When it comes time for field service companies to make improvements to bank-owned homes, one of their main objectives is minimizing the cost servicers have to pay for the completed repairs.
In order to accomplish this feat, many property preservation businesses have established contracting agreements with national suppliers and created standardized pricing reviews so servicers and vendors know how much money has to be allocated for repair work to get done.
“The industry is definitely looking for pricing to be as low as possible, but servicers still want a quality product,” said Steve Meyer, AVP of high risk and hazard claims at Safeguard Properties, in an interview with Mortgage Servicing News.
Meyer said
By forming relationships with these suppliers, Safeguard vendors can install refrigerators and dishwashers, put in new carpet and make cosmetic improvements at defaulted properties all for reduced costs if the materials are ordered from these businesses.
According to Meyer, without the contracts in place, it could cost Safeguard anywhere from $21 to $22 per square yard for vendors to replace a carpet. However, now the price is down to around $15 a square yard.
But one of the big advantages that vendors have by working with these national suppliers is it allows them to repair REO homes with a consistent product. For example, they can now use the same paint scheme throughout the property and all types of household appliances can come from one company.
“It makes the work a lot easier for vendors to manage,” Meyer said. “Again, you get a consistent product across the board which also helps REO homes be in a better marketable condition. Most of our vendors have gotten very good at understanding what the end product needs to look like because it doesn’t vary now.”
Another positive aspect of this strategy is that vendors don’t have to wait too long to receive these products from the suppliers. Meyer said if the product is in stock, Home Depot or Lowe’s could have it available for the vendor within the same day. He added that once a carpet is ordered, it takes no longer than three days for a supplier to ship this to a warehouse. Also, appliances typically can be installed from scheduling to installation within 48 hours.
“This is a pretty seamless process,” Meyer told this publication. “Once we get an order in and we know what’s needed, the proper supplier that has coverage in that area is notified and then the vendor gets an email letting them know where and when they can pick it up.”
Secondly, property preservation firms have also created consistent pricing strategies in which vendors know immediately what the overall costs will be for repairs that need to be completed.
Austin, Texas-based Field Asset Services is utilizing this concept because it
“Because it makes life a little easier for them [vendors], they are on board,” Glasgow said. “When we were going through a bidding process, then you would have days when you had to wait to see if you were the successful bidder. So our vendor network was not always awarded that job.
“Having a more standardized pricing allows the client to already know going into it what the cost to repair will be and our network has been afforded more jobs because of it,” Glasgow continued.
FAS uses standardized packages for each region of the country, Glasgow said, depending upon the area’s economies of scale and the costs it takes to make repairs there.
“This idea helps vendors identify their costs for the long-term disposition of that asset,” Glasgow said in an interview. “These are hard costs and are fixed. We stand behind them. That has been a real motivator for many of our clients to come aboard with us because of this standardized pricing.”
In addition to this pricing concept, FAS has also determined what the most popular repairs are for every region, such as roofing and all sorts of cosmetic work, and formed packages that make it even simpler for clients to manage their jobs. Glasgow said these packages provide both time and cost savings for clients because they will now know the price for a specific repair project and whether or not to place a bid to do this job.
“If we don’t have to bid these individual items, then we can move the client right onto engaging the repairs,” Glasgow added. “So we’ve minimized the time on the market by getting the repairs done. I would say it’s probably a two-week save by using this standardized pricing model.”
