Hiring a contractor
May 10, 2018 12:17 PM Subscribe
I am trying to hire a contractor for the first time and could use some advice.
Work includes: bathroom remodel, new wood floors, adding ac, updating some plumbing and electrical, fixing a minor issue with the foundation, adding more insulation
I have met with three contractors at the house to go over the list of work.
- One sent me an itemized estimate after this initial meeting.
- One I have not heard back again after this meeting, he seemed to think there was not enough work for it to be worth taking the job.
- The third met with me once and looked over all the work himself, making a lot more comments about the details than the other two. Then he scheduled another meeting at the house with about six subcontractors to go over each of the individual items in even more detail and to get estimates from them, which he will then compile into the full estimate for me.
I like the third contractor the best because he seems the most interested in the details of the work, and he seems really focused on doing things right, whereas the other contractor who sent me an estimate seemed more focused on doing things as cheaply as possible. The third contractor also has a much longer history when I search his license number.
My real estate agent advised me that I should keep 10% of the money until 30 days after the work is complete to make sure all the subcontractors have been paid and none of them put a lien on my house. I mentioned this to the third contractor and he seemed pretty offended. He said he would definitely not do that, he has been working for 30 years and has never had a problem, and he has long-term relationships with all his subcontractors. He said someone else had requested that once and he just did not work with that person.
So who is right here? Is my real estate agent correct that holding 10% back is a normal thing to do, and refusing this is a red flag? Or should I forget about that and go with the contractor who seems a lot more detail oriented and experienced?
Work includes: bathroom remodel, new wood floors, adding ac, updating some plumbing and electrical, fixing a minor issue with the foundation, adding more insulation
I have met with three contractors at the house to go over the list of work.
- One sent me an itemized estimate after this initial meeting.
- One I have not heard back again after this meeting, he seemed to think there was not enough work for it to be worth taking the job.
- The third met with me once and looked over all the work himself, making a lot more comments about the details than the other two. Then he scheduled another meeting at the house with about six subcontractors to go over each of the individual items in even more detail and to get estimates from them, which he will then compile into the full estimate for me.
I like the third contractor the best because he seems the most interested in the details of the work, and he seems really focused on doing things right, whereas the other contractor who sent me an estimate seemed more focused on doing things as cheaply as possible. The third contractor also has a much longer history when I search his license number.
My real estate agent advised me that I should keep 10% of the money until 30 days after the work is complete to make sure all the subcontractors have been paid and none of them put a lien on my house. I mentioned this to the third contractor and he seemed pretty offended. He said he would definitely not do that, he has been working for 30 years and has never had a problem, and he has long-term relationships with all his subcontractors. He said someone else had requested that once and he just did not work with that person.
So who is right here? Is my real estate agent correct that holding 10% back is a normal thing to do, and refusing this is a red flag? Or should I forget about that and go with the contractor who seems a lot more detail oriented and experienced?
Best answer: Never hired a GC but husband is a contractor. I have never heard of this. Withholding payment for 30 days after a job is complete is really not OK if the contractor is not on board for that arrangement (and I can't imagine why they would be).
I think it's the opposite of a red flag (a green flag?) that he managed to get 6 subcontractors out to your house for a consultation at the same time. That says to me that he's good at planning and communication. And, contractors won't work with people who don't pay them -- they're working with him so that indicates to me that he pays them.
Maybe getting some references will help ease your mind?
posted by rabbitrabbit at 12:58 PM on May 10, 2018 [12 favorites]
I think it's the opposite of a red flag (a green flag?) that he managed to get 6 subcontractors out to your house for a consultation at the same time. That says to me that he's good at planning and communication. And, contractors won't work with people who don't pay them -- they're working with him so that indicates to me that he pays them.
Maybe getting some references will help ease your mind?
posted by rabbitrabbit at 12:58 PM on May 10, 2018 [12 favorites]
Over the past 10 years we've had extensive renovations done on our house through a general contractor who uses various subcontractors, and we've never held any part of the payment back after the job is done. That seems super weird. I think your real estate agent is in the wrong here.
posted by invincible summer at 1:28 PM on May 10, 2018 [1 favorite]
posted by invincible summer at 1:28 PM on May 10, 2018 [1 favorite]
Best answer: IAAL, IANYL.
Retainage of 10% is standard in commercial construction in my jurisdiction. Typically, even when things are "done," there's still a punch-list of last items and work that needs to be done. Once the punch-list is done, then the retainage gets released. A contractor who categorically refused to have a 10% retainage would be a big ol' red flag.
