The home remodeling industry is booming because everybody is spending more time at home. The housing market will likely stay robust for years to come as a result. Unfortunately, home remodeling always takes longer and costs more than expected.
A good mental exercise is to expect your home remodel to cost 50% more and take 50% longer than expected. If your home remodel comes under these metrics, you will feel good about your project. If not, your expectations were too high.
I’ve done four major home remodels before. None of them were pleasant experiences. All projects took longer than expected. After my first two home remodeling projects, I finally wisened up to the game some general contractors play to extract as much money from homeowners as possible.
If you are planning on buying a property and remodeling it, please know that the permitting and remodeling process can be a very big PITA. If you are not good with dealing with stress, buying an already remodeled home may be a better bet.
Let me share with you one home remodeling example that demonstrates the opaqueness of home remodel pricing. Pre-pandemic, home remodeling already took longer than expected.
Post-pandemic, it is taking even longer to remodel a home due to supply chain issues, labor shortages, and a backlog of permits to be improved. Further, the cost to remodel a home has also gone up. Patience is a must!
Why Home Remodeling Always Costs More: Opaque Pricing
Back in 2014, I bought a fixer on the west side of San Francisco. The house was smaller than our existing house at the time. But it had gorgeous ocean views.
Further, I wanted to utilize new capital from an expiring CD and build more passive income by renting out our old house.
My general contractor (GC), who was also my tennis teammate, made fun of me for spending $6,000 for replacing my 40-year-old gravity furnace. It was lined with asbestos. I also needed to replace all my ducts and vacuum seal my house for a day to prevent any asbestos from escaping as part of the replacement and permit process.
“I could have done it for $2,000!” he said as he tried to make me feel bad about not hiring him. Oh well, saving $4,000 would have been nice. I thought he just did bathrooms and kitchens.
When my general contractor came back to me with a bid of $9,000 to paint the interior of my house, I almost threw up in amazement. $9,000 was a lot of money!
“$9,000 is a great price,” he said with a serious face. This was despite him quoting a furnace removal and replacement price 68% cheaper.
Because I thought $9,000 was ludicrously expensive, I declined his bid and found another fella I worked with in the past for $7,000.
After he discovered I was going with the other fella, my general contractor came back to me and said I was wasting my money. He said he knew guys that could paint my interior for only $5,800!
What the HELL?! He just said $9,000 was a great price. Now he quickly offered a new price 36% lower thanks to some competition.
Unfortunately for him, I didn’t take the bait. He gambled and lost. I decided to go with the other painters.
Endless Pricing Shenanigans With My General Contractor
After I hired my guys for $7,000, my contractor kept on harping at me that I was wasting money even though he initially gave me a bid for $9,000. Unfortunately, after I paid my guys $1,100 after two days of work (three guys one day, two guys the second day), they said the job was too much for them for only $7,000 so they quit.
Befuddled why they quit, I later found out that my contractor was fighting with the painters while I was away at work. My contractor was remodeling the kitchen while they were painting. The painters couldn’t take his harassment anymore! What a sabotage.
So now I was stuck without any painters. Logically I went to my contractor and asked him to do the job for $5,800 (his second bid price) MINUS the $1,100 that I already spent on two days worth of work = $4,700.
My general contractor said he could no longer get the $5,800 price. It was a one time deal and the guys are now busy. Ah, such utter bullshit.
Instead of getting the $5,800 gross price, he offered up one of his painting buddies at my original price of $7,000 minus the $1,100 spent = $5,900.
I understand everybody wants to make a buck, but I was thoroughly disappointed in my friend for trying to screw me.
In the end, I negotiated directly with a painter for $6,400; $600 more than my contractor had said he could get but $600 less than I was going to pay the other guys who quit (thanks to my contractor).
Why Home Remodeling Always Takes Longer And Costs More Than Expected
The reason why home remodeling projects tend to always cost more and take longer than agreed upon is because some general contractors want to make maximum money from you. Contractors can hold homeowners hostage due to more lucrative deals.
Making maximum profits is Business 101. However, some general contractors (GC) go too far. This article is definitely not going to make me any general contractor friends. However, I need to share my experiences on this often times very difficult process.
At the same time, the homeowner is also often at fault due to unreasonable expectations and demands. As soon as one wall is open, homeowners sometimes want to expand the project to do new things.
Let’s go through the reasons why most home remodeling projects take longer and cost more than expected.
1) The number one goal is to win the contract.
To win the project, the GC must highlight an attractive price and good quality craftsmanship. Competition is fierce, so contractors may exaggerate to win the contract.
It doesn’t matter if the price is an artificially low price. The goal is to have the homeowner sign the contract and lock them in. Once the contractor has gotten the homeowner to sign and begun demolition, this is when the GC can start manipulating the project to his benefit.
2) General contractors create a hostage scenario.
The deeper a project goes, the more a GC will highlight “unforeseen” problems that require more work. Even though there’s nothing really unforeseen for contractors who’ve been around long enough. Given most homeowners don’t have extensive experience remodeling, this information asymmetry is a powerful weapon held by the GC.
Let’s say a homeowner is $60,000 deep into a project after two months. Contractors know the chances are low that the homeowner will balk at an additional $10,000 – $20,000 worth of work to make the home better. However, sometimes, the addition work is unnecessary and doesn’t cost the new amounts.
If the homeowner really starts pushing back, then of course the GC will do the homeowner a “favor” and adjust the price so as to not have the project break down. But the homeowner really doesn’t know how to navigate the project as adeptly as the GC.
3) Homeowners’ emotions get in the way, which increases home remodeling costs.
A new home is very emotional for most people. It might have taken a couple 10 years of saving to come up with the downpayment. Or maybe the couple lost multiple bids and finally paid a big premium for this home.
The more emotional a homeowner is, the more profit the GC knows he can make. For example, let’s say the homeowner mistakenly tells the contractor this is their dream home. They overbid by $100,000. In such a scenario, what’s charging an extra $10,000 in remodeling costs?
4) Homeowners rely on default thinking which enables contractors to charge more.
