I'm seeing a new trend in my areas of service where more and more realtors are the second bidder on trashouts, wints, lawn care, etc. It would appear to me that this could be a conflict of interest on the realtor's part. As a preservation vendor, I am prohibited from purchasing a Fannie Mae property that I provide services on due to conflicts of interest. One would think a listing agent on a REO should not be allow to be the second (and in most cases lowest) bidder on preservation work. Thoughts?

I am often asked to obtain a second bid for various work. That bid comes from one of my contractors. Through me not from me. In addition, I'm not privy to the bid that the national property preservation company sent in. In many cases my local contractor is lower since he doesn't have a national tacking on a profit.
for instance; If both bidders cost was 800 and each added their 200 profit each bid would be 1,000. In the case of the national, they would add on their 25% or so and your bid might show as 1250 to the bank, the agent's contractor's bid would show as 1,000 and you lose the job. Thus it's not necessarily that the agent pulled a fast one, but rather that there was an additional level of profit eliminated.

Hi JackREO,

Thanks for the response. The scenario you described I believe is more of the norm and the procedure followed by most agents in my area.

The majority of my business comes directly from RE agents that specialize in REO's, I also subcontract with a few nationals. You're right, the percentages the nationals charge on top the vendor's bids usually places them on the high side.

What I have recently experienced on two different occasions is this: First - I was contacted by a local agent a few weeks ago to bid on initial services (ie. trashout, winterization, market cleaning and lawn). Oddly enough, I was contracted last week by one of my nationals to go out to the same property for a preservation inspection. Much to my surprise and more to the agent's surprise, when I arrived at the property they were onsite with their spouse trashing out and cleaning the home. Needless to say, I will not be wasting my time bidding for them again.

The second instance is another local realtor I have provided bids to in the past who is now openly advertising on a social networking site that they perform preservation and repairs on REO's. In addition to this, they post their active REO listings to the site.

I know times are tough, but it would seem to me the risk of loosing listings from an asset company, and more importantly a broker's license for a possible conflict of interest, would far outweigh the monies earned from performing the preservation tasks themselves.

I also own a real estate investment company in addition to my property preservation business. I do a fair amount of preservation work on Fannie Mae properties. Fannie Mae prohibits its listing agents, as well as vendor/contractors, from purchasing property they have been assigned to, due to conflicts of interest. There is not a property out there that I would risk purchasing, if in turn it jeopardized my long term relationships with Fannie Mae and my Fannie Mae Brokers.

Rightangle......

I have a situation right now that I'm trying to figure out how to deal with. I have submitted bids for preservation work to a realtor and, by chance, sent a vendor back out to a property he gave us a bid on a week ago because I needed more pics of a pile of concrete that sits on the propery line. We wanted to make sure we didn't bid it if it belonged to the neighbors.

To our surprise, someone was there doing the trashout already and, as it turns out, was a relative of [and working for] the realtor.

I feel as if we've been wasting ours and our vendors' time by taking photos for the realtor to submit to the bank, along with a bid that he can copy, paste, and undercut in order to get the jobs.

We are continuously being told that we didn't get the approvals because they went with a lower bid.

In what situation[s], is this not a conflict of interest? If the realtor is requesting bids, then trashing out his own listings, isn't there a rule that applies here?

JackREO.......

Please feel free to comment as well. I would really appreciate some advice here.

Linda

Every listing agreement I have specifically prohibits me, my company or any company I have any interest in from performing PP work. I do agree with you, it's a major conflict of interest.

You really need to report it to the lender. The bottom line is it's probably a breach of the listing agreement. Of equal concern might be a lack of proper insurance, improber disposal of hazardous waste, etc.

Thank you, JackREO. That's what I thought, too. I've got bid requests in my mailbox and haven't addressed them yet because I just found out yesterday this has happened.

Trying to figure out how to ask the realtor about what's going on in a way that doesn't offend him if it turns out not to be a conflict of interest. I don't know what kind of agreements he has with the banks.

I thought he was an honest guy but my gut is telling me he's not. Just not sure what to do about it yet and open to suggestions.

Linda

I spoke with an asset manager yesterday and they confirmed exactly what you stated above JackREO.

