What General Contractors Don't Want You To Know
As a contractor in the residential field for years, I have seen all the tricks of the trade from my competition. Although most see this as ethical, I tend to stay away from these practices. Most building trade professionals use the philosophy, what the homeowner doesn't know, only makes us richer. The type of contract you have makes all the difference. An hourly rate vs. an estimate can be one of the biggest scams when using a dishonest builder. Getting talked into using a general contractor or prime contractor is also a way to lose money. Then, there is the old material plus trick, as I like to call it. Being educated about these "ethical" practices could save you big bucks.
Hourly vs. estimate
Hiring a contractor by the hour is fine as long as you have all the details. Let's face it, some are simply better that others, more efficient with better tools, better quality, and have years more experience. Usually these guys demand a better hourly rate, and that is understood. An hourly rate is usually preferred by builders, as it decreases their risk. This is also valid. So where does the scam come in? Let's say George gives you an hourly rate of 15.00 per hour. He has all the latest tools and years of experience. You've checked his previous work and are more than satisfied. So you agree to hire him. So, while you are at work, George brings in his crew. With him are two 16 year old boys whom he will be paying 8.00 per hour. The catch is that you are paying for total man hours at 15.00 an hour. So for every hour on the job, George is making 29 bucks. This would be fine if you were aware upfront. Beware of this scam and get all the details. Find out what each of his employees make and offer to pay them with a separate check.
General contractor vs. project management
Just about every builder would prefer to be the general contractor on your project. How does this benefit them? There are usually only a few who specialize in every aspect of residential construction. They will give you a price for a concrete foundation, add a large percentage and hire the cheapest guy they know to do the job. This process is duplicated several times leaving you paying way more than necessary. Your general should be rewarded for his knowledge and overseeing the job, but how much is that really worth. The homeowner would be better off hiring someone to be the project manager. This manager with years of expertise could oversee the job and hire specialized contractors to complete it at huge savings. You would know up front what the cost is and could pay him a flat fee. Being informed is crucial in the homebuilding or remodeling process.
Most builders feel that 10% is a fair markup of materials. It takes added time to acquire these items. What you don't know is that they already have an account where they get a 10% reduction in price. The larger the project the better the bottom line for the contractor. The way to offset this is to get an itemized list of every screw, nail and board. If you agree to pay a markup, do it with the knowledge upfront. Offer to pickup anything needed or pay them a reasonable percentage for their trouble.
There are a lot of honest builders. But, as we have always heard, one bad apple ruins the whole bunch. Just be on your toes!