Some experienced homeowners enter into a remodeling project with the default thought that the project will cost more and take longer than expected. Letting your GC know your default thinking is also bad, because a GC might really start taking advantage of you. As the saying goes, “give an inch, take a mile.”
It’s up to homeowners to cut this type of thinking out and make GCs stick to the contract. But GCs can be very intimidating sometimes. They use their intimidation to force things through.
The remedy for this is to have a LATE FEE clause in the contract. In other words, for every day a contractor goes beyond the agreed-upon finish date, you get a credit.
5) Smile and charge pricing strategy for home remodeling.
The most skilled price gougers are the GCs who bring up additional work to be done while constantly being nice and smiley. GCs understand that most homeowners just want to have GCs who take the time to listen to their problems and find beautiful solutions.
They understand homeowners are busy with their jobs and kids and don’t fully understand all the remodeling nuances. By just being responsive over e-mail and talking things through, some GCs adeptly persuade and guilt homeowners into paying more than expected.
6) Pricing discrimination by neighborhood.
I have a new contractor I’m using. He’s extremely unreliable and not a good communicator. But at least he is good value and honest.
One day, he readily admitted to me that if he has a home remodeling job in Pacific Heights, one of the most expensive neighborhoods in San Francisco, he will charge 100% more just because the homes there are more expensive.
He discovered that rich homeowners are much more likely to accept higher remodeling prices because their homes are more expensive on a price per square foot basis. Therefore, there is a bigger cost buffer they can deal with e.g. remodel for $1,000/sqft and sell for $1,500/sqft.
Luckily for the GC, input and labor costs largely remain the same. For example, the cost of sheetrock and electrical wiring doesn’t change by house price.
I have one friend who owns a home in an expensive neighborhood get charged $600 per plant when he landscaped his terrace. Each plant cost less than $50 bucks and he could have easily planted each one himself. He had no idea about the $600/plant cost until they began to die. It was only then that he decided to check his invoice and see how much he had been overcharged.
GCs know that some homeowners are so rich that they never bother to look at the receipts. Check your receipts!
Welcome To The Home Remodeling Jungle
The residential remodeling business makes the auto service business look like a girl scout lemonade stand business. Everybody needs to take their cut in the building business, sometimes even corrupt building inspectors who approve and sign off on your project!
I’ve heard plenty of stories where an inspector demanded payment for approving a project. So far the building, plumbing, and electrical inspectors I’ve been dealing with seem above board.
However, when I pay $325 for a roof permit, and the building inspector doesn’t even bother to climb the ladder to inspect the roof, I begin to wonder. All he did was drive up to my house, look at the roof, and sign the permit card.
Beware, the number one bullshit excuse general contractors like to use to charge more is that the project will cost them money. They will always say something like, “I lost money working,” or “I’m working for free for you.” They will try to guilt you into paying them beyond the initially agreed upon contract. Don’t let them!
They don’t lose anything if they have to work longer. It’s not like they have to spend more money out of their pockets for much more material or pay their sub-contractors if they aren’t working. The GCs just need to spend more time based on their agreement.
If you can successfully navigate the shady home remodeling business and remodel fixers in strong real estate markets you’ll do very well. But chances are high that you will get run over and get buried in your backyard with cost overages.
During the pandemic, new construction and remodeled homes are commanding higher premiums.
Strategies To Keep Your Home Remodel Within Budget And On Time
1) Get multiple bids
Don’t rush into anything, get multiple bids, and be willing to walk away. Be as detailed as possible when drawing up the contract regarding costs, time, materials, and work to do. Whenever a GC wants to charge you more, simply point to your iron clad contract and have them carry on.
If they don’t, then you must be willing to fire them and hire someone else. Be aware that you are only required to pay for work that is completed. Don’t let a GC swindle you out of work that he says he’s planned for.
2) Have alternatives
The best way to keep your general contractor honest is by having a detailed list of alternative people who can do the job. Your GC must feel the pressure of losing your business if they try to screw you too much once remodeling has started.
One strategy is to have a handyman purposefully work on another part of your house while your GC is there. This way, your GC knows you are resourceful and have other alternatives.
Whenever my unreliable GC goes AWOL for more than two weeks, I text him saying I’ll get my friend who he knows to finish the job. If I do, I’ll subtract his cost from our existing contract. My contractor always responds and gets back to work once he hears this.
Keep the communication pressure on.
3) Have a late fee clause
Finally, absolutely include a late fee clause in your contract. Come up with a conservative finish date so that your general contractor will agree to the late fee clause. The conservative finish date is also something you need to be comfortable with as well.
The late fee clause should state that for each day the contractor is late there is a credit or reduction in price.
For example, I once had inserted a late fee clause that stated that for every day over our agreed-upon termination date, I would get a $250 credit. The project went three months over and I was able to save $22,500!
Further, the late fee clause will reduce your anxiety. You might start rooting for your contractor to take his sweet time in order to save more money.
Planning And Building Department Backups
Another reason why home remodeling takes longer and costs more than expected is because your city’s Planning and Building Department is inefficient. When the pandemic hit, Planning and Building Departments stopped working in person. They tried to put everything online, but the system failed.
Also, there is sometimes corruption in the Planning and Building Department. Plans sometimes don’t get approved unless you pay for a meal, pay for a vacation, or slip some money under the table!
In the home remodeling industry, we call this “pay-to-play.” It stinks for homeowners. Hopefully, you won’t encounter a corrupt planning department plan approver or corrupt inspector who holds your permit hostage.
Related: Should I Remodel With Or Without A Permit?
Reduce Your Home Remodeling Expectations
Chances are high your home remodeling experience will be terrible. Therefore, I suggest you lower your expectations. Expect it to take longer and cost more than expected. But keep that to yourself. Further, you must educate yourself as much as possible about the home remodeling process so you aren’t constantly surprised.
You must negotiate hard with your contractor and continue to keep on him during the entire home remodeling project. If you find there are long delays, it is highly likely your contractor is working on another home remodeling project.
