Negotiating With Home Repair Contractors

Homowners with the time and competence can save some money on home repairs by doing them themselves. However, tasks should be chosen carefully. It’s tempting to try to economize by buying materials, but this rarely pans out. Contractors mark up the prices of their materials, but they can usually buy them cheaper than the homeowner can. They also find the materials, select them, have them delivered, inspect the quality and pay for them. Painting, on the other hand, is often a good choice. So is cleanup.

Compare Bids and Check References

When negotiating rounds are complete, bids that are radically high or low should be discarded. Using the bids that are fairly close, the most competent contractor should be chosen. Also be sure to check the contractor’s references. If references check out, call the local consumer affairs office to confirm the contractor’s license and check on any complaints filed against him. Touch base with the Better Business Bureau as well. Before any work is done, have the contractor’s insurer provide a certificate of liability and workmen’s compensation insurance coverage.

Negotiate, Negotiate, Negotiate

Now it’s time to negotiate the contract. Good contracts make for successful projects; never turn over any money until the contract is signed. Get everything in writing, and include as much detail as possible. Not just the color of paint, but the brand, if it’s to be sprayed or brushed, and how many coats. Identify manufacturers, model numbers, grades, etc. Define the contractor’s responsibilities at each step of the project.

The payment schedule set forth in the contract may be a subject of negotiation. Building projects generally call for partial payments as the work progresses. The agreement should specify exactly when payments are due; and each payment should be tied to the completion of a specific, easily identifiable milestone. Don’t let the payments get ahead of the work. Each payment made reduces leverage. A retainer of at least 10 to 15 percent of the total price should be held as a final payment, due when all work is complete.

Even with a detailed, signed contract, a few bumps in the road to a successful project must often be negotiated: changes and extras. These are the source of some of the most serious disagreements between contractors and their clients. There are two black-letter rules applicable to changes. One, the contractor must supply all labor and materials necessary to complete the job in a “workmanlike manner.” That means he must fulfill the plans to the letter, furnishing everything—hardware, fixtures, and trim, whatever—unless specified otherwise in the contract. Two, any changes to the plans must be approved by the homeowner, and in writing, before being undertaken.

Be Sure to Cover All The Bases

That would seem to cover all the bases, but it doesn’t. “Anything that can go wrong, will go wrong.” What happens when rotten studs are discovered under sound drywall? Or granite is encountered instead of the expected alluvial soil? Or any one of a thousand other significant, unanticipated problems crops up that wasn’t specifically provided for in the contract?

Don’t Leave Anything to Guesswork

If the matter is unambiguously covered by the contract, the homeowner should firmly but diplomatically insist that the contractor perform as agreed. But if it’s in a gray area, then negotiation is the answer. But, is the issue important enough to cause the entire project to collapse? A concession from the homeowner, perhaps in exchange for some additional low-or-no-cost work by the contractor may keep things together. The homeowner could offer to pay half. Try to get quid pro quos for whatever is offered, but this should not bog down the job.

Tips to Remember

  1. Never hire a contractor selling door-to-door.
  2. There actually isn’t much real gouging in home repair. It occurs more often on siding, window replacement, driveway sealing, and basement waterproofing jobs.
  3. Roofing jobs produce the widest range in bids. That’s because in roofing work the decision to repair or replace is very subjective. Surprises often lurk under old shingles. Repairing is initially less expensive than replacing, but can be more expensive if the repairs only last a year.
  4. Zip codes show up in bids. Contractors bid jobs higher in better neighborhoods. The affluent pay more, but also tend to be harder to work for and quicker to sue. The answer is to try to get a preliminary quote over the phone before the contractor visits, hide the Mercedes in the garage, and put the kids’ junk car in the driveway.
  5. Clear the work area before getting bids. Contractors love access. Inside or out, spruce up the job site.
  6. Budget for contingencies. Include an extra 5 to 10 percent in the budget for the project, especially with renovations. Until the walls are torn out, the final cost is only an educated guess. But don’t tell the contractor about the contingency fund.
  7. Get the subs to sign a lien release. If the contractor will be using subcontractors, make sure each sub signs a waiver of mechanic’s lien rights. Try to get the principal suppliers (e.g., the lumberyard) to sign waivers as well. If they don’t, and the contractor doesn’t pay them, they can slap a lien on the house to go after the money they’re owed. The house cannot be sold until the liens are released. Even if the contractor was paid, the unpaid sub can file a lien.
  8. Be nice to the contractor and things will likely go better.

Part One of this article “How To Save Money on Home Repairs” is available for viewing on Suite 101.

For more information on negotiating, bargaining, “krunching,” and “nibbling,” visit Common Ground Seminars on the web.