If you own a foreclosure cleanup company, you already know that prices for services are all over the place, because services can encompass so many things. In a foreclosure cleaning business, you can offer everything from simple trash removal services to lawn maintenance, gutter cleaning and pressure washing, painting, minor repairs, and much more. You can offer any of these services exclusively or in combination with other services, which makes it a bit difficult to determine how to price effectively.
According to Cassandra Black, owner of Foreclosure Cleanup, LLC, in Atlanta, “We get calls all the time from foreclosure cleanup companies who want to know how much to charge for debris removal, repairs, etc. They want a simple formula where they can “plug in certain factors to get quick pricing. Unfortunately, there are no easy answers because many factors dictate effective pricing, especially for the newer, smaller foreclosure cleanup company.”
Ms. Black continues: “On the other hand, potential clients often call and want a quote over the phone, just an idea orf what they can expect to pay for foreclosure cleanup services. Often they are looking to buy a foreclosure and want to know what they will be dealing with after closing to get the house ready to move into, or a real estate agent will call because he or she has received a large number of foreclosures from the bank to be ready for the market. We tell them we have to see the properties before setting the price.”
As in most things, the rush in pricing causes waste. New foreclosure cleanup companies will almost always do themselves a disservice by giving a quick price over the phone to appease the caller. Several factors must be taken into account before providing an estimate for profit in this industry.
There are several schools of thought on foreclosure cleanup prices. Below are some indirect factors to consider before doling out hard and fast numbers on foreclosure cleanup estimates.
1. How much is someone in the county, city or ZIP code in question willing and able to pay for a foreclosure cleanup service? Customers from a metropolis like Chicago will expect to pay more than someone from a smaller city like Selma, Alabama. New companies should call other companies to see how much they charge for services. New foreclosure cleanup companies may not be able to call existing foreclosure cleanup companies because they may be the only ones in town. Foreclosure cleanup is a new and booming business, according to Entrepreneur magazine, The Oprah Shows and various news outlets, but there is still room for startups in a lot of areas in the United States due to rising foreclosure rates. Foreclosures are at record levels.
To help determine pricing, new businesses should call existing businesses that offer some of the services they plan to offer in their new business. For example, calling home and commercial cleaning companies, landscaping companies, gutter cleaning companies, painters, etc. will help smaller businesses create their own pricing structure based on their services and area.
2. Who will pay your foreclosure cleanup company? You need to know who will write the check out to your business. This small piece of information will help you price effectively for make a profit. This is why:
Real estate agents who specialize in listing REO (real estate ownership) properties often pay financially out-of-pocket for property upkeep and expect banks to reimburse them for lawn care, trash removal, minor repairs, etc. etc. If a real estate agent, in these times of lower and slower commissions, he’s paying you directly, you may need to lower your estimate a bit to secure the rubbish job so they can pay you, time and time again! The bulk of these real estate agents is how you will make your money.
On the other hand, if you tell that realtor you’re going to do the crap and wait more than 60 days for the bank to pay you, your estimate should be higher. Why? Because you have to take into account that you will be waiting for them to pay you; someone else will be keeping money that should be in your bank account earning interest or keeping you in the black when it comes to your business cash flow.
If you decide to wait at the bank, you may need to factor that bill to get your money right away. If you “factor” that invoice (sell it to a company that will give you a percentage of the invoice value in exchange for immediate payment), it will cost you a percentage of your profit. Naturally, you will pass that cost on to the bank by charging more.
3. When pricing foreclosure cleanup jobs, you should also consider the entire property scenario. For example, does the real estate agent have volume for you to handle or is it a 1 house rubbish? Once again, the volume should be lent at lower prices. (Immediate wholesale, NOT “promised” wholesale.)
If a buyer is looking for a waste removal estimate, assess whether the buyer has already closed on the home and is in the offering phase. If the buyer has already closed on the home, schedule an appraisal meeting at the property and take a tour to evaluate the contents. Why? Because if they just bought the foreclosure, there’s probably a lot of other things they should have done.
Foreclosures are almost always sold “as is,” so the buyer will likely need special move-in cleaning, painting, gutter cleaning, power washing, minor repairs, or a combination of both. Ask the buyer if you should add this or that to the estimate while touring, depending on the services he has decided to offer at his foreclosure cleanup company. By the time it’s said and done, trash will probably be the least lucrative part of your estimate.
If the buyer hasn’t closed on the home, they may be seeking multiple estimates from various vendors so they can weigh which estimate to use as part of an offer contract in an effort to get the seller to lower the foreclosure price. mortgage depending on the amount. of the garbage disposal estimate (“seller’s allowance”). In this scenario, you may NOT want to be the lowest bid.
4. Will you be a subcontractor on the job for which you are providing the estimate? Are you working for a larger provider? Larger property preservation companies use smaller foreclosure cleanup companies all the time. Expect to bid lower on these jobs if you’re a subcontractor, because the primary provider often works within the budget constraints dictated by HUD-type hard and fast guidelines. The larger providers know that they cannot exceed a certain amount to complete a certain service in a foreclosure without approval. Try to find out what those pricing guidelines are for your provider and price accordingly.
There are so many factors to consider when pricing for foreclosure cleanup jobs. You really have to weigh everything, and at a minimum, the soft factors above, before coming up with hard, fast numbers so your business can effectively price for profit.
Good luck!