Of course, not all general contractors are going to try and rip you off. Some are going to be absolutely wonderful to work with. I just haven’t found any of them so far and neither have any of my friends who’ve remodeled. Even friends who have spent multi-millions remodeling their homes have had terrible experiences.
Good luck with your home remodeling project. It will likely be one the most difficult and frustrating things you’ll ever have to go through. Realtors have told me a home remodeling project gone bad is one of the most cited reasons for divorce and home sale!
But once your remodeling project is done, you’re going to be so glad the nightmare is over. If you focus on increasing the livable space, you will mostly likely increase the value of your home.
I‘ve got to say, reading this post definitely makes me not want to remodel ever again. From now on, I’m just going to buy an already remodeled home. I’m just too old to build sweat equity anymore! I’d much rather make real estate equity passively.
Home remodeling is costing more and taking longer in this post-pandemic world. The supply chains are still disrupted. Therefore, patience is a must. Make sure you set your home remodeling expectations low!
The good thing is, if you get through the remodeling gauntlet, your home will likely sell for an even bigger premium than before. With fewer people wanting to remodel homes due to how difficult it is, more people will pay up for already remodeled homes.
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As the owner of a design/build remodeling company, this article is the reason why we do things differently. We have a (relatively small) design retainer that allows us to work for (generally a couple months) with each homeowner to first design, then go through the entire selections process, do thorough “walk-throughs” with our trade partners and get quotes from each of them. We do all of this BEFORE we sign a project contract with the homeowner. This allows us to be 95%+ certain of all the costs of projects (before contract). There are, of course, certain things that we find buried in walls (rotten areas of wood, inappropriate electrical junctions, etc etc) that we can not know ahead of time. But these are a relatively small things compared to how things are typically done in the industry. And we clearly let people know about these possibilities.
I really wished other companies would adopt this strategy because it levels the playing field. We sometimes have homeowners share that they received several other quotes that were all below our “initial estimate”. In cases where people will send those “quotes” to us, we can see all sorts of places where those companies are leaving out many costs that are going to need to happen, its just that they don’t discuss those “extra costs” until after contracts are signed and they are into the project. In many cases, right within the quotes are lines such as “doesn’t include electrical work”, or “doesn’t include x,y,z). This is why we suggest that homeowners decide on a company to work with that that feel the most trust with, and companies that are being all inclusive in the pricing. If a homeowner is “tricked” into getting into a contract (meaning the company KNOWS its going to cost more than the “contract amount” but are playing a game to get the project) then the entire relationship is based on deceit. Its not ALWAYS a deceit by a company. Many companies are just way overly optimistic on things and sort of just unconsciously “tune out” what all the additional costs are that will ultimately be asked of the homeowner to pay for.
I certainly understand that the majority of companies choose to operate this way because homeowners often dont realize that the differences in costs from one company to the next is in things being left out.
There are other areas too that companies shave off costs in order to get contracts. They dont plan on appropriate management, secure clear deadlines, appropriate protection of the home, on and on.
And so, we rarely “give a bid” to people… because we have found that when people get a bunch of bids, it is very rarely ever an apples to apples comparison. If someone does really really push us for this, we will ask questions like: do the other bids include…. x,y,z? (all the things that are not the actual work itself… but all the things that are still necessary to carry out a successful project.
We have ended up doing several of these projects where we took this approach. And so some of our job is also to educate homeowners on all the tasks that are required for a successful project but are so often overlooked.
This was an interesting read for me. I am a project manager for a construction company in Seattle. We do not try to “price gouge” our clients. I don’t see other respectable companies doing this either. Ultimately, it costs what it costs. We charge time and materials. We will give you an estimate, what we think it will cost. Then, we open walls and find that whoever first built this house didn’t plumb or flatten the walls, or we find other issues such as electrical changes etc that need to be corrected, solutions to running new ducting etc. As soon as we get a client that is shopping for the lowest bid, frankly, I cringe, and hope they don’t go with us. Again, it costs what it costs.
When you look at 3 quotes, one most expensive, the next less, and the last ridiculously cheap. Here is what I see. The last bid, the guy (or gal) has under estimated, or missed something. Compare all three line by line…likely the first two caught whatever this person missed. Again, these are GUESSES based on knowledge, price gathering and estimation of man hours. Everyone will miss something, and it will be an additional charge item in the end. (or change order if you received a bid)
As a PM, its my job to make sure I have the right person doing the right job. If I had the same carpenter (60/hr) also doing site protection, dump runs, clean up etc, this is ultimately going to cost a lot more than tossing in one of my 25/hr guys to take care of that stuff. We pay our guys based on skill level, a living wage and health insurance. I would also like to be paid for my time organizing all of the details of your project. This will have to be done by someone….seems easy enough, right? You would be surprised how much experience it takes to keep everything moving forward with accuracy, budget tracking and flawless execution. Ultimately, what saves money is not the proclamation of a low price. Its how the project is run. Time is money….
Many people choose the lowest price on a quote or bid. What you likely are getting is a misrepresentation of what it will cost. You will have a guy that is great at woodwork, but bad a communication, organization and business. (also, try to build some cabinets while you are also answering the phone and taking questions from the plumber and the electrician…..Recipe for mistakes)
This is why the “price shoppers” have miserable experiences. They want what they cannot afford, and want someone else to build it for less than it actually costs. Its almost a guarantee that someone, either you or your contractor, will end up unhappy.
Go with the company that gets good reviews on their projects from all aspects. Leave extra money available for things that come up.
Here is another list on how to save money on a remodel:
Choose everything up front – Give your GC a list of every item that will be used in your remodel. Down to the switch covers. This will save time of numerous phone calls to you, the architect and the guys onsite wondering what goes where.
Invest in drawings – These are like having directions with your ikea furniture vs no directions.
Don’t offer to help – Clients think they are saving money by helping. This is usually NOT the case. Even inexperienced cleaners can cause problems that cost more time/money.
Dont continually change your design – Finalize the design before any construction begins. The amount of time spent to switch gears eats dollars.
