“Many times what we perceive as an error or failure is actually a gift. And eventually we find that lessons learned from that discouraging experience prove to be of great worth” – Richelle E. Goodrich
Ok, 1 project, 2 years and 2 different general contractors. We obviously didn’t get it right the first time and the second attempt was a failure as well, so while I can’t give you a fool-proof method or checklist on how to go about finding and hiring a great, ethical, morally fit and competent general contractor; I can share with you what worked and what didn’t. Basically lessons from the University of Life.
Sure, we read and followed all (most) of the great and insightful advice given on numerous websites (most probably written by someone who has never been through this process) but we still got scammed. Two professional and business savvy people victimized by contractors who seemed to be not only one step ahead of most of the advice but most importantly the system, the system specifically put in place to protect homeowners.
I’ve said it before; the crooked ones are smart and good at their game. Most homeowners hire a contractor for a major project only once or twice in their lifetime, however these guys are juggling numerous jobs at any one time – who do you think knows the game better? And if you think you can depend upon your local governmental authority to monitor or punish these donkeys think again. Most of these agencies don’t have the time, finances, capacity or desire to do so and the laws; well if they’re anything like the ones in Georgia then you’ll find they’re structured to mostly protect the contractor, not the homeowner. (Any guess on who has a bigger lobbying group?)
So here it is; suggestions on what to do, or not to do, in no particular order:
Have an Attorney Review the Contract. It’s a no-brainer that you should always have a written contract between the two parties. It doesn’t matter the size or scope of the project there should always be a contract specifying at least the commencement date, estimated completion time, total cost of the project, payment method and plan, insurance coverage, detailed specifications of the project as well as what constitutes a default (BOTH parties) and the possible remedies. Of course there needs to be additional language covering delays, change orders and termination language for both parties as well as various other sections addressing permits, inspections, utilities, etc…however what most don’t take into account or stop to realize is that the contract is usually supplied by the contractor. That’s right; it’s the contractor’s contract, written for the benefit and protection of the contractor. See why you should have an experienced attorney review it? And by experienced I mean someone who deals in construction law. Believe me, the few hundred dollars spent having the agreement modified to offer you the same mutual protection is well worth the alternative. Last, despite what you might be told, there is no standard contract and they all can be modified. If your contractor tells you he won’t accept changes or that it can’t be done then you need to find someone else.
Insurance. Require that the contractor provides you with all of the proper insurance coverage for your project. Make them supply you with proof and make a copy of it. Call their insurance carrier and verify the amount of coverage & type. Also keep track of the expiration date of the policy to make sure that it covers you throughout the construction period. Last, have your insurance carrier review the insurance language in the contract as well as the coverage carried by the contractor.
You Control the Money. Meaning, if you’ve obtained a construction loan to finance your project, make sure that only you have access to receive and/or order a distribution. Believe it or not but giving the contractor the authority to withdrawal funds is a somewhat common practice or request – but you’re only asking for trouble if you agree to it. Thankfully we didn’t, and while both of the contractors weren’t entirely please with our resistance they eventually got over it. If your contractor requires such – RUN!!
Lien Waivers. Make sure that you receive a lien waiver from the contractor each and every time you provide them with a payment. A lien waiver stating that they indemnify you and your property and that their business (& them personally if able to achieve) will take full responsibility if ever a claim of non-payment appears. Also, make sure that your attorney reviews this agreement prior to the final execution of the Construction Contract/Agreement. Better yet, try to obtain the ability to pay any subs directly and require that they indemnify you via a Lien Waiver; you can still pay your contractor his percentage fee separately.
Only Pay for Completion. Pretty self-explanatory but only pay for completed work. When things started to get off-track with our second contractor we arbitrarily decided to only pay for work which was 100% complete and only on rare occasions would be pay for work which wasn’t, then paying a percentage which was less than the percentage of what was actually finished. Example, you receive an invoice for the labor of installing sheet rock throughout the house(100%) however only 90% of it has actually been hung, you would only pay 50% of the invoice, with the balance being paid once that particular job is 100% complete. I sure wish we had implemented this from the beginning, as once we did a number of unfinished items were quickly completed.
Do Not Pay In Advance for Materials. Looking back the only way that I would agree to altering this stance would be for specialty ordered cabinets or something similar with a higher dollar value. If your contractor is unable to afford to front the initial expense then his bank account is probably a little too lean. We got stuck on this one – our second donkey told us that it was required by the vendor for us to pay for half of the cost of our exterior doors upfront and the balance would be due on arrival. Stupidly we did, and once we released him and went to pick up the doors from the vendor we were quickly told that they never received our initial “down payment” and they’ve never even had such a policy. Trust is a two-way street.
