Who NOT to Hire for Home Repairs (The Trust Trap)

By
Real Estate Broker/Owner with Providence Group Realty TREC# 0608931
https://activerain.com/droplet/5lpv

Protecting your investment means staying on top of maintenance and repairs when you own a home. Deferred maintenance has a tendency to increase project costs and scope. Peeling paint on a home's exterior, for example, can lead to wood rot -- which might lead to wood-destroying insects or water penetration, which in turn could lead to interior damages.

If you are ready to tackle household repairs, there are a few cardinal rules experts recommend when hiring contractors. Choices matter! Look for referrals from family and friends. Check qualifications and credentials where needed (proper licensing and/or certifications). Pull up their reviews online, giving preference to A-rated Better Business Bureau members and those who are highly ranked on Angie's List. Don't give contractors money upfront (as a general rule). And above all, require them to be properly insured (liability and worker's compensation) and bonded. 

What's the Difference Between a Contractor Being Insured and Being Bonded?

"Bonding protects the consumer if the contractor fails to complete a job, doesn’t pay for permits, or fails to meet other financial obligations, such as paying for supplies or subcontractors or covering damage that workers cause to your property. 

Insurance is different. There are two common types: liability insurance and workers' compensation. Liability insurance covers such situations as contractor-caused damage to your property, although it doesn't typically pay for repairing or replacing shoddy work. That is the reason for the bond. Workers' compensation provides payment to injured workers for lost wages and medical services, regardless of who was at fault. Workers’ compensation coverage will also provide benefits to the contractor's family in the event of a work-related death."

Source: https://www.angieslist.com/articles/hiring-contractor-whats-difference-between-bonded-and-insured.htm

Working With a General Contractor

When the scope of work calls for multiple trades, there can be tremendous value in hiring a general contractor (GC). Often, a GC brings the credibility of a solid reputation in the local marketplace, backed by a legitimate business entity (registered with the State and in good standing), and equipped with the credentials described above (insured, bonded, rated and reviewed). It isn't uncommon for a GC to specialize in one or more trade areas themselves, but a customary practice is to subcontract ("sub-out") pieces of a large job to skilled and qualified tradespersons. This brings efficiency and speed to the table, combined with the benefit of keeping a single point of accountability between the consumer and the GC for the entire job.

The Trust Trap

When a GC puts his/her good name on the line, the trust the consumer has for the GC is naturally extended to his/her subcontractors. The interaction between the consumer and a subcontractor should never endeavor to cut the GC out of the conversation or solicit additional side jobs. When it does, this is a violation of trust, and quite frankly, revealing a character issue that should trigger a giant red flag warning in the mind of the consumer about that subcontractor. If a subcontractor is willing to bite the hand that feeds them (the GC), then they will also bite the consumer's. And it isn't a matter of if... it's a matter of when. Because leopards don't change their spots.

Consumers may naively fall into this kind of trap, assuming that such conversations are somehow condoned or endorsed by GC. Or, they may be tempted by bait pricing (undercutting) that causes them to forget about the due diligence steps they took when they initially hired the GC. And it is in the moments of when things go poorly that folks realize the mistake, and subsequently, the difficulty they might encounter with any recourse.

What To Do

If you find yourself in this position as a consumer, the best thing to do is to alert your GC that you've been approached/solicited directly by their subcontractor. Bottom line: whether it occurs during the initial project or after the project concludes, the subcontractor should not be looking to drum up gigs out of another contractor's book of business. If it is a blessed activity, the GC will advise you of such. If the tradesperson is engaging in subversive activity, it will probably spell the end of the working relationship between your GC and that particular subcontractor.

Why It Matters

There are several ugly truths that tend to emerge in these scenarios. As real estate professionals, we hear the horror stories and deal with the collateral damage caused when these situations occur.

The first thing a consumer should realize is that this person they are now considering doing business with has already demonstrated their willingness to steal. Thieves don't abide by the same moral compass that honest folks do. That cheap price they promised to win the side job is likely going to come at the expense of 1) failing to complete the work and absconding with money, 2) inferior craftsmanship, or 3) substandard or questionable sourcing of materials.

