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MortgagePoint » Your Trusted Source for Mortgage Banking and Servicing News 30 November 2023 C O V E R S T O R Y numerous field services vendors, including members of Five Star's Property Preser- vation Executive Forum. While there are many headwinds facing this industry, the primary focus of this story is, as the name suggests, "The Cost of Doing Business." Join us for a deep dive into the challenges facing this sector, the areas where import- ant progress has been made, and the areas where critical work remains to be done to ensure that this unsung hero of housing market stability continues to stand—no matter how rough the waves become. An Uphill Climb W hen asked to name some of the primary pain points facing property preservation in 2023, Maher immediately lists "tight margins, weakening vendor networks, and extended timelines." The former can, to some degree, be tied to the same inflationary factors that have led to headaches and belt-tightening for compa- nies throughout the nation. Simply put, things are more expensive, from the screws and bolts needed to secure a window covering, to the gas needed to get the con- tractor to the property. And while many of those we spoke to spotlighted areas of progress in recent months—see below for more on these wins—across the board, the vendors we spoke to all emphasized that allowable fees still need work and re- thinking to help offset the larger economic factors that property preservation vendors are facing. Another critical pain point ties back to the career shifts mentioned above: even with the so-called "Great Resignation" of the COVID era having largely died down, the field services sector is still dealing with the bleeding effect spurred by the pandem- ic and exacerbated by inflation and other economic factors. Some companies have shuttered or shifted to other business lines. Longtime contractors have left this field of business in search of greener pastures. And those that remain are often stretched thin and have to balance their desire to continue doing property preservation work against the siren song of quicker, easier, or better money to be made elsewhere. "Labor costs and competition for independent contractors have significantly increased," said Michael Greenbaum, Chair of Five Star's Property Preservation Executive Forum and COO of Safeguard Properties, a field services provider that has been in the industry for more than 30 years. "Whether that is entry-level positions in retail or restaurants paying significantly more, or the more complex roles of gen- eral contracting significant home repairs, the competition is fierce." Greenbaum emphasizes that the fixed-price system of allowable fees must remain competitive with the larger market to attract and retain the labor needed to support it. When it falls behind, the work will be there, but no one will be there to do the work. "The Gig Economy is our major com- petitor," added Greenbaum. "That will only increase the tug on the finite and dwindling pool of independent contractors." "Our industry requires a specific skill set, which requires construction knowl- edge and the capability to supply a wide variety of services," noted Bill Garrecht, President of Innovative Field Services, a field services provider for almost two de- cades. "The gamut goes from requiring the ability to install a roof, winterize a property properly, landscaping, electrical, plumb- ing, install windows, doors, etc. Those with these skillsets are in short supply, and where they do exist, they naturally prefer to perform retail work where they can dictate pricing. The current standard and allowable pricing leave us short of having the ability to hire personnel who have these skills. In addition, insurance cost and workmen's compensation costs have skyrocketed in New York state, making it nearly impossible for new vendors to enter the industry." "Some groups estimated the turnover in vendor networks as high as 70% during this time," said Maher. "While we are starting to see some new vendors enter the industry, some lack experience and there is a lot more touch and follow-up required to get the same services completed as in years past. This has, in turn, led to higher timelines and more return trips for QC corrections." Garrecht noted, "Another issue is that most properties are rural, far apart, and have been in our inventory for 4-10 years. Besides landscaping, there is not much work left to be done on the properties. Windshield time has risen probably five- fold for our crews." The Gig Economy is our major competitor. That will only increase the tug on the finite and dwindling pool of independent contractors." —Michael Greenbaum, Chair, Five Star's Property Preservation Executive Forum; COO, Safeguard Properties