It’s every homeowner’s worst nightmare. Your dream kitchen renovation has begun. Your out-dated cabinets and appliances have been removed, and the rock-bottom deal you got from your contractor has let you upgrade the new ones even more than you’d hoped. The discolored tile has been ripped out, plumbing pipes and electrical wiring are disconnected, and the exterior wall has been removed to make way for the expansion. You live with the mess through a long holiday weekend, looking forward to beginning reconstruction. Your contractor doesn’t show up on Tuesday, but you’re not alarmed, because you assume the rain delayed him. You are mildly panicked by Thursday, when your calls and emails have gone unreturned, but your heart sinks on Friday, when instead of his voice mail, you hear “the number you have dialed has been disconnected.”
A contractor going out of business in the middle of your project is the number one fear of homeowners. Renovation projects can be disruptive under even the best of circumstances, yet what gets homeowners through is picturing the end result. When a contractor folds mid-project, that end result is delayed exponentially. You have to find another contractor willing to jump into the chaos left behind. Your new contractor may be left with more questions than answers – not knowing what was done when, by who, and how well, which causes further delays and costs as he tries to discover where and when he can even begin. And that’s if you can find a contractor willing to take on the job in the midst of likely legal proceedings against the previous company. All the while, your family will be living amid the debris of a job left undone.
One way to avoid all this is to heed the warning signs and do your research on the front end. Check to make sure your contractor brings a diversity of skills and experience to your project, which makes them more capable of handling any unexpected challenges. Verify that they are a member of a recognized trade association such as NARI and that they are accredited with the BBB. Ask how long they have been in business. Make certain they are currently licensed with the state, and see what level of license they hold. There are three types of licenses in North Carolina: A Limited License allows them to work on projects of up to $500,000; an Intermediate License allows them to tackle projects of up to $1 million; and an Unlimited License – which Palmer Custom Builders possesses – is not restricted to any dollar value. This is important, because they each have different minimum working capital requirements – $17,000 for Limited, $75,000 for Intermediate and $150,000 for Unlimited. A higher license ensures a greater depth of financial resources and may also be an indicator of diversity of skills and experience.
Undoubtedly, the largest red flag of all is price. If one company’s bid is radically discounted – defined by prices slashed 20 percent or more – than comparable companies, the odds are you’ll be getting far more than you bargained for. As Wendy A. Jordan, Contributing Editor of Professional Remodeler magazine noted in an October, 2009 article: “Radical discounting is a topic that stirs strong emotions among established remodelers. I contacted several around the country, and they said it is business suicide for all but extremely large companies, and eventually, [for] those giants, too.” Why? As she explains, “You’ve fried your profit and probably a good share of your overhead coverage.”
So what, you may think as a homeowner. I don’t care if company X is around forever – I just want my project done at a great price.
As Jordan explains, that price will be higher than you think: “[the contractor] will have to cut corners to save money – perhaps reducing the numbers of workers on the job, providing less frequent production oversight, scheduling fewer dumpster pickups, doing less painstaking site protection, and so on. It raises the risk that you will make more errors, fall behind, disappoint your clients and sow the seeds of negative PR.” Most importantly, it bleeds businesses dry. Her numbers show discounting 20 percent over an extended period leads to a net loss of 3.7 percent – which means the contractor won’t be there when you need them to fix their questionable work.
As you can see, the price you’ll likely pay for using a radical discounter is simply too high – cut corners, substandard materials, poor workmanship, and perhaps, the ultimate cost of a project left undone.