10 Things Contractors Won't Tell You

By Michael Kaplan, Wall Street Journal "Smart Money" staff, 05/19/2009
http://www.smartmoney.com/spending/for-the-home/10-things-your-contractor-wont-tell-you-10541/?page=10

1. “My license is laughable.”

When you hire a general contractor to come build an addition onto your house, you probably assume you’re getting someone who has spent years learning his craft, giving him the proper credentials to saw a hole in the side of your den. In reality you could be getting a madman with a toolbox who answers to no one. That’s because only 27 states have any state-licensing requirements—and where regulations do exist, they vary. In California, one of the stricter states, aspiring contractors must have four years’ experience, prove their financial solvency, and pass a written exam to become licensed, whereas in South Carolina, they need only two years’ experience along with an exam and submission of financials. Maybe the disparity helps in part to explain why the Better Business Bureau received 1.1 million inquiries in 2006 from people seeking “reliability reports” on specific contractors—to ensure they were trustworthy enough to hire—ranking them third among industries for that request, according to the Council of BBBs.

HOT: Texas does not license builders at all. Even with the TRCC (before it was abolished), the only requirement for builder registration was to be (1) at least 18 years old, (2) authorized to work in Texas, and (3) "trustworthy".

So how should you shop for a contractor? Ask for and check references, of course. One good resource is Handyman Online (www.handymanonline.com), a referral service that can connect you with contractors in your area who are legitimately licensed, carry liability insurance, and have at least three references. And Tom Pendleton, owner of McLean, Va.–based consulting firm The House Inspector, offers this advice: “Close to 95 percent of home-improvement contractors go out of business or change their name within three years” due to consumer complaints or mismanagement, he says, “so you want a contractor who’s been in business under the same name for more than three years.”

HOT: The printed Yellow Pages is a good resource since established contractors often pay for the larger ads. Another good reference is Angies List (www.angieslist.com), a fee-based referal service that only lists contractors after members say they are happy (or not) with their service. A Google search for "contractor name" and “reviews” or “complaints” will show what other people say, but know that people will more likely complain about problems than submit complements, and sites offering only complaints provide a one-side view. Also, large volume builders will see more complaints because of their scale of operations. Still, reading complaints can uncover patterns and give consumers a sense of a contractor's business practices and reputation.

2. “Our contract favors me . . .”

When it’s time to sign on the dotted line, most contractors will present you with a boilerplate agreement based on one created by the American Institute of Architects. It lays out the job’s details, including its scope, materials to be used, and a payment schedule. Not surprisingly, according to Mark Levine, coauthor of The Big Fix-Up, a consumer guide to home remodeling, some contractors will set up a schedule that puts your payments ahead of the work. “When [a contractor] has received 50 percent of the money for 25 percent of the work, that’s when he stops showing up as often,” he says.

Levine suggests a plan such as paying 10 percent down, 25 percent when plumbing and electrical work are done, 25 percent after cabinets and windows are finished, and 25 percent for flooring and painting. “And don’t hand him the last 15 percent on his final day,” Levine says. “It’s called ‘retainage,’ and you should keep it for 30 extra days just to make sure everything is working the way it should.” In addition, if the job is big enough— say, $50,000 or more—Levine suggests investing in four hours of attorney fees to devise a contract that includes a fair payment plan, with retainage, and stipulates that disputes will be settled through arbitration (the quick and easy way to do it).

3. “. . . so I can take your money and run.”

Mark Zarrilli decided to enhance his Wall, N.J., home by putting a new cobblestonelike path around his swimming pool. It was an $11,000 job, and he paid $7,000 up front to the contractors—supposedly for materials. “They brought somebody in to do the preliminary brickwork, then played a duck-and-run game for three months,” says Zarrilli. “They’d tell me the truck broke down, the wife was sick, the cement company couldn’t deliver. I’ll never get my money back.” Zarrilli took the dispute to the Monmouth County Prosecutor’s office, who charged the contractor with theft by deception. (The contractor eventually pleaded guilty.)