But commercial is a whole different market than residential, especially a job like what you're talking about here. To satisfy the contractor, maybe you could come to an agreement with him that the final payment isn't due until all the work is done, including the punch list? Talk to him, too, about workmen/mechanic's liens. He'll probably tell you he's never had one in 30 years and that it'll be taken care of, but depending on your jurisdiction, you may be able to get a waiver of those.
(The line about having worked for 30 years and not having had a problem is bit of negotiating puffery. It's construction. Problems are the name of the game. Jobs never go smoothly, especially closeout.
I would not, in any circumstance, suggest that you pay the subcontractors directly. Dear lord. Why in the name of God would you want to insert yourself into the contractor-subcontractor relationship? Not only is it a legal nightmare, but that's legit something that would make any good general contractor hit the roof/walk off the job.)
posted by joyceanmachine at 1:37 PM on May 10, 2018 [3 favorites]
Retainage of 10% is standard in commercial construction in my jurisdiction. Typically, even when things are "done," there's still a punch-list of last items and work that needs to be done. Once the punch-list is done, then the retainage gets released. A contractor who categorically refused to have a 10% retainage would be a big ol' red flag.
But commercial is a whole different market than residential, especially a job like what you're talking about here. To satisfy the contractor, maybe you could come to an agreement with him that the final payment isn't due until all the work is done, including the punch list? Talk to him, too, about workmen/mechanic's liens. He'll probably tell you he's never had one in 30 years and that it'll be taken care of, but depending on your jurisdiction, you may be able to get a waiver of those.
(The line about having worked for 30 years and not having had a problem is bit of negotiating puffery. It's construction. Problems are the name of the game. Jobs never go smoothly, especially closeout.
I would not, in any circumstance, suggest that you pay the subcontractors directly. Dear lord. Why in the name of God would you want to insert yourself into the contractor-subcontractor relationship? Not only is it a legal nightmare, but that's legit something that would make any good general contractor hit the roof/walk off the job.)
posted by joyceanmachine at 1:37 PM on May 10, 2018 [3 favorites]
I'm doing a gut renovation of a kitchen right now and just pulled out the contract to double check.... My final payment is due "upon satisfactory completion of the project"; and the contractors certifies that the work will be good to local (rather stringent) standards and will come back for up to 365 days later to fix any issues with electrical, plumbing or workmanship that arise. This was fairly standard amongst the high end contractors I surveyed (only contractors who held enough insurance to satisfy my building's requirements). YMMV in jurisdictions that are not as stringent as mine work.
Additionally, in my case, I made sure to define "satisfactory completion of the project" as a fully functional kitchen, with finishing done to a high standard; contractor had no problem agreeing to that. Contractor also agreed to text or email me about any changes, so we could both reference things in writing so there wouldn't be any issues, but I'm also not living on site/directly supervising. It's helped a lot to eliminate any discrepancies.
My project scope/work order was incredibly detailed; down to the type of waterproofing, the grade of sheetrock, the number of coats of paint they were going to do, any change orders have been similarly detailed.
posted by larthegreat at 2:02 PM on May 10, 2018 [2 favorites]
Additionally, in my case, I made sure to define "satisfactory completion of the project" as a fully functional kitchen, with finishing done to a high standard; contractor had no problem agreeing to that. Contractor also agreed to text or email me about any changes, so we could both reference things in writing so there wouldn't be any issues, but I'm also not living on site/directly supervising. It's helped a lot to eliminate any discrepancies.
My project scope/work order was incredibly detailed; down to the type of waterproofing, the grade of sheetrock, the number of coats of paint they were going to do, any change orders have been similarly detailed.
posted by larthegreat at 2:02 PM on May 10, 2018 [2 favorites]
Your contract, when you sign it, should outline how the payments will be made. At the GC I worked for, this would have been based on milestones, e.g $X after demolition, $Y after framing inspection, $Z at completion of job. Not every GC does it that way but they should give you something explaining how payments are supposed to go, and that's what you'll be bound to. Being late in paying is not OK. Customers sometimes got behind, but someone deliberately witholding payment would have been a problem. If you want to hold back 10%, negotiate to have it in your contract. It would be weird and offputting, though.
