How to Treat Vendors As Clients

Tampa, FL-From an REO property preservation and management perspective, now is the time to fine-tune internal processes to place a company in the best position to manage delinquent properties flooding the market.

According to Allan Martin, CEO of Mortgage Contracting Services, a property preservation and asset management company here, one process that should be examined is the way a company manages its vendor network.

He says treating these relationships as a company and its contracted employees can lead to disconnected relationships where the proper level of communication isn't maintained.

"The best results are produced when vendors are treated as clients. The relationship then becomes a partnership that is based on mutual trust, respect and excellent communication," describes Mr. Martin.

Many companies use conferences or trade shows as the only face-to-face contact with their vendors and never visit their vendors in person, or make the visits a regular practice. Most of the time, the only regular communication that takes place (with vendors) is over the phone, he said. "The problem with this approach is that servicers cannot get a true assessment of the vendor's work environment and capabilities over the phone."

For example, a vendor may say that they have the capacity to take assignments from anywhere in the entire state. Upon visiting the location, the servicer may discover that it's a one-man show, and the vendor is overburdened when he or she has to travel across the state to complete projects. This situation becomes a problem for the servicer because the projects are not being assigned the vendor that is most equipped to complete them.

"On the other hand, a servicer may visit a vendor and find that although the office is located in a remote area, the operations are very sophisticated and the staff is extremely knowledgeable and dedicated to property preservation."

Many vendors are business-savvy people, and they have a desire to be treated as such.

A visit from a servicer will not only allow them to communicate this, adds Mr. Martin, but it can lead to an increase in the number of assignments that the vendor receives because the servicer knows about the quality of the business and has more respect for the staff.

Phone calls should be made weekly with the purpose of going beyond merely checking on the status of a project.

"This does nothing to foster a positive relationship with the vendor or to build trust. Instead, the calls should be made to cultivate an ongoing relationship in which the vendor has an opportunity to communicate any problems and develop a clear understanding of the servicer's customers."

From the vendor's perspective, this is seen as a breath of fresh air rather than an interruption, he adds. "Regular communication can also lead to detecting an issue early and making sure that a minor problem does not escalate to a catastrophe due to bad communication."

Additionally, communication with the servicer should benefit the vendor because not only does the vendor have a chance to work through any problems, but the servicer also can find ways to help the vendor operate more efficiently.

Banks and other servicers have had the luxury of being able to grow and stay ahead of the curve to meet the increased demand of the default market. However, vendors are often small business owners who do not have the financial ability to add staff members and space and then wait for the new business to come."Instead, with the current increase in REO volume, many vendors are overwhelmed as they try to scale their operations to meet the new demands."

It is not uncommon to see vendors going from handling 10 to 20 REO properties to now handling 100 to 200. This leaves the vendors scrambling to not only hire additional staff, but also to train them, upgrade technology, modify business processes and manage the financial impact of increased payrolls and expenses.

"As a result, many vendors can benefit greatly from a servicer guiding them through how to best respond to the recent growth in the industry. The relationship then becomes one that has added value for the servicer and cultivates loyalty."

A vendor can fall 30 days behind schedule for a number of reasons. If the servicer speaks with them on a regular basis and has visited the site, they may know that it is a small operation run by one person. The servicer could convince the vendor that it would be worth investing in additional staff members."In the past, vendors have hired based on anticipated business that did not come so they are hesitant to do it again, but a good relationship with a servicer can overcome this barrier."

A servicer may need to call one week to make sure that a work order has been received, call back to explain the customers and system, then follow up to find out if there are any problems with the project. As a result, it benefits servicers and field service providers to create a team or department that focuses exclusively on vendor relations.

This group should contact vendors on a weekly basis through a combination of phone calls, e-mails, faxes and on-site visits. The goal is to make sure that there is excellent communication with each vendor that is based on more than just following up on a work order. The vendor relations team needs to constantly look for ways to positively affect each vendor's daily operations and help them understand the internal preparation that needs to take place to be ready for new business. "In essence, this team serves as a human resources department for the vendors."

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