My wife and I finished a home renovation years ago. I hired contractors for the bulk of the work. I’d heard all the horror stories, so I carefully prepared and thought I had myself covered. In the end, the last $3,000 of work was abandoned (out of a $20,000 job) after stretching from an initial 1-month job into a 7-month job. This post is intended as an overview of what we did that helped get the $17,000 part of the work completed and what I did wrong that led to the problems at the end.
Get Referrals As Much As Possible
I hired the contractor who was referred to me by my real estate agent (who I bought the duplex with). Another contractor was a recommendation from a co-worker at the university, who had gotten a good quote from his guy but hadn’t been able to hire him. A third recommendation came from a local friend.
Get As Many Bids As You Can
Two of the contractors took weeks to get their bids to me, and the third never bothered to call me back. At the time, I felt like 3 bids were plenty, but if I was doing this again I’d go bigger. I dropped one of the contractors who pushed back getting me the quote twice – I figured if he couldn’t even deliver a quote on time there was no point trying to work with him.
Ask for license number and bond/insurance info to be included with their bid.
Make Sure You Have A Contract!
It’s vitally important before work begins (and before you give any money) that you have a contract. This should detail the work to be performed, in detail, the price to be paid, in detail, the schedule for payments, and the completion date – with possible penalties for missing it. Look into local laws and find out if there’s anything else that should be in the contract. In some states, you want a signed “lien release” when you make payment.
Don’t Give Too Much Money Before Work Is Completed
I’ve talked to and read about people giving contractors tons of money before they’ve done the work. Contractors who work in this manner are going to have a natural tendency to take as many projects as possible to get the cash up front, even if they don’t have the time to actually complete them. We paid an initial 10% of the project upfront, and I paid for the electrician and plumber (referred to me by the contractor) directly after they had done the work. Partway through the job the general contractor asked for a $2,000 draw, which I gave him and didn’t seem to be a problem.
At the end of the job, with 2 small parts let over, he asked me for the balance of work completed ($7,500) and that he would complete one of the two remaining jobs by the end of the week and the other a few weeks later. He made a special trip over for the $7,500 check and that was the last time I ever saw him. We then had 4 months of continuous excuses, ranging from one of his employees had stolen from him and run away, to him having been in a 4 wheeler accident, to him having had all his tools stolen from a job site, to his little boy wanting to spend the day with him instead of him coming to finish the work (really!). We’d only get the excuse after the time he was supposed to come to do the work had come and gone.
I *THOUGHT* it would be ok to pay him for the work that he completed, as he’d want to get the rest of the money (and do the work to get it). In reality, $3,000 was just too small of a job for him to bother with, so he kept making excuses instead. I *SHOULD* have offered him another $2,000 draw or refused payment until the job was complete when he asked for the $7,500.
Once a contractor is working a job, you ALWAYS want them to be unpaid for completed work until everything is finished. This helps motivate them to keep working and get the cash for work they’ve already done. This should be spelled out in the initial contract. A 10% initial payment for material seems standard and is reasonable if the contractor is reputable. I have read about people making this initial payment and having the person run off on them.
I would be willing to pay for materials directly if a contractor was worried about being stiffed by me. This is the only way I’d exceed the initial 10%.
Contractors Are Independently Minded People
It’s important to realize that the type of person who decides to be a general contractor is the type of person who likes to do things their own way. There’s loads of work for people in the trades, so the ones who hang out their shingle and work for themselves are very independent. This can cause issues if you push them too hard: they’ll likely react badly.
I used to do software contracting, and I could NEVER have gotten away with half the stuff that seems to be the standard operating procedure for general contractors.
It’s easy for people to give a list of all the things to demand from a general contractor. If it’s a competitive market and there’s lots of work, this will just mean that no general contractors will take your job. If they’re your only option to get the work done, eventually you’ll have to work with the best option of what you have.
Be careful if you read anything about people in commercial real estate working with contractors. These are big jobs that are coveted by general contractors. People offering big jobs can get contract terms, concessions, rigid schedules, and work done that homeowners just can’t.
Consider Using A Third Party
I tend to be fairly opposed to “middlemen” in general. You pay them for being an intermediary and often don’t get much value from it. With contract work, I think it’s well worth doing through a retailer if possible. I’ve had painting done by Sears, counters and appliance installations done by Lowe’s, and appliance purchase and installation by appliance stores. Each went very smoothly and I was happy with the work done and the time frame.
This is because the people working for these organizations realize if the customers are unhappy they won’t get future work. The stores have FAR more leverage to get the contractors to do the work properly than individual customers do.
Know When You’ve Been Fired As A Client
In retrospect, I was pretty pathetic to keep talking to the contractor for 4 months. He’d obviously abandoned the job, and I was too naive to read between the lines and understand what his excuses were telling me. It’s like someone who doesn’t realize they’ve been dumped.
If you’re too difficult to work with or if the job isn’t worth the outstanding payment, general contractors will have no problem abandoning the job. Understand when this has happened and be ready to move on.
The best recommendation I’ve read on how to handle this is to send them a firm e-mail telling them you’ll assume the job is abandoned if no further work is completed by a specific date (perhaps 2 weeks from giving them this notice). There’s no point in making accusations or writing angry things to them.
Decide for yourself if a lawsuit or writing bad reviews on various websites is a good use of your time.
HowStuffWorks.com has a list of 10 red flags when working with a contractor. The Chicago Tribune had an excellent article with advice about working with general contractors (archived).
I released a book on Amazon about “Getting Started As A Small Scale Landlord”. It treats this as a part-time job you can give yourself, rather than a get-rich-quick scheme. If you enjoyed this post, I think you’d dig it.
Have you hired a contractor before? How did it go? What lead to problems or prevented them?
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