How Do You Read a REAC Score?

Real Estate Assessment Center (REAC) scores play a pivotal role in evaluating the condition and quality of multifamily housing properties in the United States.

These scores are crucial indicators used by the U.S. Department of Housing and Urban Development (HUD) to assess and monitor the physical condition of properties receiving federal housing assistance, such as public housing and multifamily housing.

Understanding the significance of a REAC score and its implications is essential for both property owners and tenants. Let’s delve into what a REAC score entails and how it is interpreted:

What is a REAC Score?

A REAC score is a numerical assessment that measures the condition of a property based on a physical inspection conducted by HUD-certified inspectors.

This evaluation encompasses various aspects of the property, including its structural integrity, safety, cleanliness, functionality of systems (plumbing, electrical, heating, etc.), and overall livability.

REAC Scores Explained:

1. Scoring Scale: REAC scores range from 0 to 100, with 100 representing an excellent condition and 0 reflecting severe deficiencies or unsafe conditions.

2. Components Evaluated: Inspectors assess multiple areas, such as exterior, interior, common areas, and individual units, assigning scores to each section. These scores are then aggregated to determine the overall REAC score. The five major categories are:

• Structural: Structural evaluations include the condition of walls, ceilings, floor, and foundations of the building.
• Exterior: This category assesses the paint, siding, windows, and doors on the building’s exterior.
• Mechanical: The mechanical systems of the building, including plumbing, electrical, and heating, are assessed in this category.
• Interior: In this category, a building’s interior is evaluated, including its units, common areas, and amenities.
• Management: In this category, the management of the property is assessed, including the tenant selection process, the maintenance procedures, and the financial management. If you own multiple properties then you should use property management software for smooth management..

By reviewing the breakdown of the REAC score, property managers can identify the areas where they need to make improvements. They can then use this information to develop a plan of action to address the deficiencies and improve the overall condition of the property.

3. Rating Categories: Based on the overall score, properties fall into different rating categories:

• Excellent Performer (90-100): This is an excellent score, properties with this score and well maintained and managed. Properties with this score are inspected every three years.
• High Performer (80-89): Properties with minimal deficiencies and in good condition. Properties with this score are inspected every two years.
• Standard Performer (70-79): Properties with moderate deficiencies that need attention but are generally livable. Properties with a score are inspected every year.
• Troubled Performer (Below 60): Properties with significant issues requiring immediate attention and improvements. Properties with this score can be subjected to sanctions and can face loss of funds and even termination of contract.

In light of these scores, landlords might be eligible for further HUD funding or, at worst, their contracts may be terminated and tenants evicted. This presents a problem for repairing the property without a fund, and is likely to scare off future tenants. 

Check out this quick cheat sheet from HUD on physical inspections: https://www.hud.gov/sites/documents/INSPECTREPORTEXPLAN.PDF

Importance of REAC Scores:

1. Impact on Funding: As discussed earlier, REAC scores influence the funding and subsidies received by property owners. So, higher scores can lead to increased funding, while lower scores may result in reduced support or funding cuts.

2. Tenant Well-being: REAC scores are important because these directly affect the living conditions of tenants. If the property has lower scores often, this means that the tenants are living in subpar conditions, which potentially impacts the residents’ health and safety.

3. Property Management: For property owners and managers, the REAC score serves as a performance indicator, highlighting areas that need maintenance and improvement. This also helps in attracting the right tenants and at reasonably good prices for both tenants and landlords.

Responding to REAC Scores:

1. Action Plans: Property owners use REAC scores to identify deficiencies and develop action plans to address issues efficiently.

2. Maintenance and Upgrades: Doing regular maintenance checks through inspections, prompt repairs, and upgrades can significantly improve REAC scores, enhancing property value and tenant satisfaction.

3. Tenant Involvement: Engaging tenants in reporting issues and maintaining cleanliness can positively impact REAC scores.

Conclusion:

A REAC score is not just a number; it is a comprehensive evaluation of a property’s condition and livability. Understanding and interpreting this score is crucial for property owners, managers, and tenants alike. By using REAC scores as a guide, stakeholders can collaborate to enhance housing conditions, ensuring safe, habitable, and quality living spaces for all.

The significance of a REAC score lies in its ability to drive improvements, influence funding, and ultimately contribute to providing better housing standards for communities across the nation.