Shady Contractors

If you are doing residential construction work, you know there are all kinds of people. You’ll especially see it in sales; we talked about that in our online class last Thursday, and will discuss more sales “opportunities”, also known as challenges, next Thursday.

There are also all kinds of contractors. We received this note from one of the good guys, asking questions about helping a homeowner who was dealing with a shady contractor:

I recently received a phone call from a retired lady who hired a shady contractor to do an addition on her home. While the actual work being done is of acceptable quality the GC has completely overshot her budget, doing additional work and then getting her to sign off on the additional work after he starts it. He now claims that she still owes him $37,000 (the original contract was $168,000 and she has already paid him $171,000). In my humble opinion the contract price was low for what work was outlined. On top of that, after I reviewed it, the contract is obviously grossly under-detailed. There are listed items on the contract that are missing, which the GC will not credit back to the client, and the additional work done seems to be priced extremely high (double what I would charge considering my cost + markup).

Let me interrupt this note to say that the reason you need to have change or additional work orders signed and paid before doing any changes or additional work is to establish, in writing, that your client wants the change and is willing to pay for it. Most contractors who don’t take the time to get a signed change work order signed think they’re too busy to stop and do the paperwork. With this contractor, it sounds like part of the scam; he makes the change, then tell the client they have to pay for it.

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I’d like to know how she chose her contractor. It looks like he was the lowest price contractor and is making up for that low price with changes. Let’s go back to his note:

My question is: I’d really like to help this lady get her project finished. Other projects that I’ve taken over, the client had already parted ways with their original GC and my contracts were extremely specific about what work I was to do and what work I would not be liable for. In this situation the client wants to have the original GC finish the work as she has already paid him beyond the original contract amount. I AM NOT A LICENSED ATTORNEY! So, I’m a little wary of what advice I can give and how I could be of service to this lady. I feel bad for her as she is retired, single and has been taken advantage of by this GC.

Your advice would be extremely helpful! Your books saved my company back in ’09 and I value your input on this situation.

I suggested he encourage the homeowner to file a complaint with the state contractor’s board. I also don’t think it’s wise to get involved any further as long as the original contractor is in the picture.

I’m reasonably sure that many of you have either been in this situation, a similar situation, or have heard these stories from a friend. Contractors like this continue to cause problems for home and building owners, and the good guys pay the price. The GC written about in the note should have his license yanked and get the heck out of our industry. He’s one of the reasons construction has a bad name.

What can you do? Be honest. Be fair. Quote a firm, fixed price to your clients and educate them on why that’s the best way to hire a contractor. Write a detailed contract and build the job according to the contract. Don’t take shortcuts, and don’t expect the owner to pay for any of your mistakes. Good guys win in the long run.

“It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.” — Warren Buffett

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