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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The ROI Case for Remodeling: It's Got a Pulse! (But Does That Matter?)

"That's right, Mr. and Mrs. Customer. If we go forward with this kitchen remodel, I personally guarantee that it will dramatically increase the value of your home and you'll get back every penny. Especially the dual dishwashers, terrazzo marble countertops and floors made from reclaimed French wine barrels."

Let's hope you never said that in a sales call. But many remodelers fondly remember the days when they could assure prospects that they would likely get back most of the money they spend remodeling, if not all of it. (Remember averages like this, as shown in the image below? 2005 was shortly after I began covering this industry, when everyone thought homes were the best investments around.)

Those days may never come back. But the return-on-investment case is getting stronger, according to this sneak peak from Remodeling magazine about its latest Cost vs. Value Report.

"We're finding that for the first time in six years, the overall average cost-value ratio has improved to 60.6%. This is 2.9 points better tan the 2011-12 number, which hit a historical low of 57.7%, and is more than a half-point better than the 60.0% ratio from two years ago.

The 2013 Cost vs. Value report will be released today. Go here for the full download.

By the way, we'll explore the benefits of "the ROI pitch" in d5R soon. I can tell you in the meantime that some remodelers think it's a futile cause. Said one in a series of tweets yesterday:

"It's such a funny metric. Totally the wrong way to approach remodeling your home. I ask what the ROI of a car is. [Remodeling] is about quality of life. Spend what you are comfortable spending to live well."

What do you think, remodelers?

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