why does construction and remodeling cost so much? <!—-><!—-> <!—->
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Remodeling is expensive for a variety of reasons, but they generally fall into three main categories, labor, materials, and business overhead. While most of us have browsed the aisles of the big box stores and know that our dream door, or sink, or whatever it may be, is more expensive than we’d like it to be, few of us really understand the complex unseen costs of labor.
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A legitimate employer has to pay an accountant to manage his payroll, even if he writes the checks himself. Then there are state and federal taxes, worker’s compensation insurance, unemployment insurance, and other payroll burdens that the employer must bear. In <!—-> <!—-><!—->California<!—-> <!—->, the burden of payroll for a construction worker can be 100% of wages, meaning a $10/hr. employee costs $20/hr. to put on the payroll.
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Some employers try to circumvent these costs by paying their employees in “cash under the tableâ€. This is an illegal practice, and it is unfair to the employees, who are disqualified from unemployment (in the case of a firing or a layoff) and worker’s compensation (in the case of an injury), and who have no proof of income should they ever apply for a loan to buy a house or car.
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Business overhead is another largely misunderstood expense – but a legitimate contractor will likely have an office, office worker(s), advertising costs, bonding fees, licensing fees, liability insurance fees, and a myriad of other costs to bear. All of these necessary expenses must be figured into the cost of each construction or remodeling job.
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Hence, even if a contractor were a one-man operation, with no employees, the dollar amount charged is not the same as the contractor’s income. In <!—->Southern California<!—->, where we operate, a contractor charging $35-$50/hr. for his labor will conceivably have a take-home income equivalent to a $15-$18/hr. employee.
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Since construction/remodeling is so expensive, many consumers are attracted to a form of false economy by always seeking the lowest price. Wikipedia defines false economy as “an action which saves money at the beginning but which, over a longer period of time, results in more money being wasted than being saved.†This is what generally results from hiring unlicensed, illegitimate contractors who offer lowball pricing, often produce substandard workmanship, and will not be around in the future to warranty their work. <!—-> <!—->
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Many of the “sleazy contractor†horror stories we hear of are a sad result of consumers supporting illegitimate “lowball†contractors, rather than seeking out legitimate contractors with a proven track record of success.
CaliforniaRemodelingContractor.com
Edited 1/30/2008 7:46 am by Huck
Replies
"many consumers are attracted to a form of false economy by always seeking the lowest price."
I would suggest ending the sentence with the word "economy"
the rest of the paragraph says what you want.
you can get a price from three or six legitimate good contractors for the same job, one will be the lowest.
bobl Volo, non valeo
Baloney detecter WFR
"But when you're a kibbutzer and have no responsibility to decide the facts and apply the law, you can reach any conclusion you want because it doesn't matter." SHG
"...seeking the lowest economy." Huh? I don't get it. Maybe you could explain it for the challenged.Bill
"Since construction/remodeling is so expensive, many consumers are attracted to a form of false economy by always seeking the lowest price.""Since construction/remodeling is so expensive, many consumers are attracted to a form of false economy."
bobl Volo, non valeo
Baloney detecter WFR
"But when you're a kibbutzer and have no responsibility to decide the facts and apply the law, you can reach any conclusion you want because it doesn't matter." SHG
Okay, that makes sense. I was being too literal and thinking you only wanted to change the final word in the sentence to economy, when actually you wanted to end the sentence with economy and delete the stuff that followed it. Thanks for clarifying that.Bill
Well put, Huck. I often find myself giving that speech (without specific numbers) to prospective customers. Some of them "get it" and some don't. - lol
I also find two other things that require a lot of explanation. The first is all of the Home Improvement shows on TV that either ignore the cost, or only give the materials cost. Somehow, all the tools being used, and the crew of people actually doing the work get overlooked. - lol
The second is the availability of the "big box" cabinet and furniture stores such as Home Depot, Lowes, and Ikea. At some point in most of my jobs, I find myself explaining the differences between custom and mass produced items. Sometimes they "get it", and sometimes their eyes glass over when I talk about unit cost and economy of scale. And don't forget to include the cost of demolition, delivery, and installation. - lol
I think that is a very well written statement. I also think that bobl's suggested edit is a good one.
Perhaps another aspect of overhead that you could mention would be tools - remodeling takes LOTS of different tools, all of which are pretty expensive and which wear out.