As far as who to go with, I like the third one best but not necessarily just because they brought in their subs. Where I worked, we had a pretty good idea going in of what our subs would charge us for their part of the job and we'd estimate based on that. Sometimes we were a bit off but that wasn't the customer's problem. I suppose there's slightly less chance of your being overcharged for that portion, with the sub-estimates already in place. Also less chance of being undercharged for them though, so kind of a wash. Mostly they just sound thorough and as though they're not going to just give you the cheapest of everything.
Hiring a GC but then wanting to pay the subs directly in order to undercut the GC's margin is a jerk move. That margin is what the GC uses to run their office, pay their staff who help make your project go smoothly, and buy supplies. The reason you hire a GC rather than managing your own contractors is because they have the relationships and the expertise to make your project go as smoothly as possible. That's what you're paying for. If you want to deal directly with the subcontractors, be your own GC. If you happen to have a buddy or a relative who's an electrician or whatever, that's fine. But hiring a GC and then wanting to cut them out of dealing with their subcontractors? No.
posted by Anticipation Of A New Lover's Arrival, The at 2:56 PM on May 10, 2018 [2 favorites]
As far as who to go with, I like the third one best but not necessarily just because they brought in their subs. Where I worked, we had a pretty good idea going in of what our subs would charge us for their part of the job and we'd estimate based on that. Sometimes we were a bit off but that wasn't the customer's problem. I suppose there's slightly less chance of your being overcharged for that portion, with the sub-estimates already in place. Also less chance of being undercharged for them though, so kind of a wash. Mostly they just sound thorough and as though they're not going to just give you the cheapest of everything.
Hiring a GC but then wanting to pay the subs directly in order to undercut the GC's margin is a jerk move. That margin is what the GC uses to run their office, pay their staff who help make your project go smoothly, and buy supplies. The reason you hire a GC rather than managing your own contractors is because they have the relationships and the expertise to make your project go as smoothly as possible. That's what you're paying for. If you want to deal directly with the subcontractors, be your own GC. If you happen to have a buddy or a relative who's an electrician or whatever, that's fine. But hiring a GC and then wanting to cut them out of dealing with their subcontractors? No.
posted by Anticipation Of A New Lover's Arrival, The at 2:56 PM on May 10, 2018 [2 favorites]
And actually, if a homeowner had talked to one of our subs on the side and said "Hey, how about I pay you directly and cut out the middle-man?" the sub would have said "No." That's because they knew that if they cut us out of the deal, we'd be pissed and stop giving them work. Sometimes there would be something on the job where we didn't want to deal with it (usually painting, in our case) and we'd tell the homeowner "Hey, we don't do painting but if you want we know a really good painter, here's his number," or "Hey Mr. Painter, if you want to try to work out something with this homeowner on this one be our guest." But if the customer initiated it, our subs knew enough to turn them down. I'm sure some of them got future work from our homeowners on other projects that weren't big enough to require a GC, but that's different.
posted by Anticipation Of A New Lover's Arrival, The at 3:03 PM on May 10, 2018 [1 favorite]
posted by Anticipation Of A New Lover's Arrival, The at 3:03 PM on May 10, 2018 [1 favorite]
References. References. References. Any reputable contractor with happy customers should be able to readily provide references. If your state has a licensing board for contractors, make sure they're in good standing. Make sure their bond is in order. I have a friend who had to do battle with a GC that she hired and still hasn't gotten a satisfactory result (this wasn't nit-picking, the examples of the work she posted pics of were very bad.) On the other hand, I have several contractors as clients who, if needed, can call any number of their previous customers and get glowing references.
posted by azpenguin at 3:16 PM on May 10, 2018
posted by azpenguin at 3:16 PM on May 10, 2018
Best answer: he managed to get 6 subcontractors out to your house for a consultation at the same time
That, seriously, is is a loaves-and-fishes miracle. Getting subcontractors to show up when they're supposed to is roughly 90% of what you pay a GC for in the first place. I'd hire that guy instantly.
I've never heard of an arrangement such as what your realtor suggested. When we hired a GC we paid the GC and he paid the subcontractors and that was that.
posted by ook at 4:37 PM on May 10, 2018
That, seriously, is is a loaves-and-fishes miracle. Getting subcontractors to show up when they're supposed to is roughly 90% of what you pay a GC for in the first place. I'd hire that guy instantly.