I am a contractor and I say 80% of customers are horrible to deal whit.they have unrealistic expectations timewise,and they have only appreciation when the job is finished.the rest of the times you are in their way,they are impatient and they let you know.
The sad part is that a segment of Contractors fit the description you give, No doubt, but when reading both articles all the focus was on the cost/money – then- (no surprise) all the problems that follow that. I don’t recall at all any mention of hiring a Reputable contractor, someone affiliated with the local & nation builders Association. Spending time on checking references, not just getting 3 bids for cost but spending as much or more time checking references and looking at past work.
Construction works out this way, triple constraints triangle: Cost – Time – Quality. You can have 2 of the 3. Cost & Time = Quality loss, Time & Quality = Cost more, Quality & Cost = Time. (note- Quality isn’t just workmanship but also professionalism)
Last comment is that getting 3 bids from crap contractors wont change the bad experience coming. But 3 bids from reputable contractors that have been vetted will make the experience pleasant not a nightmare.
Thanks,
Thank you for your article however I honestly took exception to the negative positioning of our industry. Not all contractors behave this way at all. We call those that you described the “Chuck in a Truck” who has no ethics, minimal insurance, no real experience and does everything on the cheap!
We are a professional full service remodeling company with 6 full time employees. We take a lot of pride in all our work. We get at least 6 or 7 full page unsolicited testimonials from our customers every year. We are fully insured and all our specialty trades such as electrical, plumbing and HVAC are as well. They are all vetted and have worked with us for years.
After 25 years in the business we know what we are doing. Our entire focus with our remodeling company is customer centric and you can check it out on our web site. Google Winds of Change Contractors Colorado Springs. (Look at our testimonials) We place all our emphasis on how to take care of the homeowner.
Our guarantee is if we do not bring your project on time and on budget, we will pay the difference. We also go to great lengths to properly set expectations, everything is in writing, including how to manage and pay for change orders when someone wants something extra, mid-stream into the project. (Which invariably they all do)
We are members of our community associations such as the HBA Remodelers council, and sit on the board of several others. We participate with non-profits to give back and we are constantly improving our team, and our company. We take our free time to teach others more about the trade and how to build a successful contracting businesses.
It is important to us with the pride we take in every project. We designed a process to make it as stress free for the homeowner as humanly possible. We realize they are losing the use of their kitchen, bath or their deck and that is huge to them. We make sure every detail is managed from installing temp Hepa filter machines and clean rooms being built on site to insure no dust enters other areas of the house. We provide restaurant cards as a gift so they can go out to eat on us. We fully provide protection on all floors, walls, ceilings and doorways. We are not the most expensive nor are we the cheapest. We are a value based company that prides ourselves in delivering a superior experience with a superior product at a reasonable price. We fully disclose everything with our clients.
As to building inspections, here in Colorado, we are required to have inspectors to insure we are building everything to code! IT is not an option, nor should it be. It keeps the bad guys out because if you remodeled something that required a permit or needed an inspection and did not get one, it will be revealed when you sell your home in this state. Imagine trying to sell your home when you did not get an electrical permit or inspection with your new kitchen. So do the right thing.
I get it, as there are bad companies in all industries and there are those that make us all look bad in the eyes of the consumer. However all our clients have become our friends because of the emphasis we place on customer service.
FYI. I have several friends and buddies who own other successful remodeling firms like ours and only one of us have a college degree.
Take your time when hiring and make sure you ask for and CALL all their references. Call their insurance companies to make sure they are currently insured and be sure to call whoever has their workman’s compensation insurance. Also call the Regional Building department and make sure they are in good standing and have no complaints. Ask their references one question. Would you hire them again and were you delighted with the process and the finished work?
Thank you for reading all this and appreciate Irish 247 comments.
Contractor and landlord here who’s near the end of a long, expensive, and stressful renovation. For me, owning a rental is about 80% managing contractors. If you can figure that part out you could win at the rental game. But, don’t underestimate the difficulty of managing contractors. Without a background in the building trades and management experience chances are you’ll struggle for years before you get it right.
A big factor is that schools pushed us all towards white collar careers and nobody knows plumbing, electric, carpentry, hvac etc. Now there’s a shortage of guys who can competently work on properties but a whole lot of homeowners looking for good contractors.
Sam, you said: “they don’t lose anything if they have to work longer”. Just because their flat rate stays the same doesn’t mean they don’t lose anything. Far from it. If a job takes 150 man hours instead of an estimated 125 that contractor lost time. And in service work time is definitely money.
I can see many sides of this discussion. We own rental real estate, we own a handyman company and I have a W2 professional office job that has nothing to do with any trades.
We have only used a contractor once and I won’t again. I’ll just go straight to the sub-contractors. We used the contractor because the house had been set on fire by the tenant and we needed about 50k worth of work done and we now live in another state. I wanted someone to manage this for us given the busy time of year it was in my W2 job which makes the vast majority of our income. I felt like I paid a premium to chase the contractor around to get the job done vs just dealing with the subs myself.
They also kept trying to charge us for things that were included in the original itemized quote. After the third time I was pretty annoyed and felt they were trying to take advantage. I really wish I had set a fee for them being late and if I ever use a contractor again or any sub for a significant job that’s going to be in any contract I sign.
Now all that said with the handyman company we do often run into people who have no idea the time or skill that a job done right takes. They are scandalized that a tradesperson might make a similar amount to them hourly in their “professional” job.
We have people start adding extra things onto a job that was quoted specifically for what they originally asked for and that they do not want to pay more for more work. They’re get mad and blame us because they added more work but don’t think they should have to pay more? Try that at a retail store and see how far you get.
We run into people who think that they are better than us or smarter ect.. (little do they know the handyman stuff is a side business and I probably make more at my W2 than they do at theirs and the handyman business makes us more than a lot of people make in a year)
Yup I make 6 figures in a professional job but I’ll go out there and help stain a deck ect.. In some ratty old clothes after work if needed for the handyman business. There really is an arrogance out there some people have who think they are better than those who work with their hands.
