Home Contractor vs. Homeowner

Most of the home improvement contracts that I see are fixed price contracts. Homeowners ask for proposals and then choose a competitive bidder. Contractors must price jobs carefully. They should charge enough to cover costs and build in a percentage of profit, but they don't want to charge so much that they lose out on jobs. This forces contractors to build in a cushion for possible changes in prices of materials and/or labor. If contractors do not put a provision in the contract for increased prices, or make their proposals time-limited, they may put themselves in an unfortunate position where they barely break even. It is understandable that fixed price contracts may not offer the cheapest possible alternative for homeowners or contractors. For that reason, there seems to be an increase in the use of time and materials contracts. The arrangement for these contracts is that the contractor gets paid on a weekly or biweekly basis either in advance, or as each phase is complet...

I recently met with a new contractor client who was in financial trouble. He reported that his jobs were not profitable, that he bent over backwards to please clients, and his prices were generally lower than other bids. This contractor seemed to do an excellent job for his clients, but he was not doing well for himself or his business. Contracting is a business. Not all skilled craftsmen are business people and vice versa. As with any business, one has to recognize one's own strengths and weaknesses. Hiring a business manager, or taking a business class may greatly improve one's profitability. A friend who is a contractor says that she takes her cost and adds ten percent. She knows the price of her labor and materials and ensures her profit. If changes are requested, she requires written change orders. I can't emphasize this enough. You have a right to make a profit, and you do not have to bend over backwards and satisfy every demand of the client. For example, I...

Construction contracts frequently have mediation clauses, but few people understand what these mean, and whether they are useful. Mediation has a number of definitions, including assisted negotiation, but its most important features include a third-party neutral whose job it is to help parties identify the issues, generate options, and develop an agreement that comes from the parties themselves. Mediation is usually voluntary, and there is frequently an agreement signed stating that it is a confidential process. The advantages of mediation are numerous. When parties are in the midst of a dispute, the communication between them has often broken down. There is a great deal of emotion, and people need to vent. When people are involved in a dispute, and are angry, it is very hard for them to think rationally. Mediation is an opportunity to turn back the clock, and gives each side the chance to really listen to and hear the other's version of the story. Feeling listened to and und...