Hiring a contractor: You get what you pay for

Posted on January 3, 2013 by Sonoma Valley Sun

John Mangiantini | Special to The Sun

Times are tough for a lot of homeowners. Property values have declined, equity is diminished or evaporated, cash flow is tight and credit is extremely hard to get. Still, your home is one of your biggest investments, and you need to protect it by keeping it well maintained. If you’re handy, you can save money by doing some of the small upkeep and repairs yourself. But for most property owners, the time inevitably comes when you need to hire a contractor for the larger jobs: upgrading a bathroom, remodeling a kitchen, or building an addition, and so on.

Most property owners know that it’s smart to get multiple bids to find the best value. But what exactly does the best value mean? Does the lowest bid always represent the best value? If getting the work done as cheaply as possible takes priority over other considerations, you could be putting your property and yourself at risk.

The fact is, getting results that meet or exceed your expectations from a professionally managed project that is completed reasonably close to the cost and time estimate, with high quality craftsmanship that conforms to local building code and fire safety standards, will likely not be the lowest bid.

Does it always have to be a tradeoff between price versus quality? Answering that question accurately requires a thorough understanding of the differences between licensed and unlicensed contractors. Here is one homeowner’s story.

Joe has a beautiful home in Santa Rosa that he’s owned for more than 25 years. Always cost-conscious, he was among the first wave of California homeowners to put a solar system on his roof to get the maximum rebate and save on utility bills. When the time came for a new roof, he decided to replace his old tile roof and upgrade the solar system. The job meants higher up-front expense but greater cost savings over time due to the longer life of the new roof and better performance of the new solar array.

Joe figured he could shave some of the up-front project costs by hiring a contractor referred by a colleague. He knew the low bidder was unlicensed but he was confident in his friend’s recommendation and anxious to save money where he could. When the contractor told Joe he needed a deposit of half the project cost up front to purchase materials, Joe thought that sounded reasonable.

Upon tearing off the old roof, the contractor found dry rot under the eaves, requiring some additional reconstruction — and more money for labor and materials not included in the original bid. The contractor had only two laborers and one small wheelbarrow. Joe jumped in to help, using his own tractor to keep things moving along. The job produced 22 tons of construction waste, filling a large dumpster multiple times. The county-operated landfill charged by the pound, another expense not anticipated in the contractor’s original bid.

Then, part way through the project, the contractor and his crew simply did not show up for several days. When the contractor finally called, he said he needed additional money to continue because he had been able to order only half the materials with Joe’s deposit. The shipment took five days to arrive, delaying the project further. Even then, it took several more days for the contractor and his crew to come back because he had taken on other projects to keep the money coming into his small operation.

The contractor finally finished the job but not before causing Joe and his family a lot of aggravation and added expense, magnified by the fact that Joe took time off work to help due to the project taking so much longer than expected.

The final blow, though, came with the first post-project rainfall when the new gutters started leaking. At Joe’s insistence, the contractor reluctantly came out to fix them. Unfortunately, while he was on the roof, he slipped and fell onto the back deck, breaking a one-of-a-kind antique stained glass window. Not only did the gutters go unrepaired, but the contractor could not pay for the replacement window and tried to saddle Joe with his medical bills because he lacked both liability insurance and workers’ compensation. Joe finally made him back off by threatening to report him to the Contractors State License Board.

Now, if Joe had hired a licensed, reputable contractor …

He would have received a written bid detailing all phases of the project with estimates of time and materials that also included a provision for handling unanticipated developments. A good contractor will conduct a walkthrough or overview of the project with the property owner, noting potential areas where unexpected conditions may be encountered to put together the most realistic estimate possible. Doing this accomplishes more than reaching a clear agreement. It’s an opportunity for the contractor and the customer to establish good rapport, which can make all the difference in navigating a difficult turn of events during a project.

Joe would have been asked for a maximum deposit of no more than 10 percent of the overall estimated project cost or $1,000, whichever was less, according to California Home Improvement Contract Law. How the balance will be paid should be part of the negotiated agreement. Conscientious contractors often make arrangements for incremental progress payments tied to completed phases of the project. Most importantly, whatever the arrangements are, payments should never get ahead of work completed to the building code and standards of good workmanship.

