Homeowners beware of the low price!

By
Home Builder with Winslow Homes

I'm seeing a disturbing trend out there in the home improvement/repair industry:  competition is skyrocketing and price for the work is dropping.

Bruce Case, President of Case Institute of Remodeling, recently said that "...levels in competition have gone way up, frankly through the roof, which is unique among most industries, because most industries when there's challenging times you see less competition..."

Translation:  General Contractors that built houses are now doing repairs and remodels, those already doing remodels are now doing repairs, those doing repairs are still doing repairs, and those laid off have gotten their tool belt and gone out on their own to do repairs.  Competition is tremendous right now!

This is great for the homeowner, as the pool of available home improvement contractors is way up, but the pool of available work is flat at best and more likely down in the economy.  That means that prices are getting cut to get the work.  Cut to the bone in many cases!

But it's also not great for the homeowner.  How do they choose who to hire?  Getting 5 quotes has become standard in some cases.  And then price becomes the biggest (only?) factor considered by the customer.  And that's where trouble can start!

The contractors know price is king, so they figure out how to slash prices.  Usually it consists of one or more of these:  lay off workers, cut wages, cut overhead, delivery more quickly, or use less expensive materials.  The first two don't necessarily directly affect the homeowner as much as the last three, but let's explore each.

LAY OFF WORKERS

This can sometimes be good, as the first workers to go are usually (but not always) the least skilled.  It gives a company a chance to trim the fat.  But it also puts workers out on curb!  Typically workers like the benefits of a paycheck, such as eating and keeping the mortgage/rent paid, so they go back to work.  But are they qualified?  Are they insured?  Those can be scary questions, and often the answer to both is "No!"  Hiring this contractor to do your work can be a risky proposition.

CUT WAGES

This probably has the least effect on the customer but I can think of two things it can do:  

 

  1. It can make the workers upset, and they don't pay quite as close attention to the details of your house repairs as they used to.
  2. It can make the workers realize they need to shape up and be thankful to still be employed lest they be back in the first category!
CUT OVERHEAD

This can usually be thought of as administrative positions, and that certainly is one of the first places contractors look to cut costs.  But this can also mean other things, such as insurance.  Yes, contractors consider not carrying the expense of insurance so they can meet your price demands!  That means that the workers on the jobsite may not be covered in case of accident, or maybe that the contractor isn't insured at all!  When that happens, the homeowner may not realize the risk they are taking.  If anyone gets hurt or something goes wrong, the risk has been transferred almost completely to the homeowner without their knowledge.  YIPES!  On the biggest single investment in your life!  

Be sure to get a certificate of insurance from the contractor's insurance agent, not the contractor.  Yes, those certificates can be forged.  It happens!  You may not have anything go wrong, and it usually doesn't, but again is this a risk worth taking?

DELIVER MORE QUICKLY

This one can have serious long term effects on the customer's house.  It may be done well, by getting better tools and methods.  But often it really means that the contractor is cutting corners (refer back to CUT WAGES). 

There is an expression that often is used in the contracting world when looking at questionable work, "You can't see that from my house."  I'm appalled at much of the lack of quality in the work that we are often repairing.  Frequently we are repairing previous "repairs" (if you can call them that!) where the aforementioned expression obviously was the guiding factor.

This is especially egregious as it can lead to more damage in the future, costing the homeowner twice.  And often the damage is much worse after a quick band aid fix.  The customer believes it to be fixed and so it's not on the radar, so to speak.  The repair can get water damaged, weaken, and allow damage to occur to framing behind it or material adjacent to it.  When it is discovered, it's usually a whopper repair now!

USE LESS EXPENSIVE MATERIALS

This one can lead to the same results as doing the work quicker.  Less expensive material is less expensive because it's easier to make, more readily available, or of lower quality.  It's the last one that really can be the killer.  For example, there is a great deal of difference between a 60 year caulk and a 25 year caulk or a top of the line acrylic paint and the "builders grade" paint.  The higher end paint and caulk holds up to temperature differences better, stays elastic longer, and is a better barrier on the house against the elements.  You get the picture here.


So before you choose, consider that price may not be the only factor you need to think about.  If these things aren't important to you, then ignore this post!  But if they are, be sure to find out the details before you contract for repairs.  If you don't, you're only enabling the problems in contracting to continue!

 

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  1. Dan Edward Phillips 11/02/2010 08:14 AM
Tags:
wake forest handyman
wake forest home improvements

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Rainmaker
247,997
Matt Grohe
RE/MAX Concepts - Des Moines, IA
Serving the metro since 2003

Jeremy: This same trend is occuring in our area. I think a homeowners can have a lot more control on quality with smaller contractors who have been in the business for at least ten years.

Oct 26, 2010 04:16 PM #1
Rainer
400,300
Jeremy Wrenn
Winslow Homes - Youngsville, NC
C.O.O., Winslow Homes

Wow, interesting.  I guess it may be nationwide.

I would definitely say that smaller contractors with some longevity in the area are best.

Oct 26, 2010 04:21 PM #2
Rainmaker
684,112
Dan Edward Phillips
Dan Edward Phillips, Humboldt and Del Norte Counties, CA - Eureka, CA
Humboldt and Del Norte Counties, CA

Good Morning Jeremy, you have some excellent points in your post for the home owner to be concerned with.  Great post!

Oct 26, 2010 09:41 PM #3
Rainer
400,300
Jeremy Wrenn
Winslow Homes - Youngsville, NC
C.O.O., Winslow Homes

Thanks, Dan!

Oct 27, 2010 01:21 AM #4
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Rainer
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Jeremy Wrenn

C.O.O., Winslow Homes
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