I’ve never had a project where we were doing our own work that did not have at least something come up unexpectedly. Sometimes it’s little-sometimes it’s not.
Example we are turning our theater room into a suite for our college age son. He’s saving us a ton by going to a local college. When we pulled up the baseboards and carpet along an outer wall we saw a small area of mold. Pulled out the drywall and could see whoever put in the window above didn’t seal it. Been in the home 5 years never saw any signs of this. So now we have to pull out dry wall and replace
some of the studs and all the insulation as well. Then seal the window properly and replace the sill. This will add time and money to the project. It’s not the fault of the person who is doing the work. It’s just sometimes you cannot see issues until you start pulling things apart.
It’s really true you can have any 2 of the 3 items below:
Fast
Cheap
Done well
I’ve done quite a lot of work over the years on our house and worked with a small company who has guys (lots of relatives in the business) that can do most any project. They do a good job and are reasonable priced but they are notoriously slow. I got a spare room renovation project going on now and a guy only showed up one day this week. But the guys are good and I worked with the owner (who also does difficult project work himself) on about 5 projects over the years.
In general, I’ve selected Done Well and Cheap. I work with our contractor to ensure disruptive work gets done quickly but if it’s not that inconvenient, I give the contractor latitude to take care of their other customers with more critical work. in return, I get quality work and sometime some “extras” for free (e.g. in this project, he had some spare flooring from a past project and didn’t charge me for the material.
I don’t claim this always works. You need a contractor who has the skills and integrity. I feel we got lucky and found a decent contractor early and just stuck with him.
To me, the biggest mistake homeowners make is trying to nickle and dime the contractor, putting dollar ahead of workmanship or service. And after the fact wonder why they had a bad experience when the homeowner put money ahead of everything else in the decision process. If multiple bids on the table for consideration, ask the high bid WHY they are worth the premium, and why the low bid think they can do the same job for significantly less money because that is as much as a red flag than high bid.
Does not mean I agree with the GC friend’s actions, but don’t expect Ritz Carlton finish when the decision process favors Motel 6 value.
Unfortunately the biggest challenge to the homeowner is how infrequent they’d need construction or renovation work. If someone remodels their house every 10-20 years, the concept of customer loyalty does not apply in a meaningful way, so both the homeowner and GC try to extra the most short term value instead of trying to build a long standing working relationship.
Wow. I’ve generally had only great experiences with my contractors.
Of course, this is the greater NY metro area and everything is like, “Oh yeah, my coworker’s sister’s son has a cousin who does that sort of thing. I’ll send him your way.” And said cousin either has a great work ethic or doesn’t want to embarrass himself in front of all those people by allowing you to be disappointed.
And what you said about charging more for nicer homes is dead on.
I ordered an extra nice toilet from Amazon and the plumber we use, whose kid’s went to school with my wife’s kids, comes and changes it out for a reasonable price within a day or two.
My dad, who lived in a small coastal town in the Florida panhandle, saw it and ordered one just like it for himself. The plumber he called came out, looked at it, and wanted $1,200 bucks for the same job. Many times what I had paid just a few miles from freaking Central Park. Of course, that plumber had seen a gated community, a big beautiful home with exquisite furnishings and landscaping, and an old guy living alone.
He didn’t realize that the old guy had done the same job himself at least a dozen times when he was younger, and knew exactly how much and how little was involved. That contractor didn’t get the job (hell, it would have been cheaper for me to fly down and do it myself), but the job eventually got done at a reasonable price.
Awesome! It’s definitely harder to screw over friends and family.
We are looking to move to a different house, and we’ve been deciding whether to purchase a home that has everything we want for a higher price or a good home at a lower price that needs some work.
In the meantime, we have done minor touch-ups of our current home to prepare it for sale. These touch-ups included paint work for 6 interior wall faces, electrician work for one pendant light fixture, 4 bedroom carpet cleaning, deep-cleaning of all the interior, and cleaning up the yards. Except for the electrician work, either every single item went above the agreed-upon price, or the finished work was unsatisfactory and needed additional $$$ paid. These jobs are not major tear-downs such that unforeseen events could exist at the outset.
As a matter of principle, we refused to be induced to pay more than what was agreed, so we terminated all work and did it ourselves. We did the remaining paint, finished the carpet-cleaning, cleaned the remaining bedrooms, and cleaned up the weeds ourselves. It was not a matter of price so much as a matter of principle of setting and meeting expectations. For many of these jobs, we did not necessarily go with the lowest price, and the deliverables were clearly stated. We would have been okay with paying more if this was agreed upon at the beginning. I am a lawyer by profession, so I am accustomed to documenting every possible detail and setting up contingencies, but I was mistaken this time in not documenting every detail believing the stakes were not high enough for the effort. The only contingency my spouse and I discussed was that if prices go over what was agreed, all work is to be terminated, we would make a note of the bait-and-switch for future reference, and we would do it ourselves.
Thankfully, the work that needed to be done in our current house was so minor that we could do this in our own free time on the weekend, but this little experience made us decide not to buy a house that needs work. Although my experience is based on minor touch-ups and on just being a homeowner in general for contracting periodic home maintenance work, my advice would be to 1) document and memorialize everything, e.g., if you hired painting work, write down every single wall face, every single trim piece, every single baseboard, etc. (ideally, after notifying the service provider in advance, just video the entire conversation), 2) include a quality-control step into the contract so you can QC the work and that mistakes are not billed additionally, 3) keep a shortlist of the contractors and service providers you have had good experiences with, and for the ones that were bad experiences, document in detail what went wrong for future reference.
I don’t have experience with major home renovations, but I agree with one comment I read on this page: Document everything and price-itemize every contingency (like a tree diagram), and define every term in the statement of work. When I was previously in private practice, we operated under this exact type of itemization tree diagram for our client companies based on every permutation (and likelihood of each permutation) that a litigation pathway can take on, e.g., if the judge grants a motion to dismiss, if a claim construction decision is favorable, if one versus two versus three versus four issues can be knocked out early by summary judgment, how cooperative opposing expert witnesses are, etc.
