A couple years ago when the housing industry was booming, I was flamed and called a cheap SOB for asking 3 contractors to provide a free estimate for a $100K job. In today’s newspaper, I read the following:
“We expect housing to start slowing the economy this quarter or the next,” Edward Leamer, director of the quarterly University of California, Los Angeles, Anderson Forecast, wrote in the report to be released later Wednesday.
The cooldown in the housing sector is likely to be spread over several years, with as many as 500,000 construction jobs and 300,000 financial sector jobs lost, the report said.” [Associated Press]
I need to have my roof replaced next year. If the above story is true, am I still a cheap SOB for seeking a free estimate, or will the economy have deflated some of the industry’s arrogance by then?
Ray Bleaux
Replies
Ray -
Are you looking for an estimate or a firm bid? These are very different animals in my opinion.
With the price of materials being so uncertain, there's no way I would give anyone a firm bid today for a job several months out. That isn't arrogance - just good sense.
Ray-
There's a big difference between the time and effort required to provide a price on a $100k addition and on a roof. Specialty trades like roofers are used to giving free estimates- they can pull up, measure the house, and 15 minutes later give you an estimate. Large remodels, on the other hand can take days to assemble an estimate for, and if the plans aren't 100% complete (they virtually never are), the bids will vary greatly in scope and price. For that reason, many contractors are starting to request payment for putting together estimates, especially if they only have a 33.3% chance of getting the job.
Also, don't confuse a slowdown in housing starts with any effects on the remodeling industry. The two act pretty independently of each other, and often a slowdown in one creates a boom in the other. If people can't afford a new home (due to rising interest rates and high prices), they're more likely to stay where they are and do some remodeling.
Bob
Bob,
I agree with a possible boom in the remod industry if the new home market falls off. However the new home construction folks will flood the remodeling industry creating a more competive market.
My neighborhood is going remodel crazy right now.
Homes in my area are averaging over $225+ a sq ft(to purchase). Most of the existing homes are in the 1200-1400 sq ft range. All the lots are 50 x 100.
There are 4 major remodels within in a stones throw of my house (inculding mine).
I have noticed in our area folks are opting to remodel now, the homes for sale have decreased, sat on the market considerably longer, and they are selling below the asking price (believe it or not homes were sometimes going up to 10K over list).
Remodel guys could do quite well here.
Not taking away from new construction either, its still quite big.-----------------------------------------------------------------------------
WWPD
Where in the Tampa area are you by the way?
When I lived there you couldn't give a remodel away. Then again, $1500 sqft was $80K.
South Tampa.
10-12 years ago alot of this area was ruled by bars on windows and the flash of blue lights.
It has been revitalized-----------------------------------------------------------------------------
WWPD
Sailfish,
I graduated from LETO Highschool in the 80's. I remember when South Tampa was bad and noone would go to Ybor city after dark.
Back then I was pulling down a whopping $7.25 an hour and my boss was getting $8.50. A house in Northdale by the elementry school could be had for $84K and that includes the pool.
I was surprised at how things have changed when I was there a few years ago.
I remember as a teenager cruising down Nebraska Ave on the way home and turning down the side streets and dragging the brakes on my firebird. The hookers would come running down the sidewalk hoping they had just scored a new john and when they could almost touch the car we would dump the clutch and leave them in a big cloud of rubber dust. Afer a few times we would split and drive the rest of the trip home laughing our a$$e$ off.
One of my fellow Softplan CAD users lives in San Fransico. He said the asking price on homes and lots is usually the minimum, with bidding by interested buyers to follow.
Sailfish,
Did not intend to stir things up, but in my area the subs: drywall. masonry,siding etc. seem to find there nitch.Some do almost exclusive new home and some remodel. I feel that new home subs will roll into the remodel creating possibly a glut. Then again there seem to be so much work out there it might not show any change.
" I agree with a possible boom in the remod industry if the new home market falls off. However the new home construction folks will flood the remodeling industry creating a more competive market."
True to some degree, but the remodel market gets swamped every time every any industry slows down it seems- the local auto plant lays off 500 workers, and all of a sudden, they're all out working as "remodeling contractors".
