We Will Not Pay For REO Work.


I have accepted work orders from clients with pre-approved amounts where another contractor bid on a project and then went AWOL. This is usually a good opportunity to shoot the gap so to speak — create a stronger spot for ourselves with the client where this other perhaps lazy contractor may have been getting the bulk of the work. If the price is right (meaning I make a profit and the contractor working for me makes a profit) then it’s a win/win. In rare cases, I will accept even if just the contractor working for me makes a profit and I come out even.

Rare.

In the startup phase, I hungrily jumped at ridiculous fees to travel unrealistic miles in order to make absolutely nothing in hopes of building trust with a new or potential client. Truthfully, none of those clients are still on our roster today. Well before the numbers on our first year tax return made us cry, the relationship with these companies just went south.

Oh well, lesson learned.

I talked with a new contractor (new to Integrity) who was talking about a client who required them to travel 30 – 45 miles to perform lawn cuts for $19.00 and rehabs for crazy low fees and all I could hear was that he was paying for this REO work. He’s been in construction for the past 20+ years, now having a real state license and an REO workshop. He had built over 100 homes. Pretty humbling to be hungry enough to travel 30 to 45 miles for a $19.00 lawn cut.

That is something I’ve promised myself that will not happen with us. Our highest priority in this business is to build relationships for the sake of improving neighborhoods and reversing the mortgage trend. But, we are not a non-profit agency. My family and my contractors’ families have to eat.

Also, I stay away from the agencies where you pay a $100.00 – $200.00 fee yearly to be put on a portal where you receive more REO work. These deals have done less for us than a little elbow grease on cold calls and site visits. Now, if you’re a broker or a realtor this is different because this system works better for you because you get sales.

With that said, despite our loyalty to our clients and our desire to serve them with excellence, we cannot work for free. This directly affects who we will sign up with and who we choose as clients. We try to be smart on the recruiting end. Smaller banks, large REO brokerage firms, just the right nationwide asset management companies (NOT Cyprexx, Safeguard, or FAS) and we’re chipping away at it month by month. And our contractors have never complained.

Someday in the glorious future, we will have potential clients calling us wanting Integrity to work for them (at a good price). But, until that day, we choose well who we work with. You would be wise to do the same.

I post this for all the REO contractors out there, busting their butts, thinking they have to “pay” for the work. Not true. You can rest assured that these companies who are paying you nickels are taking up to 50% of the profit for the work! Performing $22.00 per cubic yard trashouts is insane because these companies are being paid at least $50.00 per cubic yard — that means you get less than half!!! I say this from my experiences as a hungry contractor. And, while I’m at it: Don’t “take one for the team”! There is no team, and at the end of the day, you’re still making no money. And they are.

Best thing to do is inactivate those clients and recruit more strategically. I’ll say it again:

– Smaller banks
– Large and promising REO brokerage firms
– Just the right nationwide asset management companies
– Real Estate Investment firms

Happy hunting!

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