Every industry has uncertainty in estimating deliverables, and litigation is arguably the most uncertain area possible, with a million different set of outcomes, and it can last anywhere between one day to 7 years, so if I can provide a price cap and range for a client company on how much a litigation will cost based on every possible permutation/assumption, I don’t see any persuasive argument to be made that a price cap cannot be provided for a home renovation.
One time on a home remodel I had the contractor propose a very interesting contract term for the cost of the construction materials.
He agreed to cover the cost of all “basic” materials like drywall, wood, wiring, plumbing, while I agreed to pay for all “finish” materials like cabinets, doorknobs, faucets. He still covered all of the labor.
This sort of pricing removes a lot of risk from the contractor, meaning they don’t have to detail each and every fixture within their contract (each with specifications, alternatives, maximum prices, etc), and they don’t have to factor your aesthetic pickiness into their bid.
They also cannot markup the prices on these things if you’re the one paying for them.
I think this sort of contract term is beneficial all around, and should be standard for most home remodels.
This type of material pricing is standard and something I’ve done in all my remodels. It’s only fair to pay for your own finished materials since the quality and pricing is so wide.
Hi, I’m in the middle of a house re-siding project with a contractor who I thought gave a good price. Work was proceeding well, but the other day the contractor showed me 4 double-hung windows that were rotted around the edge and needed to be replaced before he could go further with the siding. He said the price was $5400 complete, including new interior molding. I was a little surprised and said OK right way, but now I think the price is high, as it looks like each window costs around $400 at Home Depot (Anderson 400 series). I’m a little upset, but I’m not sure if there’s anything I can do now that I gave the OK and the windows are in. He said windows are hard to get right now. Does anyone have a suggestion?
Go to Home Depot or Lowes to price. That Contractor is smoking crack! Always, Always get 3 estimates. Put a hold on the work. I hope you haven’t signed a contract. When someone gives you a price always tell them you have a cousin that’s a contractor and you want to get their recommendation too. Always ask for a written estimate listing the scope of work and amount.
I’ve remodeled 6 houses now as it is a passion of mine. Professionallly I sell building materials but also like to get my hands dirty. While I do 85% of my own work I don’t touch electrics, roofing or most plumbing work.
There have been many valid points made from both sides. In this world you definitely get what you pay for so keep in mind you aren’t paying for his 8 outs of labor, you are paying for the 25 years of skills he has accumulated. You are just renting them that day.
Planning is the biggest opportunity to save money. On my own jobs, the biggest unexpected costs arise when I deviate from plans. While the outcome may be more desirable it always costs exponentially more money. Plan beyond any level you believe you need to plan to save money.
Speaking from enormous experience, it’s the same way when contracting to write a computer program for someone. It’s not just a matter of inserting a few extra lines of code with a keyboard.
Scope creep awareness, firmly setting expectations, and a clearly defined change management process can help, at least with some clients. However, these won’t be the ones that want you to skip all that preliminary stuff and just start writing code.
Great synergy with your business and remodeling. I’d certainly do most of that myself too.
Although, I did see one sub slice open his finger with the blade saw and ripped from top of my house down. That was kinda traumatic.
Interesting perspectives. I think after reading some of these comments and the harsh views held by some related to the skill sets or knowledge base of some of these trades people and GCs i’m appalled with the arrogance. I work for a large GC so I may have some bias overall in relation to my view on small GCs and tradespeople. However, I do understand the frustration people can have with subcontracting any work and I think it is due to their own lack of experience, education or effort to research and understand options. As a side note, for those of you doubting the talents and billing rates of “uneducated trades people” check out Mike Rowe and MikeRoweWorks Foundation. The country as a whole is rapidly approaching a massive skills gap, largely due to the idea that everyone should go to college and chase the “corner office”. However, society will fail in my opinion if that is the case. We need people with proficient skills in all areas to survive. Good luck waiting for the tech geniuses to create a bot that will perform all of these repair tasks for you.
While the post itself has numerous valid points, I think like with anything having more information and open communication is the key. If you make your expectations known from the beginning and take the time to strike an agreement outlining all risks and contingency plans, including allocating funding for mitigation, then you will be successful.
I think some of your tips such as a late finish clause is good, though I think you would need to be flexible and understanding to reasons why there was a late finish. Utilizing LDs in construction is very common, but enforcing them doesn’t always happen.
Another point for those commentators who were “screwed over” in the past paying too much in advance or giving cash advances. Why would you do that? You come to an agreement and you need to enforce your contract. I have had contractors on my home renovations ask for 30% deposit, or 50%, etc. I always say no. I will pay for installed materials only (given the job scopes were small and short in duration). This is an agreement you come to, and then you need to stick with it.
I find the negative perspective on trades mentioned in the various comments unreal. There are so many skills required to become competent in performing some of the tasks people listed and mocked.
As for the comments about “barely graduated high school…” I don’t see how that is relevant. Not everyone is going to be good at the same things. Further, people with skills who find a way to get paid for them are likely better off at least economically than someone working in a dead end office job with a college degree.
I know a lot of individuals who “barely graduated high school” that now run their own business, whether auto mechanics, plumbers, electricians or GCs. They learn to master a skill or how to manage others and build their empires.
Sure, one mechanic I know can barely write a complete sentence without a couple spelling errors. This same guy of course has a franchise of auto repair shops, and a $5M house that he owns out right. So, I think there is a place for those who may not have excelled in high school, but have found a way to flex their talents.
As noted I happen to work for a large GC myself. I can tell you some of the most talented people I have ever met have gone through the trades programs. The amount of knowledge some of these people are able to gain in their careers while building, installing, running equipment, demoing, etc. is simply amazing. Not to mention those with the courage to go out on their own and start their own companies. Why would you look down on them?
My last suggestion for those of you who mock the trades. Try doing some of your own home renovations. See where the skill gaps really are. I think sometimes because these people make it look so easy based on their abilities, people begin to think the work is easy. I challenge each of you to try and do some home maintenance and maybe you will learn to appreciate the contractors and trades more. Their knowledge of the tools they need, and the materials required for a job. The fact that they can anticipate the duration, and give you a fair assessment of the value of work and time to complete the tasks alone should give you confidence on their abilities.