The key is to establish yourself as a professional, so that you aren't "competing" with this new "competition". There will always be the portion of the public that will go for the low price every time, but that shouldn't be your target market when times or good, or when they're bad.
Bob
True to some degree, but the remodel market gets swamped every time every any industry slows down it seems- the local auto plant lays off 500 workers, and all of a sudden, they're all out working as "remodeling contractors".
From your description bob, I'd think you've worked in the Toledo area.
And you are right on with your prescription of how to deal with it.A great place for Information, Comraderie, and a sucker punch.
Remodeling Contractor just outside the Glass City.
Quittin' Time
Not Toledo, Cal- but central NJ has several auto plants (well, had- Ford closed and demolished theirs recently, and GM closed theirs last spring), and everytime there were layoffs, every UAW worker with a level in a gunrack in the back window of his pickup was a "contractor" (note: guns are not allowed to be carried in NJ, so the gunrack was specifically for the level....lol).
Bob
You think when there were layoffs in sillycon valley the same thing happened?A great place for Information, Comraderie, and a sucker punch.
Remodeling Contractor just outside the Glass City.
Quittin' Time
Sure did (does), Calvin. I've been in the Sillycon Valley for over 30 yrs now and have seen several cycles. During two layoffs, I worked with friends who were GC's (one of them had been a VP of a chip company).
Some of the high tech guys will start doing handyman work and a few of them are actually pretty good. The rest stumble around until they can scare up a "real job". I've also heard of some kind of handyman "network" that is almost exclusively laid off high tech folks.
Thanks dave for the report. I was making a joke but you have clued me in on the real story. I see now that what appears here as everyone can do what we do when pushed to do so, is the same everywhere. And this is in no way a kick at those that seriously do it and are good at it. Another phenomenon are the 3 days on, 4 off guys........oftentimes firemen. I've worked with a couple and some of them too know whats up. A few even carried insurance and some were licensed. I think what gets us is having to compete with those that don't. But hey, alls fair in love and war.A great place for Information, Comraderie, and a sucker punch.
Remodeling Contractor just outside the Glass City.
Quittin' Time
I give free estimates for $350,000.00 plus custom homes, and free guaranteed ( good 30 day with right of revision afterward) bids if the client is further interested.
Free estimates take about an hour, a free guaranted bid takes two or three meetings with clients to discuss specs and detals and another 6-8 hours office work.
If the HO comes to us with a plan, but no specs, we charge for spec writing. If they have no plan or need modifications, we charge for design work, but usually discount these from regular pricng at the point we sign a Contract to Build.
Asking for a free estimate or bid (especially for a roofing project) is not out of line.
When seeking a new sub-contractor I try to obtain three written bids.
Depends.
That survey isnt worth the paper to wipe on in some areas and others its probably true. Theres always booming towns .
Since you speak of roofing and lets talk about tree trimming . A lot of those guys went South or in your case to LA.
Tim
Ray,
I've been watching the housing forecast pretty closely as well. But I think that might be a seperate issue from your question. I can't decide if you are really asking if you should pay for an estimate or if you are attempting to gloat at the impending down turn. I suspect it might be to simply gloat. So here's an answer that might help.
I was one of those guys who put "Free Estimate" on his business card, and I had every intention of giving an estimate to every person who asked. Wanna know what I learned?
I can swing by and give an estimate for Crown moulding or a new stair rail or a dozen other things off the top of my head, and have it be accurate enough to make a fair amount of money. Some people are simply tire kickers but it never hurt me to stop and spend a half hour or so. Most of them were serious.
Bigger jobs are a different matter. Those customers come in several sizes.
1. is the guy who knows exactly what he wants. He has a plan. He knows he can afford it. He has specs. All he's doing really is interviewing contractors. He's looking for a guy who he feels comfortable with and hits the price range he is in. This guy might get a free estimate, maybe even a free detailed propsal since it's a sure bet that one of the guys is actually gonna get the job.
2. is a guy who is serious but needs guided thru everything. He's a nice guy but it will be a pain in the a$$. Might get a free consultation or two but once the design work starts and the proposal is being put together he's writting checks.
