Happening NowCleaning / Trash-Out Services

The personal property indemnity clause is usually the sticking point in a REO trash-out vendor agreement

When papering the vendor side of a crew taking on REO clear-out work for servicers and property management shops, the commercial terms are typically the easy part: a flat bid per job with a stated per-additional-pull rate, net 45 payment terms, insurance certificates naming the client as additional insured, and a general liability limit in the range servicers commonly require in onboarding packets. Personal property is where these agreements tend to get complicated. A draft that has the vendor remove and dispose of all items as directed, with the client indemnifying the vendor against claims from former occupants, puts a large amount of weight on that indemnity, and it is fair to expect resistance to signing it as written. The underlying issue is that what occupants may have left behind, and what a vendor may lawfully dispose of, is governed by state law and varies considerably. Some states impose notice and storage requirements after a foreclosure sale that a vendor has no practical way to verify were satisfied, which means the vendor can end up carrying risk for a compliance step someone else was responsible for. Two reasonable structures to weigh: a hard carve-out where the vendor sets aside anything matching a defined list and bills storage separately, which slows the crew down but limits exposure, or a lighter documentation-only obligation paired with mutual indemnity, which moves faster but leaves more risk with the vendor. Has anyone seen a version of this clause that a servicer actually signed as drafted.

dmitri_248 CB2CPRO 11

Answer

hannah_west29 SS2APRO 16

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 with two crew members that is about $45 a job. Storing a couple of boxes for 30 days 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 is cheap enough that I would stop trying to trade it away in the indemnity and simply 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 do not 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 they will be carrying two months of it, so the group needs $40k of working capital sitting still before they sign anything. That is the number I would put in front of them first.

hannah_west29 SS2APRO 16

2 replies

diane_kowalskiServicePRO

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.

diane_kowalskiServicePRO

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