Who Works for Free?
There is a long-standing expectation in this industry that all contractors should give free estimates. As a result, little work actually goes into the initial estimate. Herein lies the problem. Some contractors guess an estimate or make a low bid to get their foot in the door. As a result, the consumer chooses the low estimate because he or she trusts that the contractor actually put a lot of time and energy into quoting their project. But is the estimate really free? Seriously, who works for free? I don’t know too many people who are willing to produce quality products for no cost. The fact is that people don’t work for free, especially business owners. If they do, they typically aren’t in business for long. Someone will eventually pay for that free estimate in one way or another. Whether it is the one out of ten homeowners that accept an estimate and start a project or the contractor who goes out of business because he didn’t charge for his time. Someone ends up paying for the free cost. In most cases it is built into the selling price of the project. So “free” for many is paid for by a few. Worst case, and the most common scenario, is that the price we pay for a “free” estimate is a poorly planned, inaccurately priced, mess of a project which results in disappointment and sometimes the homeowner having to hire a second contractor to correct what should have been done right the first time. So when examined more closely, collecting the “free” estimate is not the best approach to hiring your contractor. We feel that most contractors have good hearts and actually care about people and their product. But there are not any estimating standards set in our industry, so each contractor does it his or her own way. We know this from experience. Many skilled craftsmen enjoy working with their hands and get to the point where they decide to start their own practice out of their love for the trade. After a couple years, their practice has evolved into a business and they find themselves stuck in a business position without business knowledge or experience. As a result, business errors are made, corners are cut, and they have few or no systems and processes. Sadly, there are many homebuilding companies that fit this profile.
Apples–to–Apples Comparison: Why is This Wrong?
Most homeowners make their decision based on comparing estimates. It’s not that this is wrong, it’s just extremely hard (if not impossible) to do. The problem with this approach is that there is no industry standard for estimating a project and all contractors offer different levels of service. Did Contractor “A” include everything you want, or just standard finishes to keep the price low? Did Contractor “B” include labor as a cost of the job, or as an overhead cost? Did Contractor “C” assume a flat, level site because he didn’t visit it and your site is sloped? Or, did Contractor “D” use generic and knock-off products instead the name bands you requested? You get the point. Plus there is not one company that operates exactly like another. Complicating the issue even further is that the typical free estimate is based on a one to two hour visit with you and a ton of incomplete information causing a horribly inaccurate bid.
How should contractors be compared?
We recommend getting average project costs of previous homes from a contractor to make sure they fit your desired investment criteria. Then interview the contractor based on their level of service. Your project cost will be different from any other project total because your project is different than any other project. So as long as the contractor is somewhere in your price range, spend time interviewing the contractor and asking them questions. After all, you will be spending the next several months working with this individual or company.
Trust Your Instincts!
You have to feel that the contractor is right for you, and that you communicate well together. You have to know that the contractor will meet your expectations, and keep you informed. If you get a bad feeling, invest the time needed to make sure they are the contractor for you before moving forward with them. If they aren’t, then move along. The difference in price between different contractors equals the value you receive or the experience that you will have. Why is there such a difference in price between the contractors you are interviewing? Contractors all pay about the same labor rates, get materials from the same handful of suppliers, and pay the same fees for specialty trades. So what is the difference in cost?
We believe it is the value you are going to receive when you hire that company.
Company “X” is a one–man operation with little or no insurance, works for wages, never mentions a warranty, hand draws a home design in a notebook, pays his helpers cash under–the–table, uses the cheapest trade contractors out there, and has a one page agreement. His price for a home is 20% less than Company “Y”.
Company “Y” is properly insured, charges the right amount to ensure that they are in business years from now should warranty issues arise, offers a written 2-10 warranty, uses computer design software, pays their employees well and with good benefits, uses an online Client Portal to communicate finish selections, schedule, and job progress to their clients, uses top–rung trade contractors who also warranty their work, and has a clear and thorough contract.
Which company do you think offers the best value?
Next time…Questions to Ask a Contractor.