The second thing to understand is that consumers who unwittingly participate in these arrangements make themselves accomplices to the subcontractor's crime against the General Contractor (and others in the food chain that might be getting stolen from). GCs who earn their reputation in the marketplace by doing things right -- paying for advertising to generate new clients, earning referrals and repeat business, legitimately sourcing quality supplies, and taking care of the customer -- deserve loyalty from their relationships. If consumers understood the deep level of betrayal -- and equated it to robbing a mom & pop store, or losing a hard-won account to an unscrupulous poacher in their own line of work -- they would be quick to decline and report. Unfortunately, it seems many consumers are oblivious to how things work in contracting scenarios.

The criminal mindset always seeks to justify and rationalize criminal behavior. In defense of their actions, and perhaps to persuade you to use them after being confronted, you might hear things like:

  • "It's ok. Everybody does it."
  • "You can trust me. Bob and I go way back."
  • "Because you are Bob's customer, I can get you a great deal."
  • "I'll charge you 1/2 of what Bob quoted. He's way overpriced."
  • "There's no conflict of interest now that the other project is finished."
  • "I saw you needed xyz work done...  Want me to take care of it for you?"
  • "I don't work with Bob anymore. I make way more money on my own."
  • "I have to take care of me. Can't fault a person for trying to get an honest day's work can you?"
  • "Bob doesn't own you. You can do business with whoever you want."
  • "Bob will never have to know. It's really none of his concern."
  • "Bob isn't taking on any more jobs right now."
  • "Bob doesn't really care for you like I do."
  • "I know you prefer me to Bob. I can help you with just about any project."

Don't get played. Remember the golden rule. If you wouldn't want someone to treat you a certain way, don't do it to other people. 

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Tags:
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home repair
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Rainmaker
1,368,357
Carol Williams
Although I'm retired, I love sharing my knowledge and learning from other real estate industry professionals. - Wenatchee, WA
Retired Agent / Broker / Property Manager

Hi Amanda,
You make a lot of valid points and working under the protections of a reputable GC who is properly licensed, bonded and insured is extremely important.  I know many subs who look for "side" work to make extra money. It doesn't necessarily mean they will do substandard work but almost always they ARE trying to avoid paying their fair share of taxes by working "under the table". You may save yourself some money but you are not getting the protection of working with someone who is properly licensed, bonded and insured.  The liability can be significant for the homeowner and, potentially, way more expensive than any savings.  The same is true for homeowners trying to sell their homes themselves (FSBO). The protections of working with a licensed and experienced agent is very valuable. 

Nov 15, 2019 01:37 PM #1
Rainmaker
748,802
Candice A. Donofrio
Next Wave RE Investments LLC Bullhead City AZ Commercial RE Broker - Fort Mohave, AZ
928-201-4BHC (4242) call/text

Just having this conversation yesterday . . . there are a lot of bad actors out there and almost always, they will 'tell on themselves' at the get if we're paying attention.

If not, checking them out via independent sources (our State Registrar of Contractors is a great resource) protects us.

 

Nov 15, 2019 03:31 PM #2
Ambassador
1,904,381
Debb Janes EcoBroker and Bernie Stea JD
ViewHomes of Clark County - Nature As Neighbors - Camas, WA
REALTORS® in Clark County, WA

Oh yes, hiring just anybody to save money is a big mistake. We were very careful to hire licensed and bonded pros for our kitchen remodel this year. Yes, it was spendy, but we have peace of mind - and a record of all  work being done right if we ever decide to sell. 

Nov 16, 2019 07:57 AM #3
Rainmaker
1,469,154
Kat Palmiotti
406-270-3667, kat@thehousekat.com, Broker, Blackstone Realty Group - brokered by eXp Realty - Kalispell, MT
The House Kat

Hiring the right contractor is so important. Checking referrals, ensuring correct insurance/bonding is in place, and keeping an eye out for underhanded subcontractors are all critical. Thank you for an informative post!

Nov 23, 2019 06:27 AM #4
Rainmaker
1,094,463
Margaret Goss
Baird & Warner Real Estate - Winnetka, IL
Chicago's North Shore & Winnetka Real Estate

I have been approached in the past by subs looking to undercut the GC. I never accepted but I never told the GC either - I worried about the sub getting angry and retaliating. They might not be the best people . . .

