How Can I avoid Paying Too Much For My Renovation?
This is a universal concern we all have as consumers, and it’s even more urgent with a major purchase. With things like electronics, for example, this is not too hard – a little time online and we’ll find published prices from multiple sources.
Even with cars, we can find the MSRP as a baseline and other pricing online to verify that our local dealer’s offer is fair. It’s harder with building and renovation since each project and home is unique and customized to address your needs and the condition and layout of your home.
Now, before we dig into how to avoid paying too much, let’s take a moment to consider the opposite:
WHAT HAPPENS WHEN YOU PAY TOO LITTLE?
If someone offered to sell you a brand-new Lexus for $11,000 all sorts of alarms should go off in your head. Why? Because you’ve seen the MSRP on the website and you can imagine that a sell price of one half or one third of the MSRP is below the manufacturing cost.
So what happens when you get the price for $9,000 for a “full” renovation of your bathroom which should actually sell for $25k? This is so far below the construction cost of the bathroom, that the contractor will have to use one of 4 techniques to produce the work at this undercut rate:
1) Cut corners of quality at every chance. The contractor (I can’t bring myself to call him a builder…) will have to use the very cheapest materials, and cut labor, skipping any behind the scenes steps he can imagine. Remember, he has to do the work for LESS THAN HALF the price of a reputable builder. He will be forced to skip changing the wiring for the bathroom outlet; he will leave the old valves and toilet flange. He won’t be able to spend time waterproofing your shower niche and your window. He will certainly be leaving your old galvanized waste lines in the floor, which he’ll be careful not to mention unless he decides to use it as an unexpected extra.
2) Unexpected Extras: A lowball bidder is in a bad place, having offered a price for which the bathroom cannot be executed, so a method that may be used is that of announcing all kinds of “unexpected extras” declaring that he was surprised by pipes in bad condition, wiring that is old, walls out of plumb, subfloor that needs replacing. These items will be priced at a premium to recover the funds missing from the proposed price – see “Top 5 Remodeling Problems”
3) Unqualified Tradesmen: This lowball contractor will have to use the cheapest tradesmen, or you may even find them doing your plumbing and electrical work themselves. This is not to say that there aren’t people who are pretty good at mechanical work who don’t have a license. But you should see the bizarre and sometimes unsafe work we’ve seen over the years by unqualified people.
4) Bail Out On The project: Over 25 years, we’ve been called in many times to help clients pick up the pieces of an abandoned project. The contractor just ran out of money. Plain and simple.
Here’s the story we hear about how it goes:
In the middle of, or three quarters through the project, the contractor realized that there just aren’t enough funds to buy the products and do the work. First, he went back to the client with requests, excuses, extras (plausible or not) or even demands for more money. Sometimes this is in the form of advances on completion payments. Then, he vanishes.
These types of contractors normally don’t have a nice website or online presence- sometimes you may not even have gotten their address! The company name on their business card is sometimes an invention – not actually a registered business.
SO WHERE HAS PAYING TOO LITTLE LEFT OUR CLIENTS?
Half Finished Project: After step four above is usually when I get called in. As I look over the half completed project, I see a few mistakes and oddities that make me wonder about the behind the scenes work: pipes, wires, structural. Will the tub fit in that alcove? Is that wall plumb? I’ll have to check everything. Even though I empathize with the client stuck in this predicament, I have no choice but to include extensive checking and some redo in my price to complete the project. I can’t count on the “fly by night” fellow before me to have done things right, and now I’m taking on the responsibility for the result.
I ask the client, “So how much final payment do you have left over that you haven’t paid the contractor? Too many times, the answer is: “none.” They paid him everything before he disappeared. How did this happen? This is a stressful and sensitive time for the client, so it’s not the right time for me to press too hard or critique the fact that they paid in full for a half-finished project. I can only imagine that the lowball guy was charming and a good, smooth talker, maybe offering a “sob story.” But everyone should stick to a fair, milestone based payment schedule laid out before the job. (Be on the lookout for a future article “What is a fair payment schedule?”)