I've never heard of an arrangement such as what your realtor suggested. When we hired a GC we paid the GC and he paid the subcontractors and that was that.
posted by ook at 4:37 PM on May 10, 2018
True, the most subs I ever managed to get out to a job in a single day was four, and that was for a sold job, not an unsold job where it might not even happen. Getting six subs to show up and give bids on an unsold job is pretty nuts.
posted by Anticipation Of A New Lover's Arrival, The at 4:43 PM on May 10, 2018
posted by Anticipation Of A New Lover's Arrival, The at 4:43 PM on May 10, 2018
Best answer: Oh, here's a tip: make sure that everything you want done is in the Scope of Work. When I worked for a GC, we sometimes had customers get mad at us for not doing things that we weren't contracted to do. Some people have a tendency to assume that regardless of what's actually in the contract, we're supposed to "finish the job" to whatever the customer's definition of "finished" is. This is not true. If painting (for example) isn't in the Scope of Work, we're not planning to paint. If you wanted us to paint, you should have said that and we'd have added it to the cost—or you could add it as a change order and we'll charge appropriately. Our Scopes of Work had actually grown over the years to include a lot of default lines about the things we were not going to do (paint and paint prep, hanging televisions, installing cable hookups, etc.) but people would still expect us to do those things for free even though it said right in their contract that we gave them a week to read over and comment on and then reviewed line by line with them on signing day that those things weren't going to happen.
So read your contract carefully, take note of what is and isn't in the scope, and if something is missing that you want to have done don't just assume that of course they're going to do that because it's "part of the job." What's part of the job is what's in the contract. Make sure you have a contract that covers all the stuff you want done.
Oh, and a corollary to that is that while generally speaking your contractor is OK with and in fact pretty much expects some change orders during the project (because it's hard to visualize what things will look like until they start coming together, and sometimes people change their minds) you shouldn't expect those change orders to be cheap in terms of either money or time. Change orders are disruptive, and most contractors have a higher margin on them than on the base contract to account for that disruption. They also are almost always expansions rather than contractions of the overall scope, and can easily throw off the timeline. If you've changed five things during the project and now you're wondering why the project is running two weeks behind, well, that's why.
Finally, for something like a bathroom reno, you're going to need to make some selections on your own. Your contractor may have a default shower/tub/vanity/toilet/etc. to offer you (or they may not) but chances are you're not going to want the defaults. You're going to be picking out your own shower, sink, vanity tops, etc. based on the design you want for your bathroom. Pay attention to the deadlines on those and if at all possible get out in front and pick your stuff out well in advance. If you procrastinate too long, eventually your project will grind to a halt because the contractor won't be able to move forward until they have a shower onsite to actually install. It happens more often than you'd think.
posted by Anticipation Of A New Lover's Arrival, The at 5:05 PM on May 10, 2018 [4 favorites]
So read your contract carefully, take note of what is and isn't in the scope, and if something is missing that you want to have done don't just assume that of course they're going to do that because it's "part of the job." What's part of the job is what's in the contract. Make sure you have a contract that covers all the stuff you want done.
Oh, and a corollary to that is that while generally speaking your contractor is OK with and in fact pretty much expects some change orders during the project (because it's hard to visualize what things will look like until they start coming together, and sometimes people change their minds) you shouldn't expect those change orders to be cheap in terms of either money or time. Change orders are disruptive, and most contractors have a higher margin on them than on the base contract to account for that disruption. They also are almost always expansions rather than contractions of the overall scope, and can easily throw off the timeline. If you've changed five things during the project and now you're wondering why the project is running two weeks behind, well, that's why.
Finally, for something like a bathroom reno, you're going to need to make some selections on your own. Your contractor may have a default shower/tub/vanity/toilet/etc. to offer you (or they may not) but chances are you're not going to want the defaults. You're going to be picking out your own shower, sink, vanity tops, etc. based on the design you want for your bathroom. Pay attention to the deadlines on those and if at all possible get out in front and pick your stuff out well in advance. If you procrastinate too long, eventually your project will grind to a halt because the contractor won't be able to move forward until they have a shower onsite to actually install. It happens more often than you'd think.
posted by Anticipation Of A New Lover's Arrival, The at 5:05 PM on May 10, 2018 [4 favorites]
I hereby retract my advice to pay subs directly, unless the GC asks for it explicitly!
(This advice was provided based on our experience with a roofer and his demo subcontractor, not a proper GC. I stand corrected!)
posted by samthemander at 9:20 PM on May 10, 2018
(This advice was provided based on our experience with a roofer and his demo subcontractor, not a proper GC. I stand corrected!)
posted by samthemander at 9:20 PM on May 10, 2018
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