From the desk:Cleaning / Trash-Out Services

The personal property clause is the whole problem in this vendor agreement

I'm papering the vendor side for a small group that's about to start taking REO clear-out orders. Two crews, they want to sign with a couple of servicers and a regional property management shop.

The commercial terms are straightforward. Flat bid per job with a stated per-additional-pull rate, net 45, insurance certs with the client as additional insured, a $2m general liability limit because one servicer's onboarding packet demands it.

Where I keep rewriting is personal property. The draft I have says the vendor removes and disposes of all items at the property as directed by the client, and the client indemnifies the vendor against claims by former occupants. That indemnity is doing an enormous amount of work and I don't believe a servicer signs it as written.

What occupants may have left and what a vendor may lawfully throw away is set by state law and varies, and in some states there are notice and storage requirements after a foreclosure sale that the vendor has no way to verify were met. So the vendor ends up carrying risk for a compliance step somebody else did or didn't do.

What I'm weighing: a hard carve-out where the vendor sets aside anything on a defined list and bills storage, or a lighter documentation-only obligation with a mutual indemnity. The first slows the crews down and the second leaves them exposed.

Has anyone seen a version of this clause that a servicer actually signed?

Answer

2hannah_west29 Get yours

Price the clause before you argue about it. Set-aside on a typical job is maybe 45 minutes of crew time plus a box and a shelf. At a loaded $30 an hour and two crew that's about $45 a job. Storage at 30 days on a couple of boxes is trivial. So the compliant version costs roughly $50 to $60 a job, which on a $2,400 average bid is two and a half percent of revenue.

That's cheap enough that I'd stop trying to trade it away in the indemnity and just build it into the base price. What you cannot price is the tail risk of a former occupant claim landing on a two crew company with no set-aside record, because the defense cost alone exceeds a year of margin on this work.

One thing your commercial terms don't cover: net 45 on paper is net 60 to 75 in practice once a completion packet gets kicked back for a missing photo. Two crews running four jobs a week at $2,400 is roughly $19k a month of receivables and you'll be carrying two months of it, so the group needs $40k of working capital sitting still before they sign anything. That's the number I'd put in front of them first.

2 replies

3diane_kowalskiPassivePRO9

The version I've seen that got signed did the set-aside but kept the list very short and very concrete. Documents with names or account numbers, medications, firearms, and anything in a safe. Everything else goes. Photographed before removal, held 30 days at the vendor's yard, billed at a per-box-per-month rate that's in the fee schedule so it isn't a negotiation each time.

The short list is what makes it workable. A crew can be trained on four categories. They cannot be trained on "items of apparent sentimental value," which is what one draft I read tried.

Whether that satisfies your state's post-foreclosure notice rules is a different question and it's one for a licensed attorney in each state the crews work in, because the answer changes at the state line.