False economy: The builder who cuts corners to save $2k which will cost the HO's $5-50k in repair bills. Wish more home buyers were better educated to spot the difference and thereby either put the corner-cutters out of business or force 'em to stop cutting corners.
It is the non-corner cutting builders and the uneducated home buyers who pay for it.
jt8
"Obstacles are those frightful things you see when you take your eyes off your goals." -- Sydney Smith
Edited 1/30/2008 10:34 am by JohnT8
.....remodeling cost so much?.........
Remodeling can be a worm can, especially when following one of the aforementioned corner-cutters.
I will pick on the job I am currently engaged in for a neighbor. A neighbor approached me and I agreed to take it on a T&M basis - glad I did.
The original intent was to replace a double casement window which had been damaged by a roof leak.
Remember as the story goes along that all of this was caused by the original contractor not spending the time to cut off an existing aluminum corner post. It probably would have taken about an additional 2 hours since they already had access......................
Step 1 - solve roof leak: remove aluminum siding for access, cut off corner post, frame and extend roof deck, install metal valley, strip shingles to ridge and install I&W, metal counter flashing, step flashing, replace shingles and siding. In the process determine there is no drip edge - install. As result of no drip edge, fascia and sub fascia is rotted - replace and aluminum wrap.
Step 2 - replace window: by this time the HO decided he just wanted to replace all of the vinyl siding on the addition (window wall) with aluminum. Strip siding from addition, determine the outside lights are highly illegal and not at all weathertight - replace / remedy. Install new Al siding and trim. Remove old window, discover an ant infestation and wood damage. Call exterminator, he says "they like the moisture" - I told him the moisture source was gone - he cheered! Repair / replace damaged framing and sheathing. Install new window. Complete siding and soffit. Repair drywall damage on interior, some from my construction, some from leak. Retrim window. Neighbor paints - Super Bowl party this Sunday.
This fellow is an engineer and just wants it right, $ are not a factor.
Worms....................................
Jim
Never underestimate the value of a sharp pencil or good light.
the cut corners save no one any money....
cut corners put a larger bottom line in the original builder's pocket....
Life is not a journey to the grave with the intention of arriving safely in a pretty and well preserved body, but rather to skid in broadside, thoroughly used up, totally worn out, and loudly proclaiming<!----><!----><!---->
WOW!!! What a Ride!Forget the primal scream, just ROAR!!!
the cut corners save no one any money....
cut corners put a larger bottom line in the original builder's pocket....
That is the biggie.
There is no way for the homeowner to know that the job is being bid with enough hours to do it right, but by the time everyone from the boss on down takes their cut right off the top, the employees have very little time left to actually do the job.
Incentive based early completion bonuses can have the same effect.
Heck, as long as it lasts a year, anything more is a bonus, right? ... not ...
I like it Huck. When I use the word 'labor' in my docs, I spice it up a bit: "professional labor and the expertise to complete the project"...or something to that effect. McD's hires 'labor', and not every guy with a pickup and a level in the gun rack has the 'expertise' to do the work as I'm sure every customer of your knows from past experience...nice to remind them of that...just a thought. I think it's a really good FAQ.
-Norm
You know when you think about it, I personally don't think construction costs that much when you compare it to the many other professions out there such as medicine, legal, accounting, etc. I know the point of the question was not this idea but its what I often convey to other folks when they ask me about my prices.
Check this out. Homeowner actually tried to convince me doctors, lawyers and mechanics are cheaper than contractors!
From:
katiewa <!----><!---->
Jan-19 1:44 pm
To:
Huck <!----><!---->
(163 of 208)
99048.163 in reply to 99048.124
Really, a lot of the problems are in the system itself, not just in the people.
From the homeowner side--AMEN!!!
Regarding calling three doctors--no, but I go to the doctor about once/year. So do most people I know--so getting references is a whole lot easier.
Three lawyers. Most lawyers advertise (we've only been to a lawyer once--for a will) 30 minutes free consultation. Not much, but it's better than doctors. Most people I know don't go to the lawyer's once/year.
Mechanics. We've been fortunate in not needing one for anything other than some basic stuff (rotating and balancing tires mostly).
But with all three of these, the cost for a basic visit and service will be substantially less than for any remodeling or construction job. AND I'm more likely to have several friends who have used the services of one of these other professions. AND the doctors and lawyers, even good ones, are listed in the phone book. That makes finding a good contractor harder.
We just frankly don't expect other professions to be governed by such ridiculous parameters.
