OK so "floating" costs for REOs can be REALLY expensive, but it is a necessary evil and you need to be able to handle your responsibilities or you need to get out before you are FORCED out! I know far too many brokers who wait until contract time before they get their utilities up and running on their properties, rather than activating them at the time of listing, as most clients require.Sounds like a slick "cost avoidance" move that's healthy for your biz cash flow huh?...WRONG! Here's what happens: The property hits the market and gets a quick contract (as do many REOs)..GOOD. Then the selling broker goes out to inspect with his client and finds no utilities on (let's face it; the gas company just isn't gonna "rush" out there to bail you out because you got a contract) and he asks you for an extension. Now you have to explain to your Asset Manager just "why" we all of a sudden need to extend a property that she was counting on closing at the end of the month to add towards her bonus (did you know that often AMs are paid bonuses for closing deals on time and for the number they close each month?). Now you can either lie or tel the truth, in which case you now have a pissed off AM...BAD.
Here's the crazy thing guys. This is so darn common you wouldn't even believe it if I showed you how many times we deal with this when we are selling another broker's REO property. And the stupid thing is that this penny pinching is just such short-sighted thinking. I mean think about it for a second. How many REOs is an AM going to keep sending you if she knows that she always runs into delays and issues on your deals because you didn't do your job right up front? Do you think she's going to put her "fondness" of you in front of her lost cash bonuses?-yeah RIGHT! You better give yourself a big check up from the neck up. The extra $50 you aren't floating is gonna cost you thousands, if not hundreds of thousands in lost opportunities. The utility payments are reimbursable..a client going from giving you steady flow to giving you low flow isn't!
...and if you were actually thinking about LYING then let me tell you how that plays out: First of all just know that you WILL get caught. 9 times out of 10 the selling broker will submit an amendment to the contract asking for the extension and citing the reason "utilities were not turned on" or in some cases they will email or call your AM directly to complain. Do not put it past agents to do this. Although improper, they will got to great lengths to protect their clients and you will soon find out that the confidentiality of your client's info. is actually not so confidential. Now imagine being an AM who does NOT want to deal with selling agents at all and now she is hearing that you lied to her about utilities...guess what?...YOU'RE FIRED...there goes the kids' college fund because you're an idiot.
CHEATING on Utilities..You LOSE!
