Dealing with contractors for Inspection Objections – Knowledge is power

I had a listing this week where we went under contract as my client was preparing to leave town on his honeymoon. Instead of ruining his honeymoon, I had the pleasure of meeting contractors with the prepared solution (provided by an electrical engineer) while he was gone and getting certain inspection items done in a timely manner. Now I must say, this isn’t my first rodeo. I know what things cost. It truly is a wonder what a range of bids you will get for the exact same job.

I have one rule I use to quickly guesstimate the value of service work so I can ballpark the cost. It’s a bit general but it seems to work well.

(Cost of materials + (Hourly labor cost *Number of hours * number of workers)) + 10% of that figure = Most you should have to pay.

For example:

($400 for cost of materials + ($50 hour * 8 hours* 1 electrician)) + 10% = $880.

For paygrade I substitute $30 for unskilled and $50-$75 for skilled. For large projects this breaks down, but it works well for smaller projects. The 10% is the minimum profit I would expect a company to try to make on their time. I request that most quotes break up their cost of materials from their labor costs so I can make comparison. For the cost of materials, you could do the checking yourself or simply ask that the contractor break this section out since “You’ll have to expain this to your client” and need to understand how they arrived at their price. If you’re the homeowner…say you’ll have to explain it to your wife.

I just had some electrical quotes completed. I estimated 6-8 of work for a skilled electrician to complete a solution prepared by an electrical engineer. No extra thinking or problem solving necessary… just get the job done. I received quotes between $750 and $2200 after having 6 bids from electricians. I don’t recommend going with the lowest bidder but I do believe in my service formula.

($400 for cost of materials + 1 electrician at $50 hour for 8 hours ) + 10% = $880.

I recommended that the seller consider the bids of $750 and $850 based on his comfort level with the contractor and their reputation. These bids were the 4th and 5th respectively. Job done. Now I’m sure some people would think real estate professionals don’t earn their worth….but here’s one more example of where they can help earn it.

Knowledge is power when it comes to real estate. Educate yourself about what things cost. Get the Means Remodeling estimating book. It’s a good read….really.

Funny part is, that wasn’t the only contractor. I had to deal with a minor plumbing issue, root a drain pipe. I received bids as high as $795. There was an additional $300 charge to pull the toilet and replace it. I asked the plumber, “How long will that take to pull the toilet, 15 minutes?”. He nodded yes, that was about right. “How long to put it back on,…. 15 minutes?” He nodded yes. He of course didn’t realize that meant to me that his labor rate was $600 an hour. Needless to say…I promptly kicked him off the site. This was a widely used company in Denver. Their trucks are everywhere. He was quoting me the book rates from the company. I even saw the book. All I know is that there are a lot of people out there getting ripped off. I called a company, Discount Rooter, who promptly knocked out the problem and got it done. I had worked with them before and had a great experience. $200 total to run the line with 4 in. knives on an auger and pull and replace the toilet. The toilet part just takes $15. The numbers just make sense. What a contractor makes by taking advantage of a home owner’s ingnorance can make my real estate fee look paltry in comparison. Even more so when I’m only charging 1%. But then again if I charged more….I would be like everyone else. That would be painful.