3. is like #1 except that he wants your numbers so he can shop them around (Or worse yet even show them to others who he gets bids from) until he gets the rock bottom price. This will end up being an adversarial relationship. This guy might get a free estimate but not likely. Not worth it. And a detailed proposal? Billed by the hour.
4. is the customer who has no idea, no plan and isn't even sure if he can afford it. There is nothing there to base an estimate or proposal off of and it really just is a public relations trip to go see him. He won't pay you to design it. He has no design. He has no specs and he probably can't afford it. He wants an estimate so that he can tell the neighbors he's thinking of remodeling too. He migth get an hour of your time but you'll never hear from him again and it's a waste to work anything up. Espescially considering how he has nothing to work off of.
5. Is the guy who wants work done, can afford it, has a plan but will only hire you after he's sure he has asserted his dominance over you. He's smarter, makes more money, lives better and has ahotter wife. Just ask him he'll tell you about it. If your self esteem is low enough to beg this guy for a job, you've got it. So long as you spend 40 of your own hours working up a FREE proposal.
NOw what you have to ask yourself is, which one of these guys are you. The answer will tell you if your gonna get a free estimate. My magic eightball says " NO" but it has been wrong once or twice before.
Edited 12/7/2005 7:20 pm ET by robert
Is there supposed to be a point to your question or did someone piss in your wheaties this morning so much you decided to bring a 2 year old grudge up?
I do not mean to sound as if I am gloating or trying to start an argument. Let me provide a little more background . . . I live in a 225 year old home. In 2002, I decided to have some restoration work done and hired a preservation architect (an out-of-state friend) to draw up detailed plans. I was new to the state so could not rely upon past experience with anyone. I explained the project to the builders I spoke to on the telephone, explained that I had architectural plans, and wanted them to come out to take a look at the job, plans, and hear their ideas. (I explained that I didn't want a fixed bid, as I know that, especially with older houses, things are uncovered that really must be corrected - this $100K job actually cost $155K). Three companies told me over the phone that they would charge a flat fee to show up. At the time, I asked about this on the forum and got a lot of angry responses - "Why should we waste our time if we are not assured of getting the job?" Others said they hated HO's like me because "we" expect you to spend your time for free and that I obviously wasn't the kind of person you'd want to work with anyway.Why bring this up 3 years later? At the time, I thought that from the tone of the comments here, many of you were focussing on the "here and now," and not looking at the "big picture." The booming economy allowed builders to be arrogant in their business transactions with customers. The attitude may work during booms, but what happens when the economy starts to slow? Can businesses with such attitudes survive? Well, the contractor I hired - a young guy who had started out on his own 2 years earlier was great. Eight months ago, I saw him at the store. He had some work, but not nearly as much as he was comfortable with, as it seemed that the influx of refinance money was drying up. He was concerned about the future.I now work with fed. govt. building contracts. Soon after that conversation, I was asked for suggestions on a sub for a $400 million project. To make a long story short, the contractor who worked on my house has gone from a 6 person operation to a 25-person operation after receiving the $18 million sub-contract. (For the record, with the fed contracts I have been involved with - contractors have never charged us to submit their bids.)So, if the industry slows, is charging a potential customer (with plans and finances) to show up wise? If the shoe were on the other foot - if the industry slows and contractors are begging for jobs - would you fill ill-used if HOs started charging contractors $50 to submit their bids/estimates? Where would the above mentioned contractor be in a year or beyond if he had told me in 2002 that he'd show up for $50? Ray
I think the conception you have comes from the goverment contracts. They bring in a lot more profit than your job in question.
Its up to every owner how he or she runs their business . You saw three in a row charging for estimates. That process was explained to you. The good ones are busy and dont care to give extended free estimates to take away from their family or work time .
There are some good ones here that would have simply told you its going to be cost plus.
Tim
In my businessand most others, visiting prospects, quoting work, and constructing proposals is called...THE COST OF DOING BUSINESS. It should be no different for contractors and GC's.
A question for those contractors/GC's who charge:
Homeowners don't know contractors from Adam. Why in the world would they pay you for an initial visit and a bid? They have no idea what you will produce. In any business that requires a sales cap you have to play the numbers game. The more people you visit, the more likely you are to score accounts.
