How Do You Screen a Vendor?
I usually do by asking for references and checking online for reviews. I should also note that a lot of the vendors I find are from referrals which is, in my experience, the best way to find vendors.
We find the best vendors by referrals from other real estate investors or personal family and friends. I check on their record with the Washington Department of Labor and Industries. (Is the vendor licensed, bonded, and insured? Have they received any complaints?) I now do this every time, even if we've contracted with the vendor before.
Once we used the services of a roofer who was licensed, bonded and insured. He did a good job. Two years later we had another roof to replace and called upon the same vendor. We gave him a deposit for the purchase of the materials ($1500) and he disappeared. We went to file a complaint with L&I and found out to our dismay his licensed had been revoked two months prior. He had fallen into drug use and everything changed for him and his business. We were out $1500 and had learned a hard lesson. We also found out roofing companies usually don't require payment for materials in advance. We are now very cautious when any vendor asks for deposits or money in advance of the work being satisfactorily completed.
Depending on the job that needs to be done, we don't always contract with vendors who are licensed, bonded and insured, but we do have them sign a job order agreement that includes: worker identification, job description, time frame, and terms. In the terms, we clarify they are working as an independent contractor, responsible for their own tax obligations, supply their own tools and protective gear, perform in a professional manner according to industry standards, and leave the work area clean and undamaged. We also clarify how the work will be paid, by job bid or hourly. Labor only, or labor plus materials.
We've had problems with vendors who smoke. Even if they don't smoke on the property, the smoke permeates their clothing and the odor can foul the unit. This is especially a concern with occupied units. So we now ask vendors if they smoke and sometimes it is a deal breaker for us.
One time a vendor through Home Depot came out to measure a vacant apartment for the replacement of floor covering. He stunk to high heaven of cigarette smoke and we had to air out the place afterward. Since then, we ask for non-smoking vendors. It's tough, because so make workers in the construction trades smoke. We've had trouble with marijuana smokers getting stoned or flaking off on the job. However, we discovered pipe tobacco smokers are actually pretty good. They tend to be fastidious and great thinkers.
One thing we've been thinking about doing is legal background checks on all of the independent contractors. I do look them up in the state court record, but we haven't had them go through a screening company. Twenty years ago when we started this REI business it was never a thought, but times have changed and now it is something we need to consider.
Marcia Maynard, Fischer Properties | Podcast Guest on Show #83
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