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Fellow Foreclosure Cleanup Business Owners,
We've been sending out quite a few leads for vendor signup opportunities for foreclosure cleanup business owners via our How to Start a Foreclosure Cleanup Business: FREE Articles & Advice blog. As a result, we decided to give you a couple of pointers to remember when working with primary foreclosure cleanup business contractors, because, in many scenarios starting out, your small foreclosure cleanup company will be the subcontractor.
A primary contractor can be a realtor, a broker, a larger property preservation company, or the REO asset manager at a bank. In all likelihood, the primary contractor will be one of the first three. So "heads up" on the below. All from recent experience:
Follow Your Gut! Our company was just recently working with a real estate broker on several properties he manages for different banks. One property in particular needed tons of work, from securing the pond with a fence, to yard cleanup and maintaining, to removing debris, putting in new carpet and hardwood, new appliances, and ultimately a new roof.
The broker wanted bids from us on anything that was not FHA compliant. That was pretty much everything in the home! And he ideally wanted a breakdown of each bid by price. No problem, since we were getting a good amount of work from this broker. (In most instances we will not breakdown bids, because we know bid seekers will use these breakdowns to "price-shop certain" aspects of a job, as stated in our ebook, How to Start a Foreclosure Cleanup Business).
We Had a Hunch ... We had a "pushing invoices" hunch about this company. Be wary of contractors who are pushing invoices to the banks so they can get paid on anything they can get paid on, all the while using your company to do it.
For example, if a contractor comes to you and indicates they want you to add new carpet in a home, but it's clear to you the roof of that same home is about to cave in (because you see the puckles in the wall as a result of the last rain! -- really happened to us), consider walking away gracefully from the job at this property
Common Sense: Why would a bank want you to install new carpet when they clearly need a new roof before anything else goes in the house? Maybe the bank is depending on their primary contractor to act as their eyes and ears on the property and advise them appropriately. Banks seldom see these homes themselves. Or, maybe the primary contractor is pushing invoices so they can get paid immediately, all the while using your valid company invoices to get paid.
Walk Away, Walk Away, Walk Away... Be prepared to walk away if a job doesn't make sense. Why? Because if that roof caves in on the carpet and installation your small company will have bankrolled (in hopes of getting paid in 60, 90, 120 days, maybe), you'll be the one out-of-pocket and the primary contractor will have already been paid from the invoice you submitted to them. You can best believe your primary contractor is factoring the invoices you send to them and is getting their monies quickly.
Smell the Stink: If a job, or certain aspect of a job, stinks, walk away from it. You may not be able to point out "why" it stinks, but you'll certainly smell it first. Walk away, walk away, walk away. Your reason to the contractor should be: "It just doesn't make sense ... ." If they point out why it does make sense, in their eyes, tell them that they (or the bank) will have to bankroll the job -- pay you for supplies and partial labor upfront because the assignment is too risky.
TIP: Consider padding your labor so if the rest of the job payment doesn't come through, you will have been paid amply, because you don't want to be out of thousands of dollars in hopes of getting paid on the backend. There's nothing wrong with raising your prices if a job seems risky. Insurance companies charge more in premiums for risky policies all the time.
Tempting, But Don't Do It: It's really tempting to "just do a job" when you know it doesn't feel right because you are trying to grow your small business. But the smartest thing you can do is toss a situation over and over and look at it "logically." Operate with common sense, and with your gut instinct, at all times, and you will be just fine.
You've taken the plunge to start your own business, which means you have a helluva a gut, and some pretty good instinct. Use both of them (gut and instinct!) so you operate successfully from the beginning.
Another quick tip (referenced above): Do Not Breakdown Your Bids by Price (unless you are getting a fair amount of paid work from the contractor requesting the breakdown). You don't want your hard work to be used as a shopping tool. Give a "job rate" for all services. If a new contractor asks you to breakdown the bid, say, "Sure, after we've won the contract." Our company only breaks down bids for existing clients for their in-house accounting purposes.
Many times larger contractors will present invoices to banks, and the invoices will actually need to be broken down for the bank's in-house purposes. For example, the bank may need to know how much of the invoice is for the trash-out vs. the lawn care vs. the painting, etc. That's totally valid, but your job rate should be your job rate for initial estimate giving purposes.
OKAY, FINAL TIP TODAY: J
Stick to your foreclosure cleanup prices, once you've given them. If you barter, after giving a rate, have a pretty darn good reason for doing it. For examjple, a realtor who just hired you for a few properties says she has five more properties she needs to add to your calendar for the coming weekend for cleanup work; she's seeking a bulk rate for all the contracted work. Well of course you say, "Suuuurreee!" Guaranteed work, no problem. Good reason to barter your foreclosure cleanup prices. But, just because a realtor says, "I was thinking $300," after you've quoted $395 for services, say, "Our price is firm for this job." Be nice about it, but you get my drift.
That's it! Good luck to you on the front lines of this foreclosure cleanup crisis. We're doing good work; we're turning this market around! Proud to be in good company with all of you!
Cassandra Black, Author of the Foreclosure Cleanup Business Combo Estimate & Contract Form, How to Start a Foreclosure Cleanup Business
, The Pricing Guide for Foreclosure Cleaning & Real-Estate Service Businesses: How to Price Jobs for Profit eBook and How to Market Your Foreclosure Cleanup Business: A Step-by-Step, Shoestring Marketing Guide for Foreclosure Cleaning Business Owners, and CEO,
Foreclosure Cleanup, LLC.
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How to Market Your Foreclosure Cleanup Business: A Step-by-Step, Shoestring Marketing Guide for Foreclosure Cleaning Business Owners
How to Start a Foreclosure Cleanup Business eBook
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