(Transcription Below)

Hiring contractors for a larger home improvement project can feel a little bit daunting.

We have all heard the horror stories about working with bad contractors and home improvement projects that have not turned out as intended. My name is Marcus Auerbach. I’m a local real estate agent here in Milwaukee, and I’ve also been a real estate investor for over 10 years, and in today’s video, I want to share with you some of my personal tips and tricks on how to find, interview, and work with contractors.

Remodeling is a huge passion of mine. There is something that I find deeply gratifying in taking a house and turning it from ugly and distressed into something that’s modern, updated and looks great, and having the neighbors come over and be happy with the result.

Over the years, I’ve done pretty much everything from your standard interior remodel, with kitchen and bathroom updates, and everything from roof to basement work all the way to sewer lateral replacement. I have tried new construction and built from scratch.

We have worked with a ton of contractors over the years. Most of them were good contractors. Some of them were great and outstanding, and we have also encountered a few rotten apples. But quite frankly, if you know what you’re looking for, they’re quite easy to spot.

Before you grab your phone and call a bunch of contractors, you have a little bit of homework to do.

Step number one is going to be a written scope of work. This is very important. This is what professional remodelers and flippers do, and a lot of the problems that I’ve seen between homeowners and contractors actually stem from misunderstandings about the scope of the project.

So you need a written scope of work for two reasons. Number one, to give it to contractors so they have something to bid against, and number two, to estimate your budget and also to manage your own expectations. Step number two is going to be your budget. Once you have a detailed scope of work, it’s relatively easy to put a budget together.

Let’s say you want to replace the old concrete driveway in front of your house. If you know that concrete flatwork in Milwaukee typically costs between five and seven dollars a square foot, it’s relatively easy to estimate a budget for the project.

If you’re not familiar with those numbers, a website like homewyse.com can be very helpful in doing your research. Or, you can just ask me!

Don’t forget about the cost for the landscaper who is going to come back and fix your lawn after the concrete guys are done with their work. Accuracy is not the goal here. The reason why you put a budget together is so you have realistic expectations, you understand what the cost of the project might be, and if necessary, you can adjust your scope of work. Also, you’re going to look a lot more educated when you’re going to talk to contractors.

Number three, finding great contractors. The easiest way, and the preference for most people is just asking around. Your friends, family, coworkers. You can ask your real estate agent and see who has completed a similar project and had a good experience and can give you a firsthand account on working with a particular contractor. Personally, I’ve also had good experience running into guys at 6:30 in the morning at Menards or Home Depot, and just asking for their business cards.

Here’s a hint. You don’t want the guys to show up at 9:00, 10:00, or 11:00 AM for obvious reasons. They should be on a job working by now.

One of my other favorite ways is talking to contractors in subdivisions with new construction, because I know these guys have been vetted by a builder and deliver the quality necessary to work on new home construction, and they’re also used to the price levels that are usually required by a builder.

So now you’re ready for step number four, which is interviewing contractors. The old advice is to get three to five bids from different contractors, but quite frankly, this is easier said than done in today’s marketplace. We’re experiencing a shortage of qualified tradespeople and contractors, and a lot of my clients are telling me they don’t even get a call back from a contractor that they have called.

On the other hand, as a contractor, you can waste a lot of your time by driving around, meeting with homeowners, talking about things that they might be planning someday to do, educating them, then spending three more hours on writing a detailed proposal for them, only to find out that the homeowner is never going to pull the trigger on that.

So here’s a pro tip. Let the contractor know you have a written scope of work and you’re happy to email it over, and you also have researched an estimated budget range. This way to contractor knows you are serious, you’re prepared, you’re professional to work with, and you’re ready to go.

When talking to a contractor, keep in mind that they’re interviewing you as much as you are interviewing them. They have their own horror stories to tell about the homeowner from hell who’s screwed them over, made their life difficult, and never paid them in the end. So it really goes both ways.