You would think that the Agent's Broker(s) In Charge would have advised them of this.

When people need money some will do crazy things.Nothing surprises me anymore!

I have run into the same problem as Linda. The realtor was having his brother do all the trash outs. Funny thing is, his brother couldnt get to all of the work and some properties went neglected for 6 months and low and behold....HOA and city violations. this realtor came back to me begging for me to do the work. but since his brother did the initial, he couldnt pay more more than $150 a month on the property. The jobs his brother neglected were all $2500 and above worth of work. He promised to pay me $150 a month till the house got sold. I told him that wasnt a good situation for me, as that property could sell next week. he begged me or he would lose his Wells Fargo contract. He then offered to make me his only vendor for all of his work and would give me the full allowable on these work orders. so I did it. made my money. and of course once all of the properties went back to looking great, he started giving work back to his brother. who screwed up again. I found out and stopped doing the work and filed a complaint to Wells Fargo and he lost his contract.

We've had so many issues with national companies basically fabricating issues, most recently submitted a bid to the AMC to drain and repair a 4 year old perfectly operating bright blue pool, that we have developed out own local resources that we turn to quickly before the AM can approve a whacked out national company bid. None of these people are relatives to the point of the post.
Its a delicate balance as many times we are asking these people for bids on work that we know they will never get.
There's so much fraud in this area that it's frustrating.......

I have had this happen a few times.

Once I kept getting calls to bid pool cleaning, grass cuts, palm tree trimming, trashouts for an agent.

I'd submit bids and never hear back unless I followed up... upon following up I'd learn the work was "already handled".

I googled the phone number and low and behold this agent also ran a property preservation business...

So a few days go by and they submit another request for a bid and I asked why they didn't just bid the job themselves if they ran a preservation business and that I wasn't too clear on why they also wanted ME to bid it...

Never heard back from them again...

Do you initially have to start out with liability insurance if you don't have any contacts as of yet? What is the minimum insurance amount required?

lol thats what he gets, i am a Reo broker, and I use to use my son, and I fired him and got reputable people to do my jobs for me.. when your in business its not about family and friends its about business get it done or get going

I used to handle all preservation orders, repairs, bids, subs, etc. for about 450 properties. There isn't a conflict of interest because a) the agent represents the bank and is hired to handle their listing with their (the bank's) best interest in mind. We are simply asked to obtain a 2nd bid, not bid on it as an agent that has just possibly seen the first bid. That's unethical. Besides, when the bank is asking for the bid directly, then we wont see the other bid. We only see all of the bids if we have to order and submit them. Banks don't care what vendor it comes from when they ask the agent to get a bid. My 10 year old could bid and do the job as long as the job wont require any licenses. Since you can't avoid preservation needs, a SMART agent will make some strong contractor relationships... ones that he can count on for various reasons. The agent can provide monthly maintenance services for their client too. This ensures that the work will be done appropriately and in a timely manner. Lastly, it more reassuring when emergencies need to be addressed or if you are locked out because the lockbox code that was given to was wrong and you are now sitting on hold on the (800) # so that the company in Florida can try to find it in their system! I'm just rubbing the tip of the ice berg on this topic!

Hello~
We absolutely bid on trash outs, winterizations, lawn care and repairs on REO listings we were taking in Arizona for several years. We actually created our Property Preservation Company out of necessity, to provide quality service and upkeep on our REO properties.

We would get ridiculous bids outside the parameters of what our asset managers were willing to pay and once we found someone who would do the job, they would get busy and be a no show . This is when we decided to start a crew of our own.

One thing it did, was give us control over the work and when it got done. It also help offset the extreme cash output of REO listings. From paying vendors for their work to installing signs, rekeys, before and after photos, utilities and pool maintenance, we were responsible for each dollar spent on the listing. We had to hire someone to submit invoices for payment, we had to pay and wait four to six weeks for reimbursement, adding more expense that had to be taken into consideration.

I must say, at this point in time there are many Property Preservation Companies in the Greater Phoenix area that I would give a try if I were still in that market, but if I didn't get the service my asset managers deserved, I would round up a crew again in a minute!

Best regards,