Bamboozled

Is That Price a Little TOO Right?

Don’t Be Bamboozled by Lowball Bids

Comparing remodeling bids is a process of elimination that takes into account the level of services, materials and price. Unfortunately, many homeowners are tempted to look only at the price. One of the most common mistakes homeowners make is being tempted into taking the lowest bid. Naturally, everyone wants to save money whenever possible, and therein lies the danger!

Marginal Contractors Play Low-Ball Roulette

In an ill-advised effort to stay financially afloat, marginal contractors will sometimes make artificially low bids to tempt customers into signing a contract. Why? They need your deposit to make ends meet.

Here’s how it works. The contractor failed to charge enough for his previous job, which isn’t quite completed. Now he doesn’t have enough cash to pay the subcontractors who are still working on that job. He’s in need of some quick cash, so he offers you a bid so low you can’t resist. He plans to use your deposit to pay off the subcontractors from the previous job and hope to make up the difference on the next job. Maybe he will and maybe he won’t.

Depending on how far the contractor underbid your project he or she is very likely to run out of money again — this time before your job is complete. That’s the real danger to you. Homeowners sometime think, “Well, it’s his problem if he underbid our job. He’ll just have to do it for the price he quoted!” Actually, the more realistic scenario is the contractor could abandon your remodeling project, and will if he cannot find another source of operating cash in time. To escape creditors or angry customers the company can declare bankruptcy. If a contractor goes out of business in the middle of your project, it won’t matter what price you were quoted or what your contract says. The odds of successfully suing the company to get your money back are close to zero.

Spot the Warning Signs

Among companies in good financial health, responsible bids will typically vary by no more than about 20 percent. Overhead varies from large to small firms. An unnaturally low bid is the first clue of possible danger.

Requests for a percentage deposit on a project that includes no built-to-order cabinetry or unusual special materials are another cautionary note. Deposits for most projects should not exceed 5 percent of the contract total. A solid company will start a project with no deposit.

High-pressure sales tactics or seeming haste to get your remodeling project underway is another good reason to stall or get another bid. Don’t rush into projects. “Today Only” rates are bad news.

If a remodeler, after reviewing your project, sits in his truck for a few minutes and then brings back to your door a bid scrawled out on some stock form take his haste and quick-draw approach as an indication of the care he will put into your project. Never Ever Sign Anything When It is Handed To You!!

A Word About Deposits

Reputable remodelers have charges at most, if not all supply houses. They also have cash reserves as well as company credit cards. Very very seldom is there a justifiable reason to ask for a deposit. The remodeler should have cash reserves to cover payroll. Charges, either at supply houses or with credit card are 30 day revolving accounts.

Only on the rarest occasions has RDI had to pay cash for some odd item that a customer selected. We have, from time to time, required a deposit, but those times are for safety reasons. If a customer is entirely unknown to us and raises our suspicions we have been known to ask for a deposit up to 30% of the project.

Except in such rare situations a remodeler should bill at the end of the project or every 30 days which ever comes first. It is a privilege to not have to pay until the job is completed. Customers should not abuse that courtesy by not paying the bill in a timely fashion. Usually that means the money should be in the remodeler’s hands within 5 to 10 days of the date of the bill.

    This entry was posted in Resources. Bookmark the permalink. Both comments and trackbacks are currently closed.