Sunday, February 15, 2009

Home Owner/Contractor Patterns That Raise Red Flags

One of the advantages of having handled numerous home contractor/homeowner disputes is that I have a global view of the problems that arise. Homeowners and contractors are frequently shocked when something goes wrong during a renovation project, but if they are made aware of the "signs," the problems may be preventable.

1. The contractor who tells you that you do not need a contract. Sure, things are great at the beginning, but working without a contract can be a recipe for disaster. The purpose of a contract is to memorialize a "meeting of the minds." As one arbitrator said to me, "the best kind of contract is put on the shelf once it is drafted and left to collect dust."

2. The homeowner who is overly preoccupied with details and processes. Homeowners should be actively involved in the renovation process. However, if they have difficulty making up their minds over the smallest issues, or insist on controlling minute aspects of the work, the project could be a nightmare. They will never be happy, and will greatly reduce the profitability of the job. Watch out for micro-managers.

3. The contractor who keeps asking for money. If the contractor is continually asking for money ahead of the work, that is a sign that he may be in trouble. Contractors can get in over their heads and use money from current jobs to pay off prior ones. In addition, your contractor may have a substance abuse problem. Make sure that suppliers and subs are getting paid in a timely fashion. Have a clear contract that spells out payments as phases of the work are completed.

4. Homeowners who keep asking for extras. It's fine to do something just to be nice, but a contractor who continuously does extras to please the homeowners may find himself in a difficult position. Homeowners may take advantage and again, profitability will be reduced.

5. The contractor who does a lot of extras for the homeowners, and then comes back with another bill. I have heard contractors say so many times, "did they really think I was doing this for free?" Of course the simple answer is that all change orders must be in writing! If you are not sure if something is included, ask.

6. The contractor who does not spell out which materials will be used. I have seen many situations where contractors cut corners. Serious corners, such as putting up pine siding on an addition when the rest of the house is cedar. Make sure you know what you are getting so there are no misunderstanding.

7. The contractor/homeowner who is a bully. This goes both ways. If something is making you uncomfortable, listen to your instincts. A renovation project should be collaborative. If you are being bullied, take back control.

8. The contractor whose price is much lower than the other quotes. You get what you pay for. If the price is significantly lower, it is probably not a good thing. The contractor will discover that his bid is too low and be tempted to cut corners or use cheap materials.

9. The homeowner who overextends herself. I have to say, I am often shocked by homeowners who do not maintain some money on reserve when planning an addition or home improvement. Homeowners are often shocked projects run over budget, but it is quite normal for there to be change orders that result in extra expenditures. Contractors should make sure that their clients understand that an extra ten percent should be budgeted for the job. In addition, they should be wary of homeowners who are living so close to the bone that they run out of money before the project is finished.

10. The contractor who takes on more work than he can handle. Beware of contractors who are running a number of projects at once. In addition, make sure that yours is not the biggest job that the contractor has ever handled. You want to know from references that the contractor has handled comparable projects previously. In addition, if they do take on more than one job at a time, the contract should spell out the hours the workers will spend at the job, and how many days per week they will be on site. The last thing you need is a contractor who disappears for weeks at a time.

These are some of the patterns to watch out for over the course of a renovation project. If something does not seem right, do not ignore your instincts. Address the issue immediately before major problems develop.