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WATCH YOUR 6 - how to protect yourself from low-ball bids

June 28, 2016

  It's a common practice that many homeowners fall victim to - contractors who bid a project for a discount price in order to get their foot in the door, and then price gouge their customers with change orders and add-ons. These contractors are winning the job with a low-ball bid on the front-end, but banking on the back-end for higher costs and profitability.

  

Too often homeowners look primarily at the contract price when they are deciding who to hire to work in their homes. Don't get me wrong, price is a huge consideration, but it should not be the primary one when it comes to awarding a contract. There are many  other things to consider to be sure you are getting the best value, and to ensure you are limiting your exposure to extra costs down the road.

 

Here are some tools to make sure you avoid this pitfall:

  1. Get it in writing! This cannot be emphasized enough.

    • Having a detailed scope in the contract will dramatically reduce the risk of contractors tacking on costs during and at the end of the project.

    • ​Contractors are legally required to provide and use a contract (thus the name contract-ors), this practice will clearly define the goals, elements, scope, price, etc.

    • Literally being on the same page will prove to be extremely valuable when you find yourself needing something to refer to in the case of a dispute. 

  2. Close loopholes.

    • Most contracts have stipulations in them for unknowns, overages, and change orders for work not specified in the paperwork. This works in the favor of the contractor, in most circumstances. These loopholes add up, and take money out of your pocket and put it in the contractors.

    • Read and re-read what you are signing and be sure that you understand what you could be charged for if your project grows or goes awry.

  3. Ask for a guaranteed price or a cap - NTE.

    • Most contractors are familiar with a NTE bid - Not To Exceed. This is a great tool you can ask for and use to limit your exposure to added costs.

    • Most often NTE's are offered on time and material jobs, where you pay the contractor for their labor and the material (plus mark-up). NTE's are extremely useful for these since time and material jobs can be high risk for you as a homeowner if there is not a cap to the expenses.

    • NTE's are helpful with any project, however, and should be a tool you keep in your arsenal for any work you are having done. NTE's communicate to a bidding contrator that you expect their bid to be thorough, accurate and honest. They will know you mean business and that the industry practice of making money on the back end is not welcome here.

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