The time and effort exhausted visiting prospects and developing proposals should be factored into the formula for your overhead expenses. You don't explicitly charge someone when you use your hammer and tape measure...but i am sure you calculate an annual tool budget into your overhead. Budget a certain amount of time per week for visits and proposals and factor it into overhead.
At the end of the day you are getting paid for your time regardless and homeowners aren't aren't turned off by your request to be paid before they know anything about you.
Edited 12/8/2005 11:04 am ET by mcf
Once again the view point of the homeowner is taken. Really. I do understand where you are comming from . I often wonder sometimes why an owner would open up an open check book for cost plus too never ever knowing the bottom line, but it happens every day.
If times get hard of course the GC would do what ever it takes to feed his family which you may be thinking about .
There is also times when you dont want to answer the phone at all which was discusseed here a short time ago. I think it was mentioned to let the answer machine get it and return the calls they want to. People dont like being charged for estrimates and they certainly dont like being told no.
Lets case the senario though to give a different view point :
GC has more work than he can get to and he HAS established clients who all know his work. One Doctor tells a group of doctors his man is the man to hire and goes on and on. From that trusted lead a new doc calls and so on. The same thing happens in churches where the members get to know and trust the GC. At any rate word gets around and either compliments or rocking occurs. Ive know men to work excluseivly for a few large families so there are lots of ways it happens. This guy has built a reputation by good works or ends up being THE call guy for an area from specialty work.
So if you are tryijng to figure out how to drain the swamp when you are up to your butt in aligators , giving free bids to get in deeper water doesnt make any sense. Areas are like that that are booming or in short supply of qualified people . Basically what we are tlking about is all supply and demand. You may not know them but if they are charging for estimates you can bet there are lots of people who do.
So Ill ask you a question. Why would you incur cost to get more work if you had more than you could do already ? Would you still realte that as a cost of doing business if you were in fact worried every night someone else would call and ask when in the hell you were going to be able to make it to their house?
Tim
As a matter of reference, my post was from the perspective of operating a business and not a homeowner.
I get RFQ's all day long in my business. I pass many by. Many people are looking for 3 bids and a buy. They will cherry pick the best prices in each bid. I don't entertain those RFQ's. I look for and do business with other business's that are looking for long term inventory management. These contracts typically run 3 years. I am constantly visiting prospects and doing proposal/bid work. It is my cost of doing business...it is factored into my overhead.
I am not suggesting contractors drop their toolbelt and run after every call. They have every right to accept and reject work. My point is that if you ARE interested in a project your visit and proposal should be factored into your overhead also.
I would never charge anybody for a bid. I would either no bid/ignore the request or invest the time to win the bid at my expense (not really my existing customers cover my overhead, inventory, payroll, and profit).
Edited 12/8/2005 12:38 pm ET by mcf
I get RFQ's all day long in my business. I pass many by. Many people are looking for 3 bids and a buy. They will cherry pick the best prices in each bid. I don't entertain those RFQ's. I look for and do business with other business's that are looking for long term inventory management. These contracts typically run 3 years. I am constantly visiting prospects and doing proposal/bid work. It is my cost of doing business...it is factored into my overhead.
I think you just answered the thread question quicker than I did . A job that runs three years would have my attention. Id rake you out for dinner for that.
Evidently the author of the thread holds different work?
And you mentioned the three bid posse . Who wants to be part of that for a remodel when they are busy remodeling with out getting paid on site time to figgure out methods to tie it all in? So are we talking about your point or the authors? New construction can be figgured in office and a short site visit which gains a lot more work and known profit. Remodeling brings many numbers to the table that have to be fetched from subs. More visits. Apples and oranges.
Some one mentioned getting a roof estimate was easy and here it is because as the poster said , it takes 15 minutes site time in most cases. I dont mean to be insulting to anyone but full scale remodeling takes a lot of time in the figguring department. Not everyone can do it . If Im bidding a house I can use standard sub figgures and material costs. tadone. Additions are easiar than figgureing remodels that are large. It takes experience just to be able to figgure what we are discussing here.
On the flip side maybe the GCs dont know the author of this thread.
Tim
Edited 12/8/2005 1:01 pm by Mooney