Hiring Contractors Correctly

This is a task that we have perhaps failed at more often than we have succeeded. In this blog post, I’ll go through the mistakes we’ve made, how they’ve cost us, and our processes moving forward. Most people would rather go to the Dentist than hire a contractor to repair their home. These common mistakes are the most usual culprit when it comes to a contract that is stressful and costly.

When we were starting out, our scope of work was simple. It basically didn’t exist. Our contract would say things like “install new cabinets” or “replace windows.” There was no mention of which cabinets were to come out, how they would be trashed, where the new cabinets would come from, who would pay for them, or who would transport them to the jobsite. Does installing the cabinets include installing the hardware? Does it include installing the trim? Who pays for these items?

The truth is that to understand all the steps in the process, you have to break “install new cabinets” into 6-12 separate items–each with a responsible party as to cost, transportation, and timetable. You have to define what your expectation is as to look and craftsmanship. Yes, there are terms like “to code” that you can use to cheat here. But when push comes to shove, leaning on “to code” is only going to get you so far.

An excellent contractor can take a well-defined scope of work and deliver it to 90-95% of your expectations with minimal supervision. We have had the pleasure of working with this type of GC once or twice. This is an incredibly organized individual with decades of experience. You are extremely unlikely to find and hold onto this type of individual for very long.

You’re much more likely to find a contractor who means well but isn’t 100% focused on perfection. He has kids, bills to pay, and other problems taking up his time. He needs to be supervised…weekly or more. It’s your job to make sure that the job is on schedule and he has what he needs. It’s also your job to make sure your scope of work is being followed…and to speak up when something is wrong. You can’t just had him a scope and walk away…and the cost of the contract should reflect your supervision time.

You want licensed, bonded, insured contractors with reviews and recommendations. These things cost your contractors money and time. We maintain real estate licensure in five states. It is a costly and time consuming process. Finding someone who can manage their jobsite and manage their licensure and books is difficult. You will be tempted over and over and over again to give/take on these requirements. You’ll be given every excuse and you’ll be lied to. You’ll go to the regulator website and find that the license you were told about expired five years ago. You’ll call their insurer and find out that the builder’s risk policy expired last year. You’ll then sit back in your chair and think, “well, fuck, maybe this is the industry standard.” No, it isn’t.

The con man and contractor industries overlap. The bad contractors are usually excellent at sales. The good contractors have trouble finding new work until all their business is referral only. So if you go out looking for a guy with a truck, you’re very likely to be sold to by someone who is excellent at sales…and not much else. Not just that, the more you go out looking for contractors in the wrong place, the more you’ll be convinced that they all lack some basic paperwork. That’s not true. But the ones who have their act together tend to lack in the sales and negotiation department.

Get your basic, minimal standards in line. Then stick to them. Be a Buyer, don’t be sold to. Be willing to pay a little more to have people working for you who are responsible and can deliver.

P.S. Fire Quickly. They’re not going to get better. Get them off your jobsite.

We’re busy. You’re busy. Everyone is busy. Sometimes comes up. Minor repair. You call someone out to the house. You don’t have a contract. You don’t have anything in writing. They do the work. The price isn’t what you wanted. Guess what? You should’ve put it in writing.

Have a process. You’re going to have to hire contractors on short notice. Do they have authorization to work up to certain amount before you put things in writing? How is that defined? Do you have a process for getting things at least written over text prior to approving work? Do you have some agreement as to hourly fee?

You can gamble and you can accept the uncertainty that comes with lack of documentation. It may even work out in your favor every once in a while. But understand, that more often than not, it’s going to cause stress, disagreement, and wasted time. Lack of defined process tends to do that.

Contractors want deposits prior to starting work. They don’t know you. They don’t trust you. You don’t know them. You don’t trust them. In commercial construction, deposits are given only when a contractor is bonded. If the contractor fails to deliver, at least the property owner has recourse against the bond. In residential construction, anything goes. We have lost a few deposits over the years and our thinking on the subject has changed. No more deposits. We can pay you immediately upon completion of a day or two of work for those days. But under no circumstances, does a contractor get any money up front before work has started.

That sounds harsh, right? You’re going to meet lots of contractors who demand 25 or 50% down. What if you say no? They might not do the work. You might need to find someone else. You may even not get to hire the lowest bidder. These are all great options. Sometimes an interview with a contractor is just a first date. Very often there would be a second date. Get used to that. Lots of fish in the sea. Many of whom don’t require 50% down. Set your minimum standard and stick to it.

You will be tempted to give a contractor a deposit. You’ll be tempted to hire a contractor with an expired license. It will feel like a relief. Kinda like when the cops say, “you’ll feel so much better, just tell us the truth.” Do not trust that feeling.

Every once in a while, it might even work out in your favor. You’ll hire a guy with a truck, give him 50% down, and show up to see the work is perfect. That will make you think you don’t need a process. You’ll feel like you just saved yourself all this time and effort and you’ll do it again. Maybe even with the same contractor.

And then it will happen. The workmanship sucks. The schedule is beat. Contractor wants more money. And you have zero leverage. You think about all that legalese you read about so you call an attorney. The attorney explains that sure you can pursue the contractor but your options are bleak and expensive. Just one of these situations is enough to cause more pain, stress, and anxiety than sticking to your guns for years ever will. Trust your process. Trust that there is no easy way out.