Wednesday, October 21, 2009

Why Builders Shouldn't Cut Their Prices

In a previous post, I discussed why now is a good time to renovate. I pointed out that builders are not as busy and can devote more time to their projects, the economy has weeded out a number of "fly by night" contractors who were not truly dedicated to the profession and there have been sales on supplies and materials. One advantage that I did not mention, however, was the opportunity to ask builders to cut their prices. That's because I do not believe it's reasonable for owners to try to negotiate lower prices, and it's not good for the profession for builders to do so.

Professional builders are usually quite realistic when preparing proposals for projects. I have met many contractors who proudly tell me that their jobs do not go over budget (barring unforeseen circumstances). They are usually quite clear about their markups and profit margins and accurate when determining allowances. They exemplify the adage that "you get what you pay for."

Consider for a moment the bid that comes in that is significantly lower than the others. Owners may be happy to seize the opportunity to get a job done for a bargain price. However, I have frequently seen the rest of the story in my practice. The project begins and then the owner is hit with a series of change orders that jack the price up to those of the other bids, or once the work is finished, the owner receives a final bill for "extras" that achieves the same result. Or, the contractor cuts corners and substitutes inferior materials or does work that is not up to a reasonable standard. At that point, a huge dispute arises and the parties end up in costly litigation.

Although this post may be filled with cliches, if something seems "too good to be true," it is. Choose a contractor based on references and experience. Do not try to bargain and take advantage because construction is slow right now. It is better to change the scope of your project and pay a fair price. This benefits all of the parties in the end.