Mark Herr, former director of the New Jersey Division of Consumer Affairs, calls this alleged scam “spiking the job,” and it’s one of the worst possible outcomes when you’ve signed a contract that includes a front-loaded payment schedule. “By completing a little bit of the work, they can face only civil rather than criminal charges,” Herr says. You might get sucked into such a scenario if your contractor tells you—like Zarrilli’s did— that the up-front cash is for materials. “Typically,” says Herr, “that happens because the guy needs to pay up front for goods since he has no credit, probably because he screwed up somewhere else.” Your preemptive strategy: Offer to have the materials delivered to your house and to pay for them C.O.D.

4. “Bargains don’t exist in my world.”

Before hiring a contractor, you’ll probably solicit various bids. If one comes in much lower than the others, it’s natural to think you’ve lucked out, but that’s not necessarily the case, says Lisa Curtis, former director of consumer services for the Denver district attorney’s office. Because of the fixed costs of materials and labor, a stunningly low bid is a red flag.

Common tactics include starting a job based on a bargain-basement price, then telling the customer that the work is more complicated (and more costly) than originally thought. Then there’s the contractor who quotes a price that includes windows he knows are subquality; once the job is under way, he’ll present his client with what is clearly a better window and talk him into upgrading. “Ultimately,” Curtis says, “you may pay more than you would have with a reputable person who started off at a reasonably higher price.”

5. “I’ll be back when I damn well feel like it.”

So you found yourself a good contractor. Terrific—but here’s the bad news. When contractors are busy with multiple jobs, as the best in the business inevitably are, you can pretty much expect the schedule for completing your job will go out the window. “If the contractor’s got too many jobs going,” says Pendleton, “the workers might only be in your house for two hours when they should have been there all day.”

One way to guarantee that your job won’t stretch to Wagnerian lengths, he says, is to hire a contractor with a lead person or project manager, “a working supervisor who is on the job from beginning to end.” If the job drags, the contractor still has to pay that person, so it “becomes in the contractor’s interest to finish the job,” Pendleton says.

6. “Your last-minute changes are my retirement fund.”

Steve Velasco, now a project manager for a Southern California civil engineering firm, once worked as a carpenter on a residential job in which the homeowner, just after the house had been fully framed, pointed to a peak in the roof and casually asked, “Wouldn’t a window be nice there?” As Velasco recalls, “The architect told us to go ahead and do it, and suddenly, he had spent $10,000 of the homeowner’s money.” Why so much? Because making changes in the middle of construction is the most expensive way to proceed, since work has to be undone and redone to accommodate the new plan. Indeed, Baker has described “while you’re at it” as “the four most expensive words in the English language.”

Architect Richard Hornberger advises that you spend time on the front end devising a plan, then commit yourself to living with it. And if you need to make a change, do it the way architects do: “Give the contractor a proposal request, in writing,” he says. “Then, in writing, you get back a change order that lays out what will be done, how much it will cost, and how much additional time it will take.”

7. “If it looks good, I don’t care if it’s done right.”

Unless you have X-ray vision or the time to spend days watching your contractors in action, all you may ever know about your job is whether it looks good in the end. Evelyn Yancoskie, director of consumer affairs for Delaware County, Pa., knows of at least one family in her area who got a new roof that, indeed, looked just fine. But the roof was lacking a key element: an ice shield, a threefoot- wide rubber lining that’s crucial for a roof in this part of the country. “The contractor figures that nobody will miss it anyway,” says Yancoskie. “But if you get a cold winter, any water that gets into the gutters will freeze, back up onto the roof, and go underneath the shingles. Without a shield, the ice under the shingles melts and leaks into your house.”

Contractors may also cut corners by skimping on insulation, but packing it with care so that it looks filled in; leaving out plumbing lines and pumps that give you hot water fast; and using low-quality wood, but laying it beautifully so that you don’t notice. “Guys will use substandard plywood, shingles, siding,” says Mark Herr. “In situations where homeowners aren’t likely to ask what’s going on, contractors use subpar materials.” Or just do a subpar job.

