We Ain’t The Cheapest.

The work in the REO market usually goes to those who offer the lowest bid. This is the single most competitive point between contractor firms. After the bid is approved, as long as one is willing to (a) still get the work completed at this price and (b) make a profit, then perhaps playing the game was worth it.

Pricing standards are also getting lower across the board, so this alone heightens the pressure to compete. The larger companies seem to be moving toward flat fees for not only individual services but a package of services (REO initials). It’s irritating. The thought is this will save time that is spent in discussing contractor fees and put the contractor on-site promptly to do the work for an “allowable” amount. But, life is not that easy. Many times the work to be done is delayed further because the contractor arrives at the asset and sees the allowable fee is whack. Then, more time is wasted by defaulting back to a bid.

Sometimes, we see this pressure to provide the lowest bid get to people. Enticed by the coveted bid approval, otherwise intelligent men and women lose touch. Like addicted gamblers in reverse, their hunger for numbers overpowers their common sense. Almost impulsively, they say, “We’ll do it for this much”. Then, a week later when the bid is approved and perhaps when they get into the work they realize they were horribly wrong. Usually it doesn’t get that far. Most often, shortly after the bid is submitted the light bulb comes on and they readily refuse to do the work they bid for.

We’ve been getting this kind of work from clients lately — already approved bids that were unrealistically low. At the time of receipt, the client probably thought it was fantastic. But, when it comes over to us the client now has a great urgency to get the work done. So great that they forego their own administrative fees. But usually, when we go to the property ourselves and bid we find the other contractor must have been on crack. How else could he have made the costs he gave work in his mind without first getting high?

For these reasons, we don’t place much value in the lowest bid. The lowest price is not always the best price. Sometimes it’s the wrongest price and the highest bid is right on. The more “expensive” contractor likely took the time to research adequately materials and labor.

What I would suggest to not only my clients but to the industry in general is to move rather to a rule of averaging bids. Keeping in mind both the desire for a quality bid and a cost-effective bid, this very balance draws one to put their focus at the center. A more practical process for receiving, reviewing and then submitting bids to the bank would be to obtain three bids and then add the costs together by line item and then average. Then, see who is the closest to the center. That would make more sense at least than targeting the lowest prices from the outset just for the sake of saving time and money.

As important as cost is when considering the bank’s assets we are doing them a disservice if we do not strongly consider quality. So, when Integrity REO Solutions provides a bid we come out higher than some other guys. It’s not because we’re greedy. We just don’t want to waste our clients’ time once the bid is approved with an apology about being wrong on price.

I asked a new client recently why we had not seen any of our bids turn into approvals (we’ve been working with them for six weeks). Most of the things we have been asked to bid on are larger projects. They said of course it was the bank’s decision, not theirs. But, she also told me on some things we were “way too high”. My thought is maybe the cheapest estimate was way too low. We had thought of everything when we put our numbers together. Maybe he hadn’t? Sometimes the cheapest is the least thought out. Sometimes it’s the least realistic.

We don’t aim at being the cheapest for the sake of getting another project. We aim at being the best. Because we do this, we may not get this particular bid approved. But later, when the cheapest bid goes wrong we’ll be there for you to turn your frown into a smile.


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