreclosure cleaning business, read on.

Starting a foreclosure cleaning business

1. Understand the current market

According to the Bureau of Labor Statistics, unemployment in the United States declined from about 15 percent to 5.2 percent in August 2021. Unemployment is now a steady fact of life for millions of low to middle-income families. The Federal Reserve Bank of New York reports that forbearance has helped some homeowners with FHA-insured mortgage loans yet two million or more mortgages remain in forbearance.

What do the statistics mean? Underemployed and unemployed homeowners face foreclosure and bankruptcy. Economic distress looms as mortgage delinquencies increase. That’s good news for foreclosure-cleaning business owners.

2. Know the basics of the foreclosure cleaning business

Start a foreclosure clean-out business by understanding what clients need. REO (real estate-owned) officers of the bank want to know what your foreclosure cleaning business services cover. In most instances, the bank needs a foreclosure cleaning business to:

  • Empty the inside of the property by cleaning cabinets, drawers, and closets. Everything must go. Remove trash, including furniture, exercise equipment, books, etc.
  • Clarify the client’s clean-out needs. Will you remove items from the property or will you also clean floors, windows, walls, and surfaces?

Pro tip: Valuable items left in the foreclosure property can be sold.

3. Prepare for the challenges

In business, there are challenges. This goes for the foreclosure cleaning business, as well.

The first is trying to get paid a fair amount. After all, whenever banks take over homes, they are less willing to pay higher costs for cleaning.

Then there’s the challenge of cleaning these properties. In some foreclosed homes, water and electricity supply have been cut, meaning the workers will have difficulty cleaning the house.

Sometimes you may have a lot of unsanitary conditions such as decaying products and foods. So you might have trouble finding (and keeping) employees willing to work in these conditions.

4. Register your new foreclosure cleaning business

Choose an attractive business name, one that will trigger your customers to hire you or believe in your services. The name should be short, simple, easy to write, pronounce, and remember.

If you want to operate in different areas, don’t put a city/county name in it.

Once you’ve chosen a name, register an LLC using Inc Authority to operate in your state.

5. Get insurance

Most banks won’t agree to work with your business if you don’t have business insurance. Get adequate insurance. Comply with the laws of your city, county, and state.

The REO officer will need proof of your business liability insurance. The bank may file claims against your policy if you damage the home.

The bank may ask you to show proof of worker compensation insurance for any workers on the job.

Consult a business insurance agency to buy enough coverage. You should have minimum coverage, usually about $250,000, but your bank client may need higher levels depending on the job.

Pro tip: Know operating hours of garbage and recycling center facilities.

6. Get permits

Factor any costs of disposal and waste fees into the business’ cost of doing business. You may be required to apply for permits when transporting hazardous items, e.g. gasoline, paint thinner, insecticides, etc., left on the property.

Contact your municipal waste authority to learn which permits are necessary to perform the foreclosure cleaning business.

7. Get a contractor’s license

As your foreclosure cleaning business grows, clients may need you to complete small construction or maintenance jobs. In addition to cleaning and junk removal, you may be asked to rekey locks, repair broken windows and doors, paint, or perform basic maintenance and landscaping tasks.

Some foreclosure cleaning businesses offer a range of services. Having a contractor’s license can make your business more competitive to a larger number of clients.

8. Set your prices competitively

Contact your local competitors and ask for a quote. You need to know the going rate to clean out a foreclosed home in your area. Then, price your services competitively.

The fixed prices should be based on square footage, and the unfixed prices should be based on factors such as levels of untidiness, the risks and hazards, the building environments, and so forth.

Consider water availability, ventilation, and the presence of other uncomfortable conditions such as having to spray for bugs before you begin cleaning.

9. Foreclosure cleaning services checklist

Questions about how you leave the property may arise in client conversations. Discuss the basics of how you leave the foreclosed property after cleaning services are rendered:

• Lock any entrances to the foreclosed property, e.g. windows, doors, or crawl spaces, to prevent squatters from entering.

• Close blinds, curtains, or drapes before closing up the foreclosed home.

• Shut off lights. Unplug appliances. Turn off all utilities unless otherwise instructed.

• Maintain the foreclosed property. This may be a value-added service or services for an additional fee. Mowing the lawn, clipping hedges, and other landscaping maintenance may improve the property’s appearance. Clearing pavements and driveways improve safety for a future buyer.

Pro tip: Alert neighbors, the local police department, or neighborhood watch about the property’s vacant status.

10. How to get more business

REO, or real estate-owned properties, are held by the bank after a foreclosure. This part of the bank deals with repossessed homes.

Since these properties represent an important lost income, the bank wants to sell the foreclosed properties as soon as possible. New REO properties are most likely to require cleaning.

If your business can offer a fast turnaround on the new REO holdings, you’re likely to get business from them. Responsive contractors who provide ready services can build repeat business from the REO department:

Contact local banks, credit unions, and realty offices to get contracts for your foreclosure cleaning business. Ask the lender who hires foreclosure cleaning contractors. Learn about what services the lender needs.

Pro tip: Develop relationships with local realtors. Your realtor’s good business relationships with lenders and others may be a good source of referrals.

Foreclosure cleaning business: The bottom line

Starting a cleaning company for foreclosed homes is not as difficult as it seems; anyone can do it without knowing how the sector operates.

Ensure you have a good business plan, strategy, legal and environmental requirements, and the right employees to make your foreclosure closing business a resounding success!

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