Posted by: Jeffrey Fick | June 3, 2011

How to make a Successful Construction Investment

What Major Risks Do Homeowners Face When Making a Home Remodeling Decision? According to the February 2010 Certified Contractors Network (CCN) newsletter, “homeowners have a lot of fear when they are faced with making a home improvement decision. They worry about whether or not they are making the right choice when it comes to contractors. Will they be able to deliver on their promises? Are they financially strong or could they be out of business soon? To secure the sale are they stretching the truth with the unique benefits being offered? And many more …”   The standard checking of license, insurance and manufacturer’s certification are critical pieces of information to verify, but do not assure a good job unless supported by internal systems and processes that guarantee consistency. Homeowners need to collect more information.

Industry Statistics >>> According to the National Association of Consumer Agency Administrators (NACAA) and the Consumer Federation of America (CFA) home improvement contracting is the top complaint category reported by state and local consumer protection agencies.  A recent Qualified Remodeler magazine survey found that 48% of respondents across North America would NOT hire their contractor again. This equates to homeowners spending thousands of dollars for sub-standard and ineffective home improvement work, plus all of the unnecessary headaches, wasted time and additional interior repairs that are associated with these bad jobs.

Why Do So Many Homeowners End Up Dissatisfied?  The home improvement industry is essentially unregulated. This means training, installation and monitoring are the responsibility of the company, and there are no mandatory apprenticeships or testing programs. Have you ever seen an ad that reads, “fully licensed and insured”?  The Maryland Home Improvement Commission (MHIC) requires a contractor be licensed, but the requirements are minimal and in most cases not adequate for the proposed project.   In the state of Maryland it does not take much to get an MHIC license, all you have to do is pay a $325 fee, take an open book test and have $50,000 liability insurance.  That’s what “fully licensed and insured” means!  So, as a consumer, you have to be careful that you do your due diligence and check everyone out… you don’t want to end up on TV as a victim of a contractor’s scam. 

The Certified Contractors Network (CCN), an independent organization committed to improving the professionalism in the industry and educating homeowners, says “Studies clearly show that most dissatisfaction involves the low-bid contractor”. Unprofessional contractors can pass the licensing and certification prerequisite noted above, but still hide things or lie by omission to put a low bid on the table. Here are some of the ways how:

  • not educating the homeowner about the proper job and potential extra costs
  • important parts of the job are partially or completely omitted on the proposal
  • not installing what is listed on the proposal
  • unrealistic contractor workmanship warranty
  • misrepresentation of manufacturer’s material warranty
  • low quality materials
  • inadequate job site safety and supervision
  • inadequately trained and underinsured installers (confirm sub-contractors liability and workers compensation coverage in writing)
  • poor property protection and job site clean-up
  • inadequate review process in place to ensure consistent quality
  • doing cash jobs; no records = no workmanship warranty and no material warranty

Other Things Homeowners Should Know 

  • The internet is a good source of information, but homeowners have to be wary of posted reviews. Some ‘independent’ sites allow contractors to write their own reviews. Look at more than one site.
  • Different Estimators from the same company may quote completely different specifications and prices for similar projects. There may be a large gap in the workmanship, supervision and end results from the same company due to lack of systems and training.
  • Some companies put their signs everywhere to make themselves look like they work in the neighborhood, without actually doing work at those locations.
  • Home Remodeling/construction is a very high employee turnover industry, so ask about the company’s installation and safety training process.
  • Many companies sub-contract the work to crews with little experience.
  • If things go wrong, the homeowner has essentially no recourse. The homeowner may win in court, but the company likely has no assets.

What Should a Homeowner Do to Reduce the Risk?

Buying a home improvement project is an intangible service that results in a finished product. The only way to guarantee a good contractor experience and the right job are proven systems and processes applied on every project. Go beyond the normal research and ask the contractor what processes they have in place to ensure consistent:

  • scheduling of appointments
  • estimator training for quoting procedures, job specifications and pricing
  • quality brand name materials
  • installer training for workmanship and installation methods
  • insurance coverage
  • job site safety, supervision and clean up
  • work in progress monitoring and finished job review process
  • warranty coverage
  • maintenance service

Professional contractors will have all of these components to ensure a consistent outcome on every job.

Homeowners never regret getting the job done right.

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