What can you do to prevent this sort of behavior? Check with your state’s department of consumer affairs to see if, like New Jersey, it requires its contractors to be registered—meaning they’re insured, must use certain approved language in contracts, agree to list specifics about materials being used, provide start and end dates for a project, and generally operate with full disclosure about their practices. “Registration [with a state board] is really key legal protection for consumers,” says Jeff Lamm, a spokesperson for the New Jersey Division of Consumer Affairs. Otherwise, you should always get multiple estimates on a project, and never settle on a contractor without checking references carefully. [HOT: Licensing is better than registration.]

8. “I delegate to novices [and undocumented workers].”

Mark Herr recounts the tale of a family that wanted their kitchen redone in time for Easter. One night before the holiday, a subcontractor was sweating to install the garbage disposal. When asked why the job was giving him so much trouble, the worker replied, “When they showed me this morning at Home Depot, I thought I understood.” The story points out a big problem: It’s not just your contractor you have to worry about but also the subcontractors whom he hires to do the actual work. “You need to know in advance who the subcontractors are,” says Herr. “You can’t let the contractor sub anything out without your permission.”

Mark Levine suggests taking things a step further: Visit homes in which your contractor’s carpenter has done the finishing work, and if you like what you see, get it in writing that that particular guy will be hired. “Look to see if there are tight joints in the molding, if cabinets are screwed into the walls rather than nailed, if margins between doors and frames are even all around,” advises Levine. “Those are signs of a good finish carpenter, and they serve as a litmus test. A general contractor who has a real pro doing his finish carpentry is probably hiring real pros to do other stuff as well.”

9. “If I come knocking, you’re better off not answering.”

Courtney Yelle was in his Bucks County, Pa., yard raking leaves when a gleaming pickup truck pulled into his driveway. Yelle says that a clean-cut workman emerged and told him it looked as if his driveway needed to be repaved—which, Yelle admits, was the case. But before he would commit, Yelle, former director of Bucks County Consumer Protection, said he’d need a written estimate along with the worker’s phone number and address. The guy said he’d leave it in the mailbox, according to Yelle, then backed out of the driveway and disappeared forever.

Yelle says that the “worker” was a seasoned scam artist who approaches people’s homes offering to do jobs at bargain-basement prices, often on the premise that he has leftover materials from a nearby project. In reality, if he does the job at all, he’ll do shoddy work with low-grade materials, says Wendy Weinberg, former executive director of the National Association of Consumer Agency Administrators. While it sounds like common sense to be suspicious of solicitors, clearly these curbside con artists can be convincing: Lisa Curtis estimates they bilk homeowners out of $20 million per year in Colorado alone.

10. “I’m an environmental disaster.”

Say you have a contractor in your home, replacing those ugly acoustic tiles that have covered the rec room ceiling for 20 years. Early into the job he realizes that the tiles contain asbestos. If he’s responsible, he’ll insist that the poisonous materials be taken out by a licensed asbestos-removal contractor. This will take time and could cost you thousands of dollars; if he’s less than honest, he’ll ask for an extra few hundred bucks to do the job himself.

The problem with the latter solution: Even if the contractor doesn’t make a mistake and release particles of cancercausing dust into the air in or around your home, the long-term repercussions are serious and may have legal consequences—for you. Contractors who aren’t licensed to deal with such materials can’t dispose of them at licensed (and, thus, safe) facilities, says Ross Edward, a spokesperson for the Massachusetts Department of Environmental Protection. If hazardous materials aren’t disposed of properly, they could leach into soil and ground water. And if your contractor gets caught dumping toxic materials this way, you may be liable, since the pollution came from your property. “These days,” says Edward, “the homeowner has just as much responsibility for the environment as any factory owner.”

11. (FROM READER) "Insured does not mean warranty."

I have been doing insurance claims for over 15 years with an emphasis on Commercial General Liability (CGL). What homeowners need to understand is the contractor's insurance policy, CGL, does not guarantee the contractors work or product. If the work is shoddy, his insurance is not going to pay to have it done over. If the shoddy work burns down your house, the resulting damage is likely covered but not at actual cash value.

12. Protect Yourself - HOT offers its own "10 Things to Know to protect yourself and your new home investment."