Any Broker and Agent that have worked in the REO for a considerable amount of time understand the importance of working with your vendors. Those brokers understand that vendors are more than service providers. Your vendors are a part of your team, the well-oiled team.
When working with vendors and before you hire a vendor, consider a few useful advice.
1. What is the vendor's track record? How much experience do you require and how much experience does the vendor have in property preservation?
2. Is the vendor licensed? You should be looking for a skilled, trained, and licensed vendor to handle most of your property preservation jobs except lawn care.
3. Does the vendor carry liability insurance? You should not hire major contractors that cannot provide an up-to-date Certificate of Liability. This includes and not limited to vendors that provide roofing, structural, HVAC, electrical, and major repairs on the property. If the final work becomes a liability issue in the future, who is responsible?
4. Service Contract/Agreement - All vendors should be on contract with the terms of service written in plain English. A few items that should be covered:
a. Services to be rendered - Clearly define who, what, how, when, and why the services should be rendered.
b. Invoicing procedure and terms -When, how and why the vendor should process all invoices in a certain manner and what are the consequences if the invoices are not submitted according to the procedures outlined.
c. Payment Terms - How and when will payment be remitted. All vendors except the utility companies should be on a PWP process, 30 - 45 day payment process, and all invoices totaling $250 or less should be paid immediately. The vendor should be aware of the process upfront.
d. Vendor responsibility - Clearly define what the vendor services should be covering. Example: if the vendor is boarding/re-securing broken windows, this should include removing ALL broken glass and related debris on the interior and exterior of the property. What is the vendor's turnaround time on common projects?
e. Broker/Agent responsibility - Clearly define your responsibility to the vendor.
f. Mediation - If mediation is required, what is the procedure and cure.
5. Do not let failure to pay your vendor or pay in a timely manner an option. Too often some brokers and agents get into a penny crunch and attempt to prolong or avoid paying the vendors. Not only does this tactic ruin your reputation with the vendors, it will also cause major problems with the REO Bank. Depending on the outstanding amount, law, and time frame, the vendor could consider a Mechanical Lien on the property. I've seen this happy many times.
6. Submit your invoices for reimbursement immediately. Spend 30 minutes a day submitting invoices. Adhere to the bank's submission procedure. Do not change the procedure to suit your own needs. Always be prepared to provide the following:
a. Typed Invoice
b. Itemized Invoice - include the service date on each item
c. Full property address with REO/Loan number
d. Copy of the W-9
e. Copy of the payment method. If paid by cash, the vendor my sign, date, and indicate cash payment. The broker/agent must also sign, date, and indicate the cash payment. It is wise to not pay by cash to avoid any problems with the bank's accounting department and seller procedures. GET A MONEY ORDER OR CERTIFIED CHECK! Cash is not traceable in disputes.
f. Keep a copy of all submissions for your file (hard copy or electronic).
7. Utility Bills - Pay the utility companies on time to avoid any late fees. The banks will not reimburse the broker/agent for late fees. If you are paying the utility bills online via the company website, don't forget to print out a copy of the payment receipt. Writing the check number, amount, and date paid is not sufficient proof of payment.
Start the process of paying each vendor on the right foot. Don't get into the habit of holding back payment because you can't manage your funds or for fraudulent reasons. The banks frown on FRAUD and angry vendors calling in to complain about non-payment.
If you are behind the eight ball and are not up-to-date with your invoice submissions, it is time to take the time and get your invoices in order. Spend 30 or more minutes a day getting your files in order. If you are working with a remote real estate assistant and other agents, consider using an online program to manage your BPO files. Take a look at MS Workspace Live, eBrokerHouse.com, TAZAREO, GetDropBox.com , and SharePoint, or an OTM program such as SettlementRoom, SureClose Personal, Transaction Point, RELAY, PaperlessRE, or TrackMyFile.