Contractor Tales From The Depths

By Author: David Reinholtz
Total Articles: 48
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Property investors are beginning to dive back into the real estate market, thanks to the incredible deals that are available through either foreclosed homes (bank owned) and short sales (homeowners seeking to get out from underneath late mortgage payments and selling at a greatly reduced price -usually what is owed to the bank). Unfortunately, a side effect of the great bargains that exist is that some of the properties need some work.

Renovation is often the key to turning a profit when flipping houses, especially on foreclosed or bank owned homes that may be sitting empty for a long time. With this, contractors come into play (or should, if you or your client is considering doing to work themselves). Contractors have a host of stories, items that are part of their quote, or payment demands and each investor should be aware of the most popular ones, the ones that can take the investor for a bit of a ride.

Tale Number One: ‘I need money upfront.'

How many times have homeowners and property investors heard this line? While demanding partial payment up front is legitimate, the amount that some ...
... contractors demand is out of bounds, though far too many homeowners simply don't realize this. If a contractor quotes a price of $30,000 for a job, and demands half up front, don't assume you have to offer that.

Counter offer 10%, or $3,000. Any legitimate contractor will not hesitate to take the job, especially in this economy. Some may refuse, which is fine. There are more than enough contractors out there to choose from. 10% is more than fair and if you are ordering a specialty item -for instance, an Italian marble counter-top custom cut for your kitchen- then make arrangements to deal directly with the manufacturer on that item.

Why do contractors demand so much up front? It depends on the contractor, of course, but many of them have bills to pay on other jobs they are currently working on or finishing up. You shouldn't have to bear the burden of his other jobs, which is why 10% is more than fair.

Tale Number Two: ‘I can't come down on my price, sorry.'

In this economy, there's no such thing as having no wiggle room. This contractor is simply trying to get their boom rate for the job at hand. Millions of Americans are struggling for work and millions more are taking furloughs and pay cuts just to keep their jobs. There's no reason that anyone should be paying the same price that was being charged a few years ago, when the economy was booming.

To avoid falling victim to this tall contractor's tale, get multiple quotes from several different contractors. Just remember that you can't compare apples to oranges and that experience, and equipment and manpower certainly makes a difference. A young, motivated contractor may vastly underbid the competition, but does he have the insurance, licenses, is he bonded? These are questions that should be asked.

Tale Number Three: ‘Skip the permit. Don't need it, anyway.'

How many contractors tell this whopper of a tale? Commonly, they prey on the unwitting homeowners who simply don't understand or know the laws surrounding home construction and repairs.

It may sound like a bargain to save money while avoiding the permits necessary, but the only one who wins in this instance is the contractor who wouldn't have to live up to expectations that come with a permit, or inspections. Make sure you secure -better yet, have the contractor secure- all the permits before commencing any work. The contractor may try to talk the homeowner into obtaining the permits, but if they do, they let the contractor off the hook should any problems arise during final inspection.

Don't forget who you work for

Don't forget that while you may be a broker or mortgage lender or real estate agent, you work for your clients and regardless of your perceived investment in them, looking out for their best interest, guiding them in the right direction, will reap benefits for you, and your firm, down the road for years to come.

David