Here’s a few questions that you should be asking a contractor. My first and favorite question always is outside of “XYZ”, “what else do you do”? You might find out that a roofer is also doing siding and gutter work, and depending on what you’re looking for, that might be a good or a bad thing. You might be looking for a specialist, or you might be looking for somebody who can take on broader projects and handle multiple tasks on your job.

The next question would be, how long have you been in business? This gives you a background on the experience and on the skill level of the contractor. Then ask them how big is your company? You want to know if they’re a one man show, if they’re working with a smaller crew, or if they have multiple crews and have to manage these crews while they’re working on your job, which can be a distraction.

The next question is, are you insured and are you bonded? Liability insurance is an issue and you want to make sure that everybody who sets foot on your property carries proper liability insurance, depending on the nature of the job that you’re contracting out. You also want to make sure that the contractor is licensed. This varies from municipality to municipality, but typically electricians and plumbers need to be licensed. A lot of general contractors that do handyman work will not require a license to complete what they’re doing.

Next, let’s talk about bids. For most larger jobs, it is very reasonable for you to request a bid that is broken out in labor and material. This is important for two reasons. Number one, it lets you compare two different bids. And number two, you can now double check if the material that is quoted by the contractor also matches the material you had “specced” out in your scope of work. For example, if you’re replacing your roof, you want to make sure that you are getting the 30 year architectural shingle that you had requested, and not a 20 year 3-tab shingle, which is obviously a lot cheaper and is not going to last you as long.

Another pro tip that can save you potentially a huge amount of money on a material heavy job is to go ahead and order the materials directly and have the contractor only provide labor and supplies. A typical example could be a window replacement. You can just go to a contractor supply house, set up an account, and order the windows directly with them. They will come out and measure the windows, will order them, and then will deliver them to your house. Now the contractor only has to come and provide the labor and the supplies for the installation, and you have saved a huge amount of money because you paid for the windows contractor pricing and not retail with the markup.

A lot of the questions that I get about working with contractors revolve around how do I pay a contractor? Now, a bid should always include a payment schedule, and on a small job, this can be a simple 50/50 arrangement. So you pay the first half when they start working and you pay the other half when the job is complete. On a bigger job, on a larger job that is more elaborate, you typically have a down payment due at signing of, let’s say, 10%. Then you would have three milestone payments as the job is progressing of 25% each. And then you have a 15% final payment when the job is completed and all your punch list items have been resolved to your satisfaction.

One word of caution on giving a contractor a large down payment sum in order to purchase materials. I would never suggest to give a contractor who you don’t know a large amount of money in order to go out and buy material. I’m happy to pay for the material as soon as it arrives on the job, but a contractor I don’t know, I would never give a large lump sum to just go out and purchase materials.

When it comes down to checking references on your contractor, there is really no one size fits all approach. It all depends on the size of the project. The only one thing that I will do literally with everybody I’ve worked with is that I will do a quick Google search on their name and on their company’s name and check out their reviews.

Beyond that, if it’s a smaller job, I might just look at the pictures on their cell phone or call a few references that they provide. But on a larger job, let’s say an addition on your house. It might be very appropriate for you to go out and visit that contractor on another job they’re currently working on. Pay attention to how well they’re managing their job and how neat and clean they’re keeping the job site. If you see a big pile of new material, waste material, tools and extension cords, that is a huge red flag.

Good contractors will always clean up after themselves. They put the tools away at the end of each day, and they will clean up after the job, and that’s what you want to see when you visit the job site.

So these were some tips and tricks on finding, hiring, and working with contractors. Feel free to go to my website and download our Milwaukee list of contractors that either we have worked with in the past, or they have worked with clients of ours or people that we know, and they have done a good job. But please do your own due diligence. I would like to offer some final thoughts on remodeling in general. Whenever you’re considering an extensive remodeling project on your house, please know that most likely the cost of remodeling will exceed the value increase that you are going to see on your house. In other words, if you’re planning on selling your house, it’s usually better if you just stick with cleaning, staging, and painting, otherwise you might be losing money in the process.

Thank you very much for watching and I’ll see you at the next one.

-Marcus