Was That Big ‘Win’ On Price Really Worth It?

We’ve all heard that line – “they got what they paid for”. Of course, how it’s interpreted and what it means can change dramatically from the perspective of the consumers versus that of the contractor.

Case in point: I recently completed a couple of small projects for a homeowner in Laguna Beach California (I took the accompanying photo from her backyard deck overlooking the beach) that had gone through a full floor-to-roof renovation the previous year. The home had suffered the ravages of time and its salty environment; leaving only a few areas salvagable.

Laguna Beach ViewAfter having renovation plans drawn up by an architect with proven expertise in beachside residences (good move – retaining someone who knows the environment and the resulting problems), she asked friends and business acquaintances for recommendations on general contractors and then solicited bids from three of them – also a good move in not only getting 3 bids, but having them bid off the same apples-to-apples plans and specifications drawn up by an objective third party who wasn’t associated with any of the general contractors. When the bids were received, two of them were pretty close in price but the 3rd was almost 20% lower. Everyone certainly loves getting a deal; but this represented a difference in price of almost $100,000 so while taking it seriously – caution was in order. The individual who recommended the low bidder was a close friend who had a successful history of investment in real estate.

The referral did come from a very trusted individual.

I know – you’re all thinking “too good to be true” or “unbelievable” or “there’s got to be a catch”. But before you judge, please keep in mind that this homeowner is no dummy and that the referral did come from a very trusted individual. The homeowner understood that some contractors will ‘low ball’ a bid in order to get the job and then really gouge the homeowner later with over priced change orders. But $100,000! That will pay for a lot of change orders.

I’ve written quite a few articles on the subject of protecting yourself on pricing but she didn’t have the advantage of having read those articles (like you do or will). So when the general contractor re-assured her that she was simply getting a good deal because of her connections, she went ahead and hired him. That was the last time she saw him until the problems became insurmountable.

The individual the GC sent out to do the actual work was represented as a highly qualified project manager (he also claimed to be licensed but he was not at that time). When the inevitable problems started and the Project Manager suggested solutions that involved more money, our deal-savvy homeowner refused to pay and insisted that the contractor meet the specifications and requirements in the plans. At this point, the contractor recognizes that he won’t be able to generate large profits from change orders on this job so can you guess what his reaction was? Finish as quickly and cheaply as possible and move on to the next, more profitable job.

Vast array of problems.

It was several months after the contractor proclaimed the job done that I was called in to provide an objective point of view regarding the vast array of problems. A discussion of these problems (including fault and possible solutions) could easily fill several more articles so we’ll leave it for now. Bottom line and to be a bit diplomatic – the workmanship was clearly substandard with incorrect materials used in some applications. For example: stacking stones were used on the patio rather than pavers and were installed over inadequately compacted soil. Result was extremely wide and uneven sand grout lines between very uneven and unlevel rows. The entire brand new patio had to be removed with proper compacting done and new interlocking pavers purchased and installed. Easy to blame the contractor on that issue but in his defense, the homeowner selected the stacking stones and was told (by the representative at a well-known warehouse home improvement retailer) that while pavers were best, stackers could be used as patio stones. She went ahead and purchased them anyways because she got a great deal on the price and the color was perfect.

It would be rather difficult to estimate the cost to fix everything as an investigation was limited to what was obvious and easily viewable. Should outer layers of the house be peeled away and ‘shortcuts’ found internally, the costs could easily exceed the $100,000 in ‘discounts’.

We’re left with some rather interesting questions such as –
• Who’s at fault (if anyone)?
• Did the homeowner not get what she paid for?
• Was she simply a victim or did the contractor take advantage of her?
• Was the contractor a victim of a savvy homeowner trying to get more than she paid for?
• What was the city inspectors responsibilities/role in all of this?
• Is there a remedy other than a lengthy and expensive lawsuit?

I will be exploring all of these questions in future articles. Stay tuned.

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