Don’t Pay A Contractor 50% When They Give 100%.

Shortly after we got started as a company, I recruited a contractor who was doing a large volume of work for another REO workshop in the Dallas-Fort Worth area. After sharing with her my business philosophy, she expressed an eagerness to help as a contractor establish the Integrity name as competitive in a saturated market. I padded her expectations quickly by telling her we were at that time by no means ready to promise a certain volume of work to serve as a regular income. Rather, my hope was that I could offer something more supplemental. She wasn’t picky about what I sent her way and she had excellent work standards. It was usually on time. She always documented her results to a fault. And, she was reliable.

She called me one day and touched on the subject of whether I had more volume I could send her way. The reason was this company she was staying busy for was paying her a ridiculous “salary” for the amount of productivity she was able to offer. Of course, there rarely is a “salary” when you are in this industry as for the most part it hinges on independent contractors.

Unfortunately, what I have seen as result of the declining economy is a pay reduction on the outsourcing end and a greater hunger on the service end. The companies who hold these distressed assets and are in charge of managing them know what the governmentally-approved fees are for maintenance, repair and securing products. They negotiated a contract with their clients (usually the banks or investment firms) for an administrative fee to be placed on all orders for the sake of turning a profit. The amount I have seen most commonly ranges from 10 – 20% above what the contractor will be getting for the work to be performed. For example, The Client (bank) orders a lock change on a house in Boston, MA for 100.00. The Outsourcing company holds an administrative fee (10.00 – 20.00) for time spent scheduling the request, and managing the order flow process. The contractor who receives the work order gets 80 – 90% of the original fee.

What happens here with the contractor should be no surprise to the contractor as a Service Level Agreement is usually discussed during recruitment. The contractor must understand that if they choose to receive work from an Outsourcing company rather than directly from the bank or investment company, they will have to accept less than 100% of what their work was worth. With this understanding, and with wise planning, a contractor can leverage his position with the Outsourcing company to earn a great deal of money in this industry.

The problem occurs when the Outsourcing company subtracts more — a great deal more — than 20% from a received work order from said client. This was the issue with my new contractor-friend as she was struggling with whether she should continue working with the large company who was keeping her busy. With embarrasment, she commented that she was only getting 50% of what she earned on each work order because this Outsourcing company was holding just that much for themselves. I was outraged at the time she told me this, and as I continue to hear similar stories from talented and eager contractors my anger grows. How insulting that a professional would be expected to offer top-level work, a wealth of documentation and make almost no mistakes — all at 50% of what they are worth!

This is the spirit behind these companies who cut their contractors’ pay for the sake of building their own empire.

Yet, from what I am seeing, the majority of contractors out there are playing this game and taking what they can get from these companies. In the past year, I hired on probably my most talented contractor to date. At the time, he also was working for some other companies who were able to offer him more volume. As always, I expressed to him that he should think of us as a supplemtal source of income. When I started paying him for basic services according to HUD guidelines, he wouldn’t accept the payment I offered. He actually demanded that I cut his payment to match what he was getting from some of his other customers. As we talked, he tried to convince me to pay him 50% of what he was worth. And, out of a strong sense of conscience, I decided right there to pay more than what everyone else was paying.

I understand that it may require more time for integrity REO Solutions, LLC to come to its full height than it would someone holding back 50% on every work order. But, I know what is most important. The contractors are the ones who run the company and make the impressions. If you recruit well, train them well, inform them well, and then pay them well you will have a small yet mighty army of specialists who will take you to the top. I have already started building my clientele around that philosophy, and will not do business with someone who keeps me running non-stop for 50%. The clients I do have are strong and multifaceted. They make doing this work rewarding because they respect me enough to pay what I’m worth.

I am no prophet, but these greedy companies will not last long since contractors are getting smarter. As this industry evolves, the contractor is able to think more as an entrepreneur. In time, contractors will stop accepting 50% and go straight to the source of the portfolio. Then, these other companies will shrivel and die. I say it’s for the best. There is plenty of work to go around for a fair price.


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