Tuesday, January 22, 2013

Sticker Shock: Could Your Contract Have Avoided This?

It's probably the biggest source of disputes between homeowners and remodelers and also the issue that remodelers least enjoy discussing: the project's ultimate cost, and the reality that it's likely to range higher than the estimate.

From "It's In the Contract (if not, It Should Be)," January 12 d5R:
Set and monitor expectations about pricing

Temptation: You developed a strong and honest estimate. The client understands that actual prices may be higher.

Reality check: The client is shocked that your actual costs are that much higher than the estimate.

Solution: Add language specifying that the job will probably exceed the budget by at least 10 percent.
Attorney Andrea Goldman: "If I had a dime for the number of homeowners who have been shocked by the fact that their job exceeded their budget, I would be a rich woman. It is your job to educate your clients. Do not be coy. Tell them that more often than not, there are concealed conditions that will increase the cost of the project. Make sure they have a cushion built into their budget. I can't tell you how many homeowners are blatantly refusing to pay for change orders because they were unanticipated. Tell them verbally and in writing, and then tell them again."
How do you set and monitor expectations about pricing, remodelers? Read the full story here, and share your thoughts.

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Abe Degnan said...

How about just building a 10% contingency into the estimate?

Anonymous said...

We always start our process with "ball-park" numbers or "cost opinions", and try to shoot high. Yes we run the risk of scaring some people off that could have been sold by going through 7 hours of design and 3 hours of proposal writing, but we have found that number to be low and this to be the best process for us to lessen our wasted time and ensure sticker shock is minimized.