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Four Key Costs to Consider When Bidding On Foreclosure Cleanup Jobs

There are four key costs an entrepreneur should always calculate for each job when bidding on foreclosure cleanup work. This will help simplify the bidding process, no matter which category of services a company offers.

How to Simplify Foreclosure Cleanup Bidding Confusion

A foreclosure cleanup business is a service that handles interior and exterior cleanup and ongoing maintenance of foreclosed homes. With the astronomical number of foreclosures on the market today, the industry is growing by leaps and bounds. According to analysts at Amherst Securities Group LP, an approved underwriter for the Federal Home Loan Bank System, Freddie Mac, and Fannie Mae, one in five homeowners could lose their homes. They also report that even "modified" mortgages are re-defaulting at an astounding rate of 50%.

How to Simplify Bidding Confusion

For the foreclosure cleanup business owner, bidding on jobs can be confusing due to the sheer number of services a business can offer. Small businesses in this line of work often offer services inclusive of the following: Debris removal, cleaning, lawn work, pressure washing and gutter cleaning, carpet removal, carpet cleaning, securing and boarding doors and windows, changing locks, temporary roof repairs (adding tarps), minor repairs and more. Many services also offer pool cleaning, inspections and mold removal in a market overflowing with foreclosures.

To simplify the bidding process, there are four key costs an entrepreneur should always calculate for each job when bidding on work, no matter which category of service a company offers. They are as such:

(i) Labor. As a foreclosure cleanup business owner, one must calculate labor costs. Many small businesses start out using subcontractors or manual laborers from employment agencies. Subcontractors may charge a job rate; while employment agencies will charge an hourly rate for each employee used.

(ii) Supplies. Supplies for a job can encompass everything from cleaning supplies and garbage bags, to goggles, gloves, pool solutions and more.

(iii) Equipment Rental. Many smaller companies start out with equipment they already have in their garages. As the need for equipment not on hand arises, businesses often rent items like trailers, pressure washers, commercial ladders, and the like, from home depot type outlets.

(iv) Miscellaneous Fees. Miscellaneous fees encompass factors such as gas, garbage dumping fees, box of bottled water for the crew, and more. (Some miscellaneous costs will include unforeseen expenses such as, for example, orange vests for the crew in an unforeseen high-trafficked area. These vests can run from $7 to $15 bucks each, but can be items loaned temporarily to a crew for a specific job and kept on-hand for future use. But that initial expense may fall under the Miscellaneous category for a specific job.)

Estimate Bids Strategically

If a foreclosure cleanup business owner has a pretty good gauge of the four key costs above when bidding on jobs, and they factor in indirect costs and company profit margin, they will make a profit on their foreclosure cleanup jobs.

But if they give prices off the top of their heads, without considering labor, supplies, equipment rental and those inevitable miscellaneous costs, they may secure the job, but they will have underbid. The price they give will leave them in the negative on a job, or the amount they earn will not be enough to warrant having won the job.

Figure Out What Went Wrong in an "Underbid" Scenario

Business is all about learning; each job will teach something valuable. If a job is underbid, the owner should simply dissect what they did wrong, where they overspent, overpaid, and ultimately underbid, and use that lesson to bid appropriately on the next job. It's not about winning bids; it's about winning bids and being in the black (making a profit).

Entrepreneurs should estimate bids strategically, and bid on jobs to leave them with a nice profit at the end of the day.

Good luck strategically bidding on the plethora of foreclosure cleanup jobs hitting the market.

NOTE: Throughout the internet and in real estate industry literature/publications, you may see the terms mortgage field services, property preservation business, foreclosure cleanup, foreclosure cleaning, foreclosure clean-outs, foreclosure clean, clean foreclosures, cleaning foreclosures, REO trashout, REO trashouts, field asset services, property field services, field service, and field services used interchangeable. The main thing to remember is foreclosure cleaning and foreclosure cleanup generally refer to smaller entities; while property preservation generally refers to larger entities/businesses.

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Article by Cassandra Black, Author of How to Start a Foreclosure Cleanup Business and several foreclosure cleanup industry Guides, Reports and Forms. Sign up as a Premium Newsletter Subscriber. You will periodically receive foreclosure clean-up job leads and consultative advice to help you grow your foreclosure cleanup business!

For more industry information, visit the foreclosure cleanup blog and the foreclosure cleaning newsletter archive.

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