Winter is coming – Are your REO properties protected?

Does your lending institution have real estate-owned (REO) properties in colder climates?

Frozen or burst pipes often cause water and mold damage, which are not covered under most property & casualty or lender placed hazard insurance policies if “reasonable measures” were not taken to prevent the loss. 

Here are some not-so-fun facts about winter-related damages:

• Weather-related water damage accounts for 11% of property insurance claims.
• Water damage-related basement cleanup and repairs can cost as much as $10,000, depending on the extent of the damage.
• Mold removal typically adds another $1,113 – $3,339 to total damage remediation costs.

Consider taking proactive measures to protect your real-estate owned against properties from uncovered winter-related losses.

Long-Term Vacancies: Managing the Water Supply 

If an REO property is going to be vacant for an extended period of time, managing the water supply is your best bet. This method is less costly than maintaining controlled heat, while also offering a better method for reducing losses.

• Turn off the main water supply to the property to prevent frozen-pipes.
  
• Open all accessible faucets starting on the top floor.
• Use an air compressor at mild pressure to blow out the lines through the faucets.
• Plunge remaining water from toilets and add anti-freeze.
• Open the faucet to drain the hot-water heater, and shut-off the gas and electric supply if heat isn’t going to be maintained.
• Disconnect and drain garden hoses.
• Use an air compressor to blow out the lines of the exterior sprinkler system.
• Perform regular maintenance checks to quickly identify any pipe freezing or damage.
• Contract a plumbing, HVAC, or property preservation company if you prefer to outsource these tasks; consult with state Plumbing-Heating-Cooling Contractors Associations for referrals in the area.

Short-Term Vacancies: Maintaining Controlled Heat

If your REO properties have interior sprinkler systems, it is better to control the heat rather than the water, since the water supply to internal sprinklers cannot be shut-off or controlled.

• If needed, contact the energy company to ensure the gas and electric bill has been switched to your financial institution and that service will be maintained.
• Maintain a temperature of at least 55 degrees on the property.
• Keep doors open to rooms with plumbing, to allow heat to flow throughout the property.
• Open cabinet doors on sinks to allow more consistent temperature around plumbing.
• Shut-off water supply and heat sources to the hot water heater, if separated from your boiler.
• If temperatures in the air become extremely cold, turn on the heat inside the property; check your policy to see what minimum temperature is required for claims to be paid.
• Perform regular maintenance checks to ensure heat is continuing to be supplied and to quickly identify any potential damage.
• Contract a plumbing, HVAC, or property preservation company if you prefer to outsource these tasks; consult with state Plumbing-Heating-Cooling Contractors Associations for referrals in the area.

In the unfortunate event your properties still experience winter-related damages, despite taking these precautions, your lending institution should file a claim through your property insurance carrier, as some or all of these damages may be covered under the policy. 

Allied Solutions is committed to providing our clients dedicated support and resources to help protect their properties from unforeseen losses. Contact Allied to learn more about their risk management services: alliedsolutions.net/contact-us.

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