Joe would have had to sign a contract with the contractor spelling out their agreement regarding labor and materials cost breakdowns, provisions for handling changes, an estimated project timeline, and specific payment arrangements, etc.

Joe would have been given a copy of the contractor’s license as well as a certificate showing proper insurance. Joe’s story demonstrates clearly why these requirements are so very necessary.

They also drive up the cost of licensed contractors’ overhead. Their bids are higher because their expenses are higher due to following the law to protect their interests and yours. An unlicensed contractor has no overhead, no business license, no insurance, and no warranty on their work. No wonder their bids are lower.

When the project didn’t go as expected, Joe would have had legal recourse to hold the contractor to his/her warranty. California law requires a contractor to have a license in his trade for any project over $500. Knowingly or unknowingly, Joe gave up the law’s protection by hiring an unlicensed contractor and paying for half of the project up front. Because many unlicensed contractors operate so close to the edge, they have little to no working capital. Often they use payments from one job to cover expenses for another. They underbid to win a job, and then run up the price through change orders – some due to inexperience, some on purpose. They also tend to be understaffed, so they are constantly shuffling a skeleton crew around to different jobs they are running simultaneously, causing project delays.

Because a licensed contractor with integrity guarantees his/her work, Joe’s leaky gutters would have been corrected at no additional charge within the first year. The broken window would have been covered by the contractor’s liability insurance and replaced at no expense to Joe. Accidents can happen to anyone, but workers compensation would have covered the contractor’s medical bills associated with his accident.

Property owners can file complaints against licensed contractors when the project is not completed correctly, to code, or as agreed upon. There’s really very little a homeowner can do to hold an unlicensed contractor accountable for shoddy work short of taking the contractor to court – which means more out-of-pocket expenses for legal fees, but no guarantee of actually recovering losses.

If the job is not done properly, you’ll either have to pay someone else to re-do it or you’ll just have to live with it. If you do the latter, be forewarned: should you ever sell your home and inspections reveal that the project was not done properly; you will have to disclose this to potential buyers or take on the financial and legal risks of not doing so. Either way, there’s a good chance you’ll be on the hook to pay for fixing it.

Good contractors have a reputation to safeguard to maintain their license and to earn new business through referrals. They are motivated to meet or exceed the property owner’s expectations and to maintain a reputation of integrity. They have something to lose if they don’t perform properly. Contractors who have not earned a license nor worked hard to maintain it have far less to lose. No workers’ compensation, no liability insurance, no consistency, no working capital, no benefits to workers who are paid below market wages all lead inevitably to poor quality. If you hire an unlicensed contractor, you are accepting all these risks.

When it comes to your home, it’s not all about the cheapest price. A low bid up front does not necessarily mean the overall project cost will be lower, especially if the project is not done properly. Whether or not you ultimately choose to go with a licensed contractor, one thing is for near certain:  You will get what you pay for.

John Mangiantini, a third-generation Sonoma native, is the founder and owner of Mangiantini Construction, Inc., (General Contractors License #800675) which specializes in remodels of residential and commercial properties and building custom homes.

When hiring a contractor

• Anyone who performs construction work that costs $500 or more (combined labor and materials) must be state-licensed in California for the specific trade that is being performed.

• Ask to see their license and a photo ID to verify their identity. Make sure the name on the license is the same as the contractor’s. Check the license to verify that it is valid and in good standing, at or 800.321.2752

• Get bids in writing, as well as references, which should be checked.

• Interview the contractors. This is really a two-way process; a good contractor will also interview you out of recognition that both parties need to feel comfortable. Trust your gut feeling.

• Never pay with cash. Pay with checks or credit/debit cards to create a record of payment. Make your checks payable to a company rather than an individual, whenever possible. Don’t pay ahead of work completed and don’t make the final payment until you are satisfied with the job.

• Maintain a project file for all related paperwork, including all invoices, payments and receipts.

• All online advertising for home improvement or contracting work must include a CSLB-issued contractor license number. The contractor license number also is required on all other forms of advertising, including print, electronic, and promotional items, and on the written contract.

• Contractors who use employees or workers must be covered by a valid workers’ compensation insurance policy. If not, the property owner could be liable for on the job accidental injuries.