You must not deal too closesly with the government!! The State of New Mexico has fined a Dept. of Energy contractor $800K+ because AFTER all the audits and AFTER several years of following the audited and approved procedures, the state decided unilaterally that the procedures were insufficient.
"Ridiculous" doesn't even begin to describe the rules governing the nuclear industry.
KathleenView Image “Good work costs much more than poor imitation or factory product†– Charles GreeneCaliforniaRemodelingContractor.com
Many of the “sleazy contractor†horror stories we hear of are a sad result of consumers supporting illegitimate “lowball†contractors, rather than seeking out legitimate contractors with a proven track record of success.
There's truth to this but it's far from the whole story. Compare these two personal experiences:
Story 1: My wife and I go to Colorado Springs to fix up and sell her father's house, which was emptied after bringing him to Delaware following an attack of encephalitis which debilitated him. The house had been sitting for 4 1/2 months on the market with almost no activity.
We called all over for contractors to help with kitchen remodeling and many other jobs. Each job involved an estimate in the thousands of dollars and the people couldn't start for 3-4 weeks. Tried doing fix-ups ourselves, but were slowed down by having to go to Lowes for tools with every new job. Didn't even have a drill at the start.
A salesman at Lowes asked why I was buying so many tools and I told him our story about coming all the way out to Colorado from Delaware and having to wait weeks just for the contractors to start. Salesman pointed out a contractor who happened to be in the store and said "You should talk with him. He's good." I spoke with the contractor, and he said he could help us out.
I knew nothing about the contractor other than the Lowes salesman said he was good. We didn't know whether the contractor was bonded or anything, and the contractor didn't even give us an estimate.
Net result: Excellent job done right away at a very reasonable price. Sold house 2 1/2 weeks after we got there for $10,000 more than we were asking, which was thousands of $ more than what we spent.
Story 2: We're now putting a 1000 sq ft addition onto our house, along with full basement, to add a first-floor bedroom and handicapped-accessible bathroom, along with other enhancements to make the addition enhance the home's value.
This time we had plenty of time to research our contractor and wait. We didn't know anyone who did this kind of work, and in asking friends for recommendations, we never heard the same name twice, and none of the recommended people were listed in the Yellow Pages.
In other words, there was no consensus at all, and everyone recommended seemed to be a small-time relative. So then we called every general contractor in the yellow pages, verified that they did our kind of work, checked them with the Better Business Bureau, and scheduled 15 of those people who passed muster to come out for an interview.
Got 8 estimates. Went with a guy who was a member of the Better Business Bureau and who was in the business for 35 years, with references. Granted, he was also the second-lowest bidder, but everyone who bid had passed what we thought was a high bar.
Turns out the guy had employees who didn't even seem to qualify as skilled labor. I'm talking about things like painters who rolled wall paint right over door sills. His subs were illegal immigrants who put on a roof and siding with no flashing whatsoever.
Conclusion: There are so many contractors out there that, unless you have some kind of inside information, your results are quite likely to be hit-or-miss no matter what you do. And many of the best contractors don't advertize because their reputations make advertizing unnecessary. Therefore you can only find them through inside information. And, even then, the HO must be versed in construction if they want to be assured of a good job so they can tell right away if things are going off-track.
Story 1: ...I knew nothing about the contractor other than the Lowes salesman said he was good. We didn't know whether the contractor was bonded or anything, and the contractor didn't even give us an estimate. Net result: Excellent job done right away at a very reasonable price.
Yep. Some folks buy a lottery ticket and win a million dollars, too.
Story 2: ...a 1000 sq ft addition onto our house, along with full basement, to add a first-floor bedroom and handicapped-accessible bathroom, along with other enhancements... Went with a guy who was in the business for 35 years, with references, second-lowest bidder. Turns out the guy had employees who didn't even seem to qualify as skilled labor. His subs were illegal immigrants who put on a roof and siding with no flashing whatsoever.
And none of this came out when you interviewed his references, and looked over his current jobs in progress?
View Image “Good work costs much more than poor imitation or factory product†– Charles GreeneCaliforniaRemodelingContractor.com
And none of this came out when you interviewed his references, and looked over his current jobs in progress?
We checked his references, but only the references he gave us. It's not exactly an unfiltered source of information.
