Pay Me According to the Most Current HUD Regulations.

It took me only a short while to understand that my chosen industry has few regulations. You are quite often the third (even the fourth maybe) man on the totem pole when a project is assigned. By that time, days of productivity have already been lost. The process in itself is grossly inefficient, but those of us dependent upon the business don’t talk too loudly about the inefficiency of it. I suppose the upside of it is that we have been invited into the process via the assignment. Work is cool. No work — not so cool. There are written guidelines, however, in my industry. They are issued by the Department of Housing and Urban Development (HUD), and in fact they were just updated for the 2010 year. This is good news for contractors wanting to be paid fairly in accordance with labor and time and materials invested.

The Lack of Regulation.

I mentioned the industry has few regulations. By this I mean, you don’t have to obtain a license to credential yourself for this work. You don’t need tons of experience and references. You don’t need to be incorporated. You don’t even need to really market yourself for work. There are companies springing up everywhere advertising themselves on Craigslist, who have very little experience (not to mention little integrity), and they stay very busy. But, these companies suck. It’s usually the better contractor who is forced to come behind these people and correct mistakes. Payment terms are often vague. You may draft a service level agreement and forward this to new clients in lieu of receiving business. Then they tell you they cannot be held to a turn time for payment — it may come 30 – 60 – 90 days from now. And, then, even if you are able to wait there is a good chance that you will have to fight for your payment to come. Even well-known companies like Bank of America fall within the category of those who are accused of taking advantage of the lack of regulations. They are currently being sued for millions due to cases of complaint for not being paid for services rendered.

 Because there are few regulations in this industry it is more difficult to obtain your Professional Liability insurance. When I shopped around for my current policy, I was told by one representative that she filed at least four or five insurance claims a week for these inexperienced companies who blow something up or tear something up. Therefore, the prices are higher and the filing process is sometimes rigorous. In reality, the only regulations that are afforded in this industry are the Moral Code and the 2010 HUD Regulations.

Regulating Fees.

What HUD has done for the industry is essential – creating a fee structure for services provided. According to these rules you as the contractor can charge only this much money for this service. As the client, you should only have to pay this much money for this service. For both parties it is instructive and beneficial. These fees have factored in basic materials needed to complete the service. This prevents the contractor from being paid too little or too much. It also prevents the client (usually a lender, an asset management company or realtor) from wasting too much money on the asset when the goal is to market and sell as soon as humanly possible. The HUD guidelines do more than set a standard for pricing. They also provide a pattern for how services should be performed. Winterizations. Debris removal. Lawn Maintenance. Lock changes. All basic services are standardized to provide instructions for all contractors. The more detailed type of work that migh fall within renovation or construction completion are not outlined.

I am primarily concerned here with the issue of pricing. When speaking with a contractor who is not familiar with these guidelines, they will often bid for work by the hour and materials. And, usually you wind up paying more for a basic service. When doing work for a client who is not familiar with these guidelines, you are often placed in a position of debating over price, or accepting a project at a price well below what is fair.

Using Old Guidelines.

Even though HUD changed their pricing guidelines this year, I have been approached by potential clients who wanted to pay below this standard. They were attached to the old fees. Because I was hungry, the idea of work in itself seemed good when I compared it to doing nothing. I knew I could be getting paid more for the projects I accepted, but at the time I was only interested in generating any cashflow whatsoever. I don’t regret staying with these customers. Sometimes the quantity of work received from them outweighed the lower pricing and I was still able to profit. But, a good deal of work went into making this happen.

I had a conversation recently with a friend in the business, who like myself was a newbie. We were both in a slow month and desperate for work whatever the fees. We talked about taking our companies in a direction where we were able to “afford” doing work for these stubborn clients who pay below standard. When we got through talking, I still wasn’t convinced. It still seemed unfair for these large companies who were generating tons of capital to nickel and dime good contractors like us out of business because they were unwilling to change with the times.

We all go through the formative stages where bread and water is enough to sustain us, as long as we are alive. We feel good to just be out there starting something. We’ll do just about anything as long as we can win a faithful client. I’ve driven an hour one way for $15.00. Lots of other stuff for very little that I’m almost embarrassed to talk about just so I could get some capital — even if it were a few dollars. Mostly to say I had a client. But there comes a point when you get tired of bread and water. You want something that tastes better. And, so you should.

Pay Me According to the New Regulations.

In this past year I have had to make lots of changes to my client roster because so many were not paying according to standard. And, though I was honestly scared when I let some of them go or notified some that I would have to limit my coverage areas, along came a new client to sort of fill the hole that had been created. Business in itself is a matter of faith. You have large and small risks in order to grow. Sometimes the risk was worth it. Sometimes not. But also, business is a matter of being resourceful. If you are a contractor in my industry, resourcefulness is key. When approached by a client to provide bids for services, you have to reach into your resources to get the job done. One of those resources is pricing guidelines. To recap, if you want to grow your business as a contractor, you should remember the following:

1. Know the current HUD Guidelines for pricing. It is extremely available for printing and posting wherver you need it. Study the guidelines so that you will know them well enough to bid fairly. Lots of time can be saved by knowing these guidelines. Rather than telling your client you will have to get back to them within 48 hours or less you can get back to them immediately if they are asking for basic services covered within the new HUD guidelines. All you’ll have to do is rattle off from memory the standard pricing. I find that new and existing clients are impressed that you know this standard. It makes you look more professional and like you know what you’re talking about. It boosts your credibility in their eyes.

 2. Don’t Settle. I understand it is tempting to accept dismal fees when you are having slow months. You may even need to do this for a time in order to generate capital. But keep in mind, clients are often a call or an application away. If you are insured, you have the equipment you need, you have a decent resume, a good list of references, you can get work from clients who pay according to guidelines. Sometimes those slow months can be used to reposition yourself and seek more clients who pay well.

3. Actively seek clients who pay according to HUD guidelines. When approached by a potential client, or when you apply with a potential client make it a point to ask whether they pay according to the newly updated regulations. The pricing on some points is not that different, but where it is different you have the right to expect to be paid accordingly. Knowing what you should be paid is key in growing a business in this industry. If you don’t know the guidelines, you won’t succeed. If you don’t stay on top of the changes, you will only hurt your bottom line.


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