Over 20,000 Real Estate Assessment Center (REAC) inspections are completed across the country each year. They are important for many reasons, and act as a safeguard for residents who live in U.S Department of Housing and Urban Development (HUD) insured properties. REAC inspections ensure the properties are safe, clean, and well managed, and include reviews of a range of items such as HVAC, exterior doors, lighting, trash receptacles, and plumbing.
When the REAC inspection of a multifamily apartment property is completed, citations are issued immediately. Property owners have 24 hours to correct life threatening issues and 72 hours to report the repairs to HUD. Property owners must also provide proof of the finished work to the HUD or HUD improved inspector that completed the REAC inspection.
Interpreting REAC Scores
REAC inspections are scored using a scale of 1 to 100 and the most recent REAC score determines when the next inspection will occur. The scale is interpreted here:
- A score of 90 to 100 is a great score and the property will be inspected every 3 years.
- A score of 80 to 89 is a good score and the property will be inspected every 2 years.
- A score of 79 or below means there were several areas of concern and will be inspected annually.
There are three letters, a-c, that may follow the score, in addition to an asterisk. The definition of these characters is as follows:
a - no health and safety deficiencies noted
b - non life-threatening health and safety deficiencies noted
c - at least one life-threatening health and safety deficiencies noted
* - at least one inoperable smoke detector noted
In order for a property to pass the REAC inspection, it must receive a score of 60 or higher. If a property receives a score of 31 or lower, it is referred to the HUD Department of Enforcement Center for further action. The results of all REAC inspections from 2001 through 2019 are available for download by the public and property owners through the HUD website. By making this data available to everyone, it assists researchers and owners alike in planning for future housing needs, assessing the condition of the HUD properties as a whole, and the data holds property owners accountable by requiring them to offer quality housing.
REAC Inspection Notification Updates
Because the REAC inspections are completed rather frequently, HUD updated their notification system in 2019 to make it more convenient for property owners. HUD employees and contract inspectors acting on behalf of HUD will now provide property owners and their agents 14 calendar days of notice prior to their inspection. Before the notification update, HUD would provide an inspection notice to property owners that could extend up to four months or 120 days. With the old notification schedule, HUD found that property owners only completed cosmetic changes due to the upcoming inspection, instead of maintaining the property year round. HUD feels that the 14 day notification change will ensure that ownership and management maintain their properties throughout the entire year instead of using the inspection as a motivator to complete maintenance.
For property owners and management that receive low scores, a habit of good maintenance is often a result because of the increased frequency of REAC inspections. Ownership and property managers discover that it is easier to keep up with a well-maintained property, compared to a poorly maintained property that requires larger maintenance projects. An added result of dependable maintenance and good property management is also a rise in occupancy levels. In the end, proper maintenance truly is the goal of the inspections for all HUD properties.
For a property that faces large maintenance projects, a 223(f) cash out refinance can assist on multiple fronts. In addition to reducing the current interest rate and extending the loan term to reduce the monthly debt, money can be used for capital improvements for much needed repairs and green energy efficient improvements. Contact LSG Lending Advisors today for a free project quote.
Need tips on preparing for a REAC inspection? Read more here.