Sure you will have a varying price when you submit for quotes. This is one reason that you should always get at least three numbers. At a minimum this will allow you a sanity check, but also will give you a value confirmation. One of the best tips I can give you is to hide the final number of the quotes. Stack up the quotes and compare the value. Look at the track history, what they are offering, and your general comfort with the contractor. Then after you make that opinion look at the final price. If you can afford the one you rated the best, then maybe that’s the best option. If you can’t, then you need to make decisions on what service you are willing to sacrifice to get to the price you need, or what level of contractor you are willing to accept to perform the job.
Lastly, avoid the “F you” number. Sometimes you will get those, because a contractor/trades person is so busy with work they don’t really need more. However, they will go give you an estimate to see if the work can fit their schedule. If they don’t really have the time for it or it doesn’t align in their work cycle, they may still give you a number. This number will be high but if you are willing to pay it then they will shift things around to get the work completed for you. This isn’t exactly bad business, it’s more supply and demand. If they are in high demand, then the price goes up. If they are chasing work then the price goes down. Simple economics. Again, this is why you need multiple prices to get the sanity check.
Homeowners definitely need to educate themselves as well. Bad expectations and poor education by the homeowner is a cause of a lot of tension and problems for sure.
When remodeling a home, if you are living off site, you need to visit your property at least every other day. Here are just two examples of mistakes I caught what we were renovating our house. First, we decided to place kitchen cabinets up to the ceiling line. I came in one day and noticed that they had installed a soffit. The second item, was also in the kitchen. They had sealed the walls but failed to extend the gas line through the wall for the oven. The contractor tried to place the blame and additional costs us. You need to keep an eagle eye and take nothing for granted. .
Sorry to hear you had an experience that did not align with your expectations. It is stressful and can get expensive/ unpredictable depending on on your GC.
Our most recent remodel and the experience was quite pleasurable! Guess I got lucky. I didn’t hire a GC this time. I found my tradesperson through Craigslist and went one room at a time. When we were ready for the final piece (main area wall removal, ceiling vault, huge new kitchen) he had become quite familiar with us and we had time to build a great relationship. He also showed competence in reading the engineered drawings we had done for the eventual plans (also through an engineer I found on Craigslist).
I’m honestly so grateful toward him for his work ethic, skill level, innovation, and his devious ways to help us save money! I think he helped us so much because he wanted to keep working together- and it worked. I got him going on another house last month.
It was rocky at the start and there were the usual fights. But over time, I came to really like and appreciate the guy. I did things to keep him happy like sending him Starbucks gift cards, gift cards to go for back massages, money to get his truck detailed, Christmas presents for his family, and I let him find a couple of gold coins tucked into walls during demo (which he incredibly told me about). He has been totally worth it and has underbid his own work. I thought about late fees initially, but instead I gave him surprise completion bonuses on each scope of work from the start. This worked well to incentive him to get stuff done.
It’s OK. My remodel ended up being good value, so it’s fine to look back on it now and laugh.
Did you do your work with permits and get it approved? That’s one of the big issues for remodeling the U.S. I want the permit and I want it approved so it goes on the 3R report, which boost’s the property’s value.
Oh man home remodeling is SO stressful and takes freakin’ forever. And contractors are so unreliable. They start off great and then fade into the distance and sometimes totally disappear! Augh. It’s nuts how many details are involved when you remodel and if you don’t stay on top of the work, so many things can slip through the cracks or get done wrong.
I try and do small projects by myself when possible because it’s cheaper and much more efficient. But whenever I’ve been able to find someone reliable it’s nice to have someone to fix things. Recently I managed to install some Toto washlets all by myself which was nice. It was a little confusing at first because the instructions weren’t that great, but I figured it out. Anyway, really helpful post. Thanks for covering so much!
Yes, I can confirm that this is accurate from my experiences. I love the idea of a late fee. I’ve also heard that a good thing to do is this. Ask your GC for a conservative estimate of when they can complete the project. Get them to outline what potential things could go wrong that would make the project go longer and cost more. For each one, have a discussion about specific impacts for each of the situations they outline. Once these things are out in the open, you agree upon the deadline and talk late fee. This might not be foolproof, but at least it shows them that you are not going to fall for a bunch of made up bs reasons for a markups and delays.
Also, if you make additions or modifications to the project scope after it’s in motion (which happens a lot in my experience) get written commitments on the additional expenses and timelines in writing before you agree to them to protect yourself.
This problem is not unique to home remodeling. Proper cost estimation is ALWAYS a problem. People love to underestimate the amount of time and money that any project will cost. This is because they ignore the small details.
There is a rule in engineering that 80% of the cost comes from 20% of the features. In general, this means that the small features that you gloss over will have an outsized impact on the total cost of the project.
Thanks for this timely post, Sam. Yesterday, my husband and I transferred our reno budget to our bank account. We’ve been talking about this since before the pandemic started (yes, we’re cautious). I’ve gone back and forth, “Do we hire a GC? Or act as our own GCs?”
I’m forwarding your post to my husband!
Again, thank you for sharing this.
My step brother is a GC. Let me tell you that he can confirm most of the stories you mention in his experiences before he became a GC himself. They say its good to have a doctor in the family, but let me tell you, a contractor in the family is beyond priceless.
Hope he’s a good GC! Having one you trust is so incredibly valuable.
Mine is absolutely terrible. But he’s good value. Also, as I’ve gotten older and wealthier, I’m not as stressed if there’s as much wasted time. The buffer has grown so the stress is down. The late clause is huge.
The thing is, you don’t always get what you pay for. Paying more for a GC doesn’t guarantee a great experience whatsoever!
I am fortunate from my law practice to know several local contractors and I am in the middle of an addition to my house. I hired the contractor I trusted most and didn’t bid the project but did negotiate an end date. Thrilled with the results so far.