Also, I may have learned a lot about construction in the past few months, but back when we were interviewing contractors, I didn't really know enough to tell a good job from a bad one in a lot of ways. Wouldn't have been able to tell whether flashing was used, whether j-mold was being used properly, or whether unsheetrocked walls were actually straight, etc.
In a sense, our ability to be a customer with good judgement and connections requires a learning curve, just like being a skilled craftsman. We'll be better at it next time, but I don't think there's any way to avoid the learning curve.
Its a sad fact of life that unethical (many of which are licensed) contractors take advantage of people, and provide substandard workmanship. I'd like to track each and every one of these guys down, and nail their work boots to the floor (before they put them on, of course!).
It breaks my heart every time I hear of a story like yours, and there are plenty of them out there. Hope your next experience turns out better, and on behalf of my industry, I apologize to you. View Image “Good work costs much more than poor imitation or factory product†– Charles GreeneCaliforniaRemodelingContractor.com
Thank you. I think the next experience will be better. For starters, I now know about this website!
"We checked his references, but only the references he gave us. It's not exactly an unfiltered source of information. "
What did his references say? Would they have been open for you to drop in and have a look at the work that the contractor did?
On my website I have testimonials from clients and I also encourage potential clients to call them up and go see my work for themselves.
"but only the references he gave us. "
I'm curious about this statement not from a critical place but from a practical place. How could this be done other than the references that a contractor would provide?
BjR
You are right, of course he has to supply the references. That also means he can cherry pick the best ones. I used to give my clients a complete list of every customer I ever had. The list was done in a time line with info about the scale of the job etc..
Time line history made it pretty clear that all the jobs fell very close together in real time so wasn't leaving anybody off the list.I told the customer choose anybody on the list and I would make arrangements to have them talk to the prospect. Yes, I had some mildly unhappy past clients and my method was a #### shoot, I just told the new client up front that that does happen in spite of all of our best efforts and they may end up talking to one of those but the list was there so they could call anybody they wanted.
They can't get your Goat if you don't tell them where it is hidden.
How could this be done other than the references that a contractor would provide?
That's kind of the point. It's just a dilemma.
For some industries, publications like Consumer Reports can act as a third-party source of information, but when it comes to contractors, about the closest you can get (as far as I know) is the Better Business Bureau. And the BBB is likely to only save you from the worst.
When my wife and I first started searching for a GC, we asked a whole bunch of friends for recommendations, hoping that there would be someone whose name was recommended by several people. Never happened. Each person recommended someone else.
Also, visiting a site isn't going to help much if the person trying to pick out a contractor isn't already familiar with construction, except in the worst cases. This can be hard for contractors to understand because their eyes are so well trained that they spot mistakes almost instinctively. But to a novice, it may not be obvious that j-channel is being misused, or windows aren't flashed, or a roof valley is wrong, etc.
I've come to the conclusion that finding a good contractor is always going to be hit or miss, although a vigilant new guy can still manage to avoid an outright crook. To do better than that, about all you can do is to get to know people in the construction business so you can learn how they think and do things before you ever need their services. Also, it's worthwhile learning enough about construction so that you can tell good work from bad.
In other words, "Dig your well before you're thirsty." Any person who doesn't have time to lay the groundwork for finding a good contractor will learn to do so through the alternative method: hard experience.
If anyone can think of ways to do better, please let me know.
Regarding the reference issue, I think it's safe to say any reference supplied by the builder/remodeler (or anyone fro that matter, be it accountant, mechanic, etc.) will give a steller review.
Now what's interesting in the internet age is most county's webpages now has an online link to "Permit Status" or "Browse Permits" or whatnot.
Well, with a little sleuthing one can probably get a listing of every job a contractor has worked on. In my county it would work like this: I go online and type in one of the properties listed in his references. There it would list his name as the contractor. I would then click on his name and up would pop a list of all properties he obtained a permit for. Combined with a little help from whitepages.com I can then pick up the phone and call up any property owner that he worked for.
And this is a good thing. The bad guys don't get work and the good guys get to shine.
Runnerguy
Edited 2/23/2008 3:01 pm ET by runnerguy
what's interesting in the internet age is most county's webpages now has an online link to "Permit Status" or "Browse Permits"
Sounds like a winner. I'll keep this in mind for next time. Thank you!
Edited 2/23/2008 7:08 pm ET by DelawareDave61
runnerguy,
See that's the sort of referals That mean something.. Cherry picking customers is so commonly used that I seldom pay attention to it as a sales technique.