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MEMO
#1054: Servicing REO Properties - (08/19/03)
As
many of you know, one category of services Safeguard provides
for its clients includes preservation services for their REO
(Real Estate Owned) properties.
As you
probably also know, maintaining an REO property is significantly
different from performing pre-conveyance property preservation
services for investor-insured loans (FHA,VA,FNMA,FHLMC).
For loans
that are serviced for the investors, our clients' goal is
to preserve and protect the property from deteriorating or
suffering any damages until conveyance and to perform the
required work per the investor-allowed pricing structure.
For properties
that our clients own after foreclosure (REO), our client's
objective is to market the property as quickly and economically
as possible.
Those
of you who have worked with REO Asset Management Companies
are aware that the pricing structure for REO assets are typically
based on a flat fee per property, as opposed to pricing
per work performed (lock change, winterization, trash out,
etc.)
Safeguard intends to offer this flat-rate pricing structure
to its REO clients.
In most
cases, the client and the vendor (Safeguard) will agree to
a fixed price that the client will pay for the initial secure
work required (as detailed below). The client will pay one
price regardless of the amount of work needed to secure the
property. The idea behind this pricing structure is that it
allows the client to calculate its fixed (out-of-pocket) costs
to market the property.
The initial
securing services consists of the following:
Secure all doors (regardless of how many locks are required)
Winterize the property
Board all broken windows
Remove all debris and broom sweep the property (see previous
memo re: REO Clean-up, attached).
Safeguard
will be implementing the same pricing structure with its contractors
and will establish a set dollar amount (flat fee) to be paid
to the contractor for work on an REO property. This will be
a guaranteed flat rate for each initial services order you
perform at an REO property.
There are pros and cons to this pricing structure. There will
be times when the flat rate will be more than enough to cover
the work needed on a property, and there will be times when
the flat rate will not cover the amount of work needed. For
example, if the property requires only one lock change, you
will still be paid the full agreed-upon price, even though
your actual costs are well below that amount. On the other
hand, if you need to change a number of locks, board windows,
and perform other work (including the clean-up items outlined
in the attached) that causes you to incur costs in excess
of the flat rate, you will still be paid only the same fixed
fee.
This approach
to performing initial REO services on a property will not
allow for the submission of bids, unless there are extenuating
circumstances. We believe this arrangement will eliminate
repeated trips to the property for estimates and approvals.
If you are interested in performing work based on the above
pricing structure, or if you would like to have additional
detailed information about the above, please respond via e-mail
to reo.vendor.management@safeguardproperties.com.
We will
schedule an AT&T conference call with our contractors
this week to review this new process. Please
note, you will need to contact us and pre-register to participate
in the call.
I'm looking forward to hearing your thoughts and ideas about
this project.
Robert
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