View Completed Projects, but More Importantly View Current Job Sites. Fairly self-explanatory but when viewing current jobs don’t just stop by during arranged times; go by unannounced at odd times so you can see the quality of the work as well as the condition of the job site.
Don’t Just Check References. Of course ask for and actually call the references supplied to you but know that those are most likely cherry-picked, as I doubt anyone would provide less than stellar references. Go one step further, most municipalities allow you to view permit information online where you can search by address, owner’s name, contractor’s name, etc… Run a quick check for permits pulled by your contractor over the last few years and see if there are any names/jobs which weren’t given as references by the contractor and then reach out to them. At the same time some municipalities even go so far as to list online which inspections passed and which ones failed for each job – great info to have. Sure wish we had known about this in the beginning, our first contractor had a less than stellar inspection history.
Get a Detailed Bid. It may seem like overkill and it’s a lot of work on the contractor, and potentially for you, but the more due diligence done on the front-end the less chance for surprises down the road.
Don’t Fall in Love, Trust that Little Voice. It’s so easy to get swayed by the fast talk, fancy promises and flashy pictures and websites. Most contractors aren’t there to bring to life your dreams; they’re there to win the job, and some at any means necessary. Most of these guys could have a successful career as a politician so only trust less than half of what’s coming out of their mouth. Remember, they just want the job. If the promises or prices seem a little too good and aren’t in-line with those you’ve received then move on to the next guy. Nobody can pull a rabbit out of a hat without fooling you, don’t be that fool.
Third Party. While some general contractors now offer in-house architectural services I would strongly advise that you hire an outside source. Why? Some in-house architects are great but you have to remember who they ultimately work for on a daily basis, even after your job is complete. Ask those in your neighborhood who they would recommend and then interview each of them until you find one that fits your project. I would also recommend finding one that is experienced with project management and who will be actively overseeing its progress. If you’re going to have a considerable amount of structural work performed then I would also highly recommend that you hire a structural engineer to overlook the architect’s plans as well as the work being performed. Most architects have a few which they work with regularly which is fine, just make sure that your contract allows for you to have the ability to hire these advocates and then follow through with doing so. Nobody likes having someone look over their shoulder, especially when they “know” how to do their job. But despite what you might be told, the extra money spent on hiring a third-party is well worth the investment and can not only save you money but can also save your project. While we used our contractor’s architect, big mistake, we did hire a structural engineer on our behalf and it was beyond worth it and ultimately ended up salvaging our dream/home.
Careful with Fixed Priced Contracts. So the appeal of a fixed priced contract to homeowners, or at least to those which I’ve spoken with, is that you know the price will never be over the agreed to construction cost. Won’t be under and it won’t be over. The general mindset or fear of most is the possibility of the cost getting out of hand and potentially becoming unaffordable, the Fixed Priced concept is supposed to eliminate these fears; with the homeowner thinking that any cost over the contractually agreed to price will be the responsibility of the contractor. Think again, these guys aren’t idiots. Somewhere in the contractor there will be very liberal language discussing unforeseen conditions as well as change orders. One guess who pays for any extra expenses associated with these unforeseen conditions and change orders? Yep, you. And they’re quick to list something they should’ve taken into account on the front-end and label it as an unforeseen condition, sort of an extra layer of protection for them.
Keep Everything Tidy. Make sure that there’s language in the contract requiring the contractor to maintain a clean and orderly work site with all trash and debris being swept up and deposit in a dumpster at the end of the day.
Take Pictures. I’ve mentioned this before but take pictures throughout the process. Besides being able to look back on the progress being made these are also provide a great piece of evidence if ever needed in the future.
Hold Some Back. Make sure that the payment plan is structured where you’re not required to pay the last 15-20% until after the job is 100% finished, punch-list items are completed and all Lien Waivers have been executed. You’ll definitely experience some resistance over this one but try to hold back the same percentage as what your GC is charging for his fee.
Sober Up. It’s so easy to become intoxicated over the initial excitement, but try to step back and view this as a business decision. Take all emotions out of it and if you feel comfortable doing so, maybe use a trusted friend as a sounding board and then ask for their advice. Did we do this? Nope, we stayed “drunk” for the first several months and then finally sobered up before it was almost too late.
“Smart people learn from their mistakes. But the real sharp ones learn from mistakes of others.” – Brandon Mull
This is by no means a comprehensive list but just a few of the items which immediately come to mind. Please feel free to add to it or share some of your past experiences.