This article is quite true. One thing I found interesting was the author refers to the contractors as “my contractor” or “my guys”. They are not! They will bait and switch and the idea is to try to get as much money as they can.
I have had the same exact experience in Los Angeles, twice in a row on a construction project.
The first one, a licensed general contractor took $41,000 and ran away. He would do whatever it takes to get the contract signed. Then he submitted invoices very quickly saying the quicker I pay, the quicker the work would get done.
I was naive to keep paying, but when I came to my senses and confronted him that this is a lot more money than the work completed, he started to abandon the work. I had to call him everyday, leave a voicemail, send text messages and email, but no response. Finally I had to file a CSLB complaint and a bond claim.
The CSLB was useless. He didn’t respond back to any of their correspondences and the bond company had 3 other claims, so I haven’t gotten anything.
The lumber company put a lien on my property because this scum bag didn’t pay the lumber company. I had to pay out of pocket nearly $12,000 that I had already paid the contractor.
Then it took me a while to trust any contractors. I got over it and selected another contractor to complete the work.
He did the same exact thing. He got into contract, kept wanting money every week, which became every day so he could pay the workers etc. and kept lying that he would finish 3 or 4 inspections next week. Once he got the monies, he would delay everything and keep asking for more money. He had advanced $22,000 (70% of the project cost) for work that was about 35% completed.
[Just to let you know I was not the only guy thinking these guys were slacking off, the electrician who happened to have been brought by the contractor, and his friend, would say it to their faces that they have too much work remaining and they are making very slow progress. This will tell you that I was not a biased homeowner. I was the guy who kept giving money every day.]
Then he would threaten to not come back if I didn’t pay him every day.
When they see the kind of car you drive, and that you have a good life, they want to extract as much money as they can. This guy drove 2 hours to get to my house because he couldn’t afford the rent in LA, he would run out of gas and I would fill his tank up to be good to him. I would keep giving him money for food and gas everyday, paid for the porta potty, scaffold and equipment etc. even though he had included those in the contract price.
Overall, I have come to realize that the only way to complete a project is to not enter into a contract with anyone. Just get a quote for it piece by piece and pay as they complete the job.
This may end up being the same as what you would pay with a full job quote, because every contractor will always extract more than they had quoted at the beginning, because they hold us “hostage” by knowing that the homeowners are lazy to go find another contractor and we just want to get the work done.
It is best to get the hard things like foundation, structural, framing, roof etc. done by different companies and the rest can be done by people with reasonable skills.
I have heard of people who own houses in third World countries. They’d just make a phone call from the US, and the contractor completes the job and they send the monies by Western Union. They are happy to have a job and they respect the homeowners as they know that’s how they can establish a good relationship for future business.
It is very disgusting that in Los Angeles (America), the construction workers are such dirt bags.
One race of construction workers hate the other, but they all do the same exact thing. So, it is not a racial thing, but it comes with the construction trade. Perhaps their mentors, fathers or someone teaches them these unscrupulous ways.
I can clearly say that based on my repeated experiences, there is a serious lack of ethics in the construction Industry. This has to change if America needs to keep its reputation as a good place to live in.
I need help with finishing up this construction, remodeling the main house, repeat this construction on a different house etc. It is in their best interest if they worked smoothly with me and other homeowners so they can get repeat business. But they seem to want to get their kids to college with one project. They seem to lack good business ethics and common business sense.
Any contractors who find this post and my comment offensive, c’mon dude, we know you have done this before!
First of everyone needs to do due diligence before hiring a contractor & signing a contract ( you always have 3 days to back out of a signed contract) Contractors will never charge more than what was on the a quote unless it’s a change order.
If you get an estimate then it’s a different story or if you do T&M. In those cases both parties are screwed because the homeowner will think they getting ripped off if it takes longer than they think it should. The contractor will lose a client justifying the cost of extra work that was done. If your contractor cant give you an exact price you should pass.
Second is about this guy “ShaK” crying about contractors, he is out of line and guys like him get what they put out in the world.
Third is you can go out to eat at McDonald’s or French Laundry, should you pay the same price? Is the service the same? Is the skill level the same?
It’s all food right…lol wrong there is a level in every industry and you decide what level you can afford or or want.
You can have a master craftsman or a day laborer, you decide the level of craftsmanship, Passion, integrity you want to receive.
Great general contractors with amazing subcontractors are everywhere if you stop focusing on the price and start focusing on the value and quality craftsmanship you will receive!
I mean Shak isn’t really all that wrong…
I’ve been doing it for probably five years mostly cause I couldn’t find one. There’s shitty ones around every corner. My first one I took over the gc stole $50,000 and the guy had oodles of liens on his property.
I operate a little more informal at times but not shady. My original bid is a starting point. When you want to make changes we’ll alter it. If small things pop up though I do them and just bill. Part of my job is seeing the job gets done. If it has to be done, it has to be done.
I give free quick estimates. When it looks pretty confident the job is mine I’ll bid out the bulk of it based on what I can see. I don’t waste my time with window shoppers. If I get the impression you’re price shopping beyond a quick estimate I walk. Bids take time. Not interested in having my time wasted.
I’m not going to bid things like how many holes need to be fixed after the electrician has been in there running wires around in an existing structure, they’ll get fixed and billed for at what I would’ve bid at. I have a price book that I operate out of. Remodels can’t be be fully bided, but I try to make sure it’s fair to everyone myself included with extras. Recently replaced a bunch of windows, and they needed new stops. I made good margins and got what I wanted, so I made them new ones for free.
I don’t know if I’m cheap or not. I decide what I want to make on a job. You decide if the jobs worth the price to you. I know my markups on subs can be high. But it’s a job in itself staying on them.
Price shopping? So you think that a homeowner should just hire you without getting other bids? This is why I dislike GC’s, as “anyone” can be a GC and unfortunately, that’s what happens. To be an PE, or architect, you have to get a degree, and pass certification tests. The bar for the minimum level of skill in those fields is far higher.
So I am not the only one who has seen and experiencing this GC issue. It is interesting that there is no easy method of going after these guys. In California good GC are difficult to find.