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.

Increase a Homes Value

How to Increase a Home’s Value

Want to know about strategies that will increase a home’s value over it’s neighbors at a relatively small increase in cost? Consider things that are a bit just outside of the norm.

Move-in quality

What home buyers, sellers and investors (who are a bit of both) have in common is evaluating what Realtors refer to as the home’s ‘move-in quality’. Realtors will tell you that most home buyers prefer something that they can move right into with the least amount of disruption. At a minimum, they want the home’s ‘bones’ or floor plan and the way things flow from room to room to be just right. From the home buyer’s perspective, everything else – like the kitchen cabinets or bathroom sinks – can be changed at some point in the future.

Of course the investors perspective is price first, but they too recognize that the basic structure has to be right or they’ll have a hard time finding a renter or flipping the property to a new buyer at a nice profit. They also understand that in a market with few buyers, they need to make their property a bit unique in order to separate it from the competition and increase their chances of making a decent profit.

Want to know about strategies that will increase a home’s value?

Covered Patio Construction

why would a qualified home buyer select one house to buy over any of the others?

And of course, home sellers readily recognize they too must answer the question – why would a qualified home buyer select one house to buy over any of the others in that same area – especially tract homes with an identical floor plan? The answer here again is to make it stand out a bit by creating something memorable. But someone selling a home is probably not looking at investing any more dollars than necessary so an ‘improvement’ just prior to sale doesn’t make a lot of sense; does it?

Here’s an example where that could work. Before a home sells, it will undergo a termite and dry rot inspection from a licensed professional. Many times, problems are found in exterior wood structures like the lattice patio covers that adorn almost every suburban back or side yard at one point in it’s existence. A professional Realtor in Orange County California told me of a home he had listed that required over 90% of the lattice cover to be removed, replaced and repainted. As Matt Trudell of Coldwell Banker in Mission Viejo explained, when the dollars have been spent and the repairs completed, the home seller would simply be bringing the house up to the status quo of the neighborhood and the competition – there would be no return on the dollars the seller had to invest as what was done was maintenance required to make a sale.

But had the seller opted to invest the dollars in a different kind of cover, he could have not only made his home stand out and attract needed attention, but he would have increased it’s value significantly over the cookie-cutter competition. The change? Creating an outside entertainment area that could be used year-round by using a solid roof instead of 2x2s. In the photo accompanying this article, I had replaced the normal 2×2 lattice with a solid covered roof. I also added several features that really made it blend into the house by installing cedar planks over open beams for the ceiling, adding a couple of built-in fans for cooling (you can also add gas lines for heaters), stuccoed the support pillars to tie it into the house and then added a few other decorative features. I also removed the existing 1970’s style slider glass door and picture window and replaced them with a total of six french doors so when it’s time to entertain (come rain or shine), the host can open all the doors and essentially, increase the size of the living or great room by the square footage now under cover on the patio.

Cost differential was more than made up for in the increased value of the property

Yes, a covered patio such as the one I built costs more than replacing a bunch of 2x2s and wood posts. But that cost differential was more than made up for in the increased value of the property when it goes to sale and just as importantly, helped separate that house from the pack. It becomes of even more value for a home buyer who not only appreciates the increased value of the improvement, but also gets the advantages of a much larger living space with a mild climate, means pretty-much year around enjoyment (I built quite a few of these on new homes in Arizona). Even on those so-called rare occasions when it rains in Southern California and the neighbors are trapped inside their homes, this homeowner can sit outside and watch the ‘back side of a waterfall’ as it runs off their somewhat different patio cover.

NOT A “KNOCK KNOCK” JOKE

The following is a true story (ok, I added a few dramatic flourishes for emphasis)

This time, she was prepared. “Not going to have one of those, ‘I should of said …’ moments”; she thought as she peered through the peep hole at the stranger knocking on her door.

Two of them this time – probably a trainee learning the door-to-door canvassing game. Let’s see how he handles a potential customer who’s done her homework. She had to remind herself that she really does have a long list of projects she needed done for the house and if this is the one, the right one, she had to avoid getting defensive and too confrontational right from the start.

At least the trainee started off ok: “Good evening; I’m Nathan with World’s Greatest Remodeling. We’re working in the neighborhood and I was wondering if I could take a moment of your time to introduce our services?” Polite, identified himself and asked permission – not the usual condescending waste-of-my-time small talk from my new best friend approach. Still, best to keep the guard up she thought; remembering all those Criminal Minds and CSI episodes where the good looking and extremely polite mass murderer gained entry.

 I’ll just need the legal name of your company and your contractor’s license number.”

What followed was the well-rehearsed 30 second commercial about their company that if done properly, ended with an inquiry such as, are you considering any remodeling or repair work? “Yes” she replied. “But before we go any further, I need less than five minutes to do a quick check. Would you mind waiting while I confirm a couple of things? I’ll just need the legal name of your company and your contractor’s license number.”

She knew that if this was an unlicensed or illegal contractor, the conversation was either over or she’d start hearing lots of double-talk and attempts to change the subject. But this canvasser just smiled and said “Certainly” as he handed her a business card (or other form of advertising) that had the company’s name, license number and classification preprinted on it.

she clicked on “Instant License Check”.

Closing the door with a smile, she went over to her computer and opened up her Internet browser. She glanced at the note she had earlier made for herself as part of her preparation and then entered the web address for the California State Contractors License Board (www.cslb.ca.gov). Within seconds, she was on the home page where on the left side menu; she clicked on “Instant License Check”. Immediately, a new window opened where she saw several circles or buttons. She clicked on the one that said “License Number” and then entered the license number the canvasser had provider her. In less than one minute (she did have a pretty quick internet connection), she was looking over a page of information about the contractor where she not only confirmed that he had a valid license in good standing, but also could see that there were no complaints against the contractor.

she clicked on the “Check out a business” link

Next, after confirming that she had the proper spelling on the contractor’s business name, she entered a new web address – www.bbb.org – where in the middle of the Better Business Bureau’s home page, she clicked on the “Check out a business” link and then typed in the name of the contractor’s business. A moment later, she had a report that showed the contractor had an “A” rating.

Less than 2 and a half minutes had elapsed since she sat down at her computer and opened her Internet browser. In that time, she had confirmed that the contractor had an active license, had no outstanding open complaints against it and had also completed a quick check with the BBB. She knew that her due diligence work was just beginning, but by being prepared for that knock on the door, she felt safe and comfortable as she returned to the young trainee and his handler and began telling them about her plans for her home.