TRICKS OF THE TRADE: Finding Honest and Competent Contractors
an interview with David Lupberger, Director of Consumer and Contractor Outreach: ServiceMagic
“I’ve heard it said that people spend more time choosing their TV set than their contractors,” begins David Lupberger, a twenty-year construction remodeling veteran, columnist and author, who heads consumer and contractor outreach for ServiceMagic. “I think that’s because, as consumers, they don’t know what to ask or what to expect.”
“One of the problems property owners face is the low barrier to entry in construction trades. Each state is different on it’s licensing rules, and that’s hard for consumers to keep track of.” ServiceMagic’s business model is to find competent contractors, to perform the due diligence, and match consumers to contractors in their area. But even without such assistance, a property owner can find competent technicians, and manage the construction process.
What to Ask Your Contractor
“Have a list of key questions that you ask of each prospect,” David advises. If you don’t know what to ask, visit nari.org for sample questions. At a minimum, you will want to find out:
- Have they completed similar jobs?
- Can they provide a list of references?
- How far out is the starting date? You don’t want someone who is too busy, or someone who has no work.
If you are comfortable with the answers, set up a meeting to discuss the project face to face. At this juncture, you want to ask about the business entity:
- How long has it been in business?
- What is the permanent, physical address?
- Is the contractor licensed? To find out more about licensing requirements in your state, visit ServiceMagic.com
ServiceMaster also checks for civil judgments levied against each prospective contractor.
“90% of construction businesses go out of business within the first five years,” David continues. That may be because the contractor changed jobs, or because they just aren’t business people. As a general rule, if they’ve been around for five years, it’s fair to say they are established.
How to Choose a Contractor
“It’s usually not necessary to get more than three bids. They should be within a range of 10-20% of each other in price. Anything much lower can be a red flag. Either the contractor didn’t understand the job, or left something out; they could be flighty, and not committed to finish the job on time.” Price is only one factor. Look for:
- Degree of service commitment, including a “go-to” person when questions arise.
- Ability to commit to a schedule.
- A system to deal with warranty repairs.
Before signing any contracts, be sure you ask for
- a copy of the business license
- proof of insurance
The Construction Project Proposal: Getting Rid of the Gray
“Make sure any proposals are on business letterhead,” David continues. Also, make sure there is a detailed description of the work, to lesson the chances of change orders and disputes later on.” At the very least, a proposal should contain:
- The dollar amount to be charged for each detailed item.
- An estimated start and finish time.
- A specific payment schedule (unless the project under two weeks).
- Termination clause – in case the contractor does not perform.
- Mechanics lien release clause. See a sample lien release.
- daily schedule
- regular progress meetings
Hear more of this exclusive interview on the American Apartment Owners Association’s CD series, Real Estate Investment Secrets, twelve exclusive interviews with industry experts that will supercharge your ability to locate the best investment properties and manage or sell them for maximum profit. Real Estate Investment Secrets is available for purchase from American Apartment Owners Association. Join as a Premium Plus member, and receive all of the benefits of our association including Real Estate Investment Secrets free as our gift for joining. Visit www.joinaaoa.org for more information.
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