How To Spot A Potential Disappearing Home Remodeling Contractor…Ahead Of Time
One of the first things I asked Michael Baum (when we did our ride-along in January) was about the stigma of contractors starting a job and then disappearing in the middle of the job . . . leaving it incomplete for weeks at a time. I asked him very directly “what’s up with that?”
He chuckled and said, “I’ve never completely understood that.” He explained further that it’s most likely due to a mismanaged cash flow on the general contractor’s part. Some people charge more for their down payment than is technically allowed.
A Red Flag
There is California state law that says contractors may only charge 10% or $1,000 (whichever is less) as a down payment. So, if the contractor is charging more, not only are they breaking the law, but they are also putting themselves in a situation where they have less of an incentive to finish a job when they can put in fewer hours starting another job and getting another large down payment.
So there are two distinct things going on in situations such as this: First, if a contractor is charging more that 10% or $1,000, they are breaking the law, Second if a contractor is chasing deposits, that may indicate a cash flow issue and possibly poor business management. Again, this is not necessarily the case, but these are red flags you’d be well heeded to look into.
Baum Construction’s Exclusive Approach To Down Payments
The way Baum Construction works is they provide their customers with not a sense, but a reality of security. Baum requires No Down Payment. In addition, they will provide you with an estimate that includes each item you are being charged for as well as a number-of-days plan to complete your remodel. A further guarantee Baum provides is paying you $200 each day over the original estimated timeline, should they go over.
Baum explains that not only is it better for the customer, it’s better for his business to get a job done immediately. In the estimated number of days, Baum’s estimates plan out milestones they will hit before you pay a dime more. You pay for exactly what you get, after you get it. Plus, Baum construction customers are much more likely to give a referral for a quality job delivered on time than customers of contractors who leave half way through a job.
What To Look For…
A lot of this goes back to the initial search and the estimate process. There are a few questions to ask – and red flags to look for – when searching for a contractor that may give you an idea if they are going to abandon you during your remodel:
- No. of Projects in the Works – Ask them how many other jobs they are working on at one time. There is nothing wrong with General Contractors taking on multiple jobs, but if the owner is doing any/all of the work on each job himself, taking on multiple jobs at once would be a certain time demand. If the contractor doesn’t do the work, but is managing a few jobs at a time, then the jobs aren’t relying on him to be present on order to get completed.
- Get It In Writing – Are you negotiating with a salesperson, or the general contractor himself? If you are dealing with a salesperson, and a different person will be carrying out your job, you want to get everything the salesperson promised in writing. As with any sales process, the transition from sale to actual delivery can be disjointed and there is a chance you won’t get what you thought you paid for.
- Milestone & Payment Schedule – Make sure both parties are crystal clear about WHAT you are paying for and WHEN you are paying what amount. Whether you hire Michael Baum or not, there is no reason a contractor shouldn’t be able to provide you with a numbered days plan up to completion of the project
- Down Payment – Don’t pay more than the necessary 10% or $1,000 down.
While you can’t hold contractors or subcontractors hostage at your house until your remodel job is finished, you can take a few smart actions in order to ensure you are working with a quality contractor who will give you what you paid for.