When a contractor works with a Realtor it can be a time for celebration or a feeling of impending doom. No offense Realtors, but, to a contractor working with members from our industry is often a time suck and causes most contractors to feel either like that have been treated right, or they have been wronged. Most contractors are not in construction to do sales and don’t thrive as many of you do on closing the deal. Most contractors are builders that are in the business of building and creating things, not sales. Here is some perspective on how many contractors feel, so you know why they may be acting a certain way or not returning your calls. Hopefully it will help you build an understanding that creates a symbiotic long term relationship.
Most contractors I know dread working for a new Realtor. It is a huge gamble and often results in being professionally “used”. I am a Real Estate Broker, I took and passed the California Brokers’ Exam. I also took and passed the California Bar exam and am a licensed California Attorney focusing on construction defect and real property. I am also a California Building Contractor. These licensing tests are structured to ask for competitive bidding and to make sure you look after your client’s best interest. It is your job; you are the fiduciary after all when acting as a Real Estate professional or Attorney. We are taught to get quotes and present them to the client for their decision. What we are not told and what I have experienced as a building contractor is it often results in the very person you want to be doing the job being priced out of it unfairly.
Trust me, the low bid is very rarely the low bid. Most Realtors I know are just looking at the bottom line. Most Realtors are not builders, they know enough to know property and who to call to really dig into a building. You are expected to act reasonably as a real estate broker, not as a building contactor (unless you’re both). What does this mean? The high quality contractor that is going to do the job right is often excluded by a contractor that doesn’t do good work or someone that knows the low price game and sends in a low bid then sends several change orders in order to make their money on the job.
An honest contractor will give you the big picture up front. They will not hide behind a low bid and send you change orders later to inflate the price. By shopping prices only you are really lowering the quality of the work. Right when we need to be looking for our client’s best interest we are guaranteeing that we won’t find the best contractor by shopping price alone.
You can imagine that after being “price shopped” a contractor that is good is no longer going to give us free estimates on projects. It is a “race to the bottom” in economic speak. Remember Realtors; a free estimate is not really free. It costs the contractor the opportunity costs when bidding work they may or may not get, and they basically tell you how they are going to do the job when they give you a well-written bid.
I personally charge to give estimates when it is a new client. I have been used so many times for price shopping I only give free estimates to clients I know I will get work from. As a construction firm the company’s time is a series of minutes that are sold in the form of service. If I find a place that is being taken advantage of and wasting company minutes, I “trim the fat”.
Take away? Contractor’s time is valuable, don’t waste it; shop value, not just price. When a contractor feels like you treated them fair, they’ll bid for you again.
Another way a contractor might feel when you call, email, text, or tweet is happy. When a relationship
with a contractor has been formed and there is consistent work referred, in return the contractor will take care of you and your client; you all win. Some of the very worst experiences I have had in construction have had Realtors at the center of them. The very best experiences I have had have also had Realtors at the center of them. I have three realtors I regularly work with, for more than a decade. On a handshake I would start a project and take verbal change orders from them I trust them so much. I know they will treat me right. They read my bids, and while they still compare them to other pricing to meet their fiduciary obligations they compare my quote based on what is included in the bid, I know my level of quality and value is balanced against the price. Generally when I do get the work I am the high bidder. My high bid, in the long run is actually the low bid. “Quality Doesn’t Cost; It Pays”. In the rare times they don’t use me, I know they will call on the next one and I am just as likely to get that work because we treat each other right. There is no need to say we’ll make it up on the next one, I know it by how they treat me.
In addition, I get steady referrals from the trusted Realtors, they know if they scratch my back I will scratch theirs. I have had clients for ten years plus that I would do most anything for. They have proven they are quick pays when I send an invoice and they appreciate quality. Because of these benefits from fostering a good relationship with them, I am able to price my bids cheaper knowing how they operate and that they will do everything they can to make the project smooth. As the relationship grows the price savings follow. If I don’t have to bid for the unknown my prices go down.
Take away? If you foster a relationship with a contractor and don’t abuse their expertise by paying nothing for it, you’ll get higher quality and better pricing. What you wanted in the first place!
What Not to Say To A Contractor
The most accurate indicator that I will be losing money with a Realtor is at the job-walk he or she says, “If we don’t get this one, we’ll get the next and make it up, I move quantity”. I have discovered if I meet someone that truly believes they need to tell me this, they’re just price shopping and I need to run. It is not so much that it is untrue, it is that it is implied that the contractor doesn’t know that. This is generally an indicator of a devaluation of a contractor’s skills. Remember that a contractor is someone that does very complicated work. They build the thing that we sell. In addition to the disrespect, it also implies that “you are bidding this for me” and “you as the contractor owe me this”. Not true. A contractor often times is a better resource for building repairs and additions than an engineer or architect. A contractor has seen the results of design in building and has had to fix them. A contractor’s time is valuable, if you act like it, it will cause them respect yours.
I don’t know if this is personal to me, but when I have someone that has never had to carry the large overhead of a construction company tell me they understand, it makes me think that I can’t work with this person. While there are many manufacturing firms and other service business with high fixed overhead, construction requires much expense, and very long legal exposure. The other under-valued portion is the emotional toll on a contractor having to deal with the problems of building. The general rule in the real property world is it is the contractor’s or Realtor’s fault, no matter the problem with the project. We as real property professionals can sympathize with the contractor in this respect. My point is this, most Relator’s don’t know the true expense of running a construction business and most contractors don’t know the true expense of running a real property business. I can tell you for sure because I run both: Both types have nuisance and expense that cause headaches, by blowing them off and saying I understand, many times it is just salt in an open wound.
Take Away? Of course there are many more things Realtors should not say to a contractor. But, for now lets, call this high level no no’s.
Conclusion: It is always better to error on the side of being understating and part of that understanding is understanding construction is a very hard business to be in just like real property work. It is highly competitive and no one wants to feel like his or her time is not valued. More importantly no one wants to be doing work for free knowing there is little hope of being paid for it. If you respect your contractor’s time and the fact they are a highly trained professionals, you are far more likely to be treated right by a quality contractor.
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DISCLAIMER: Let me stop here to give you the boilerplate disclaimer. Every situation in law and building is different. Do not rely on this article to make decisions on your specific situation. Every matter is different and requires that you talk to a professional. If you want to talk to me see my contact below. Nothing in this article shall be construed to create an attorney client relationship or partnership.
Dan Knight is principle at Dan Knight Construction & Plumbing and The Law Office of Daniel J. Knight. He is a third generation building contractor, attorney, real estate broker, construction management lecturer at Cal Poly State University, adjunct Business Professor at Cuesta Community College in San Luis Obispo, and City of San Luis Obispo Planning Commissioner.
He was recently voted top 20 under 40 2017 by the San Luis Obispo County Tribune