- Q: I’ve always thought that checking references is the best way to evaluate a contractor. Is this true?
A: Checking references is important, however, be wary of references you receive from your prospective contractor. These references may turn out to be friends, relatives or even the contractor’s employees. Try to find three to four independent references within your neighborhood. Even with outstanding referrals, you should evaluate your contractor on many other criteria before you sign a contract.
- Q: I have received a variety of project estimates with different breakdowns and totals. To make life simple, shouldn’t I just select the lowest esitimate?
A: Selecting the lowest total may seem simple and may be successful, but you are taking a risk without proper estimate evaluation. The construction industry is plagued by contractors who lowball an estimate to win contracts. Only during construction is the homeowner made aware of all the construction details that were not included in the original estimate. Re-estimating during construction can be costly since you have very little negotiating power. Prior to signing a contract, you need to have prepared your own rough estimate and have your prospective contractor freely share information.
- Q: I would prefer signing a per-square-foot rate. For example, one contractor quoted me $125 per foot to build my brand new home. Is this a fair rate?
A: The problem with a per-square-foot rate is that you will receive a variety of opinions, from contractors to homeowners, as to what should be included in the rate. For example, does this rate include kitchen cupboards or faucets, flooring or baseboards? During construction, many homeowners are surprised to find that key finishing materials were not included. Further, what happens if you decide to change from granite countertops to Arborite to save money? Your contractor would have difficulty determining how much to discount the per-square-foot rate. Finally, contractors may build excess charges into the flat rate to cover unanticipated problems. Rarely will a contractor refund any excess at the end of your project. Best for your contractor and YOU to prepare a detailed project estimate.
- Q: Lumber estimates that I have received from contractors have been all over the map. Is it because some get larger retailer discounts than others?
A: Lumber is an extremely profitable product for retailers and only the big developers that buy tracks of land for multi-home development receive noteworthy discounts. In general, most contractors obtain an approximate purchase discount of only 10% across all product lines. The reason for the variances in your contractor’s lumber estimate can be due to either a miscalculation of quantities or excessive contractor markups hidden in your estimate. You can check your contractor’s quantity estimates a number of ways. You can bring your plans to a lumber mill or to a retail building supply store (such as Home Depot) and purchase a lumber take-off – an itemized quantities and cost of lumber list. Please refer to The Wise Renovator Chapter Seven, to do the calculations yourself. If you discover that your contractor’s quantity estimates are accurate, then you need to discuss pricing and markups. Please refer to our book or email us and we can provide you with markup information.
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