Complete Redo: If the cheap contractor has followed steps 1-3 above, but fortunately did not do the pre-completion disappearance what is the result?
• Best Case: Check out our video “A bathroom not done by Old World Craftsmen” which demonstrates visually a bathroom that is okay but filled with oopses and aesthetic defects. The bathroom we show is serviceable, and the defects might not much concern everyone, but they sure bother me. Do they bother you?
• Worst Case: At some point the shoddy work crosses a threshold and the project is not serviceable. I was recently at a client’s house, and he was showing me a pretty nice looking bathroom: “It’s nice, but the shower leaks. We’ll have to get the leak fixed.” A little investigation in the basement below revealed that it’s not a plumbing problem. It’s the shower pan (what waterproofs the shower floor and walls) that is damaged, incorrectly installed or maybe completely missing. So how do we fix the leak? You guessed it, we have to demolish the shower floor and 3 walls about a foot up. Worse, the client doesn’t have more tiles for the shower so he may be stuck with a slight mismatch, or a full redo of the shower, the most expensive part of a bathroom. Then the client said to me, “Well maybe we should just renovate the whole bathroom.” I’m pretty sure if he renovates the bathroom, he’s going to use a reputable, veteran builder, so all of the money with the lowball contractor is money wasted. So, take care – in paying too little you may be paying too much of double!
This reminds me of a quote from John Ruskin, 19th century English writer about how much to pay:
“It’s unwise to pay too much, but it’s worse to pay too little. When you pay too much, you lose a little money – that’s all. When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing it was bought to do. The common law of business balance prohibits paying a little and getting a lot – it can’t be done. If you deal with the lowest bidder, it is well to add something for the risk you run, and if you do that you will have enough to pay for something better.”― John Ruskin
NOW, ABOUT PAYING TOO MUCH
With the above food for thought, let’s go back to “Paying Too Much”. I recently installed a custom window and a nifty custom radiator in my living room and my hydronic heating contractor told me he gets $1,600 per day for a crew of 2. That’s $100 per hour per man! I choked a little on this number, but he’s a pro so I went ahead. The crew was careful of my freshly finished floors, respectful, took the time to do a perfect layout, followed my very specific instructions on how I wanted things, finishing with a great cleanup. And the work was flawless, with no banging pipes, leaks, scratches or air bubbles in the line. I’m a veteran in the industry, and I’ll wager that I could have saved a few hundred dollars on this
project if I shopped it harder. But here I am a year later, enjoying the perfect work and this little bit of premium spend seems so worth it – in terms of quality, and a stress-free experience.
1. Should I Get Multiple Bids? If you read articles published by Angie’s List and Home Advisor (same company, by the way) who are actually digital marketing companies, not builders, they will say get lots of bids to protect yourself. You’ll hear the same from the marketing team at “This Old House” or other Hollywood shows. People who may have never hired a builder. I’ve spent 25 years qualifying and curating a team of subcontractors for projects and I can tell you that I have NEVER “gotten lots of bids.” I don’t have any use for a bid that’s not from a responsible and high-quality tradesman. Which brings me to:
2. Do Your Qualification Process First: Read our article on “How to select the best builder” and consider doing the research and qualification process BEFORE you request construction proposals on your project. After all, what is the point of getting a price from a lousy builder? Getting a proposal from TWO builders who have passed your thoughtful pre-qualification process is all the information you need to protect from an excessively high price. And frankly, I strongly doubt that in your research you really liked and got stellar feedback about more than two of the builders you met with to discuss your project!
3. Don’t “Roll the dice” I had a client say to me, years ago, “Any time you hire a contractor, it’s a gamble.” Well, it shouldn’t be. If you did your homework and didn’t get sucked in to that ultra-low price that the little voice in your head warned you about – it shouldn’t be a gamble.
Gambling is for recreation with your spare money, not to put your home on the line!