How Can I Avoid Paying Too Much for My Renovation?
This is a universal concern we all have as consumer, 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.
CONSIDER THE OPPOSITE FIRST
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 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 $20k to $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) CutTING corners of quality
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 is as an unexpected extras.
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) HIRING 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) BailING 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.
IF THE RENOVATION PRICE SEEMS TOO LOW, IT PROBABLY IS!
A contractor whose price sounds too good to be true will most likely need to cut corners, use unqualified workers or may bail on the project.
where has paying too little left our clients?
1) Half Finished Project
A bathroom NOT done by Old World Craftsmen
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.
If the cheap contractor has followed steps 1-3 above, but fortunately did not do the pre-completion disappearance what is the result?
2) BEST case: sloppy workmanship
Check out our video “A bathroom not done by Old World Craftsmen” which demonstrates a bathroom that is visually 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?
3) WORST CASE: COMPLETE REDO
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 or double!
“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, 19th century English writer
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 $1600 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 of the work was flawless, with no banging pipes, leaks, scratches or air bubbles in the lines.
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!
HIRING A CONTRACTOR OR BUILDER SHOULDN’T BE A GAMBLE.
Paying too little can definitely be a gamble and the results may fall short or even be a failure. But by working with a top notch builder, a fine finished product should be a certainty.
3) Ask yourself, Is it Worth “Rolling the dice”?
I recently had a tradesman show me a sample of his work and say to me, “Let me know if you want to take a chance on me” That is the very last thing I want to do. I can’t take a chance with tradesmen - I have to have a 100% chance of delivering a high quality finished project to my client!
I had a client say, 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 like a moth to a flame 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! If you live in Westchester or Fairfield county, I hope you’ll reach out to us if you don’t like gambling with your home.