Nov 23, 2019 10:30 AM #5
Ambassador
4,069,794
Jeff Dowler, CRS
Solutions Real Estate - Carlsbad, CA
The Southern California Relocation Dude

Hi Amanda:

There is certainly a wealth of valuable information here. You hear all sorts of horrors stories from time to time about consumers who have gotten burned by unscrupulous contractors, ad those without the appropriate insurance. We have done a couple major remodels over the years and werecareful to do our due diligence and hire licensed and bonded contractors with the appropriate insurance.

Jeff

Nov 23, 2019 06:05 PM #6
Ambassador
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Michelle Cherie CarrCrowe Just Call...408-252-8900
Get Results Team...Just Call (408) 252-8900! . DRE #00901962 . Licensed to Sell since 1985 . Altas Realty - San Jose, CA
Family Helping Families Buy & Sell Homes 40+ Years

Yes everyone wants a reasonable repair price yet don’t always understand the reasons for the differences in prices.

Nov 24, 2019 06:47 PM #7
Rainmaker
479,011
Diana Dahlberg
1 Month Realty - Pleasant Prairie, WI
Real Estate in Kenosha, WI since 1994 262-308-3563

You will get what you pay for ... speaks loudly when you consider all the implications of what may be hidden not using a GC ... others have already made mention of those items.  Buyer Beware!

Nov 26, 2019 05:58 PM #8
Rainer
3,173
Keith Pittard
Alfa Realty Co Inc - Prattville, AL

Well written.

Nov 27, 2019 04:49 AM #9
Rainer
30,197
Chuck Tanner
Keller Williams Realty - Atlanta, GA
Associate Broker "Let's Get You Moving"

Awesome post, well written and eye openening! I have had some not so great dealings with some of these contractors including my own home. May I add one point? Don't ever pay for the work up front, maybe a deposit. I had to drag a contractor out of a bar to finish painting a house of a lady I was dating at the time. She paid him up front! He started the job then after a month of no-show I had to have a chit chat with him. 

Nov 27, 2019 05:34 AM #10
Rainer
274,578
Chris Lima
Atlantic Shores Realty Expertise - Port St Lucie, FL
Local or Global-Allow me to open doors for you.

Fantastic post. I have bookmarked this one. It's a keeper.

Nov 27, 2019 06:48 AM #11
Rainmaker
124,255
Richard Woodward NMLS#217454
Service First Mortgage, NMLS #166487 - Dallas, TX
Service Beyond Expectations! Your Texas Lender

Great advice.  As a renovation home loan specialist, I deal with contractors every day.  Always best to follow your advice.  Thanks for the post.

Nov 27, 2019 07:29 AM #12
Rainer
105,038
Brian DeYoung
Howard Hanna Real Estate Services - Ithaca, NY
Brian DeYoung

as a former contractor... excellent article

Nov 27, 2019 08:30 AM #13
Rainmaker
82,311
Alyse "Aly" Sands
Village Real Estate Services - Nashville, TN

Great article! My husband is a GC in Nashville, TN.  He is booked through half of next year.  He builds, remodels and repairs.  Many of his remodels are do-overs of what unlicensed (and some licensed) contractors have done or didn't complete.  He keeps the same subs because he treats them well.  They will not undercut him. There are so many people who frown on his prices (which are average for licensed, insured, bonded) so there are also so many people needing work redone by handymen.  He has had to rip out a year old shower more than once.  Some of the builders or subs cut corners but the unlicensed, uninsured worker has no higher authority to answer to nor do they care about their reputations.  Saving money up front almost always costs you more and gives you more headaches in the long run.  

Nov 30, 2019 09:09 AM #14
Rainmaker
537,757
Mary Hutchison, SRES, ABR
Better Homes and Gardens Real Estate-Kansas City Homes - Kansas City, MO
Experienced Agent in Kansas City Metro area

It's always a matter of trust hiring a contractor...even if he/she comes highly recommended!  I didn't know the difference between bonded and insurance--thanks for the clarification.

Dec 02, 2019 10:41 AM #15
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Amanda Thomas

​Broker, SRES®, BPOR, MCNE, ​Certified DRS Agent™
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