Contractor overcharging for remodel

Contractor Overcharging You? Here’s How To Handle Your Remodel

Most individuals will renovate their homes at least a few times during their lifetimes, and the experience may occasionally turn into a remodeling nightmare. If you have the misfortune of working with a poor contractor, you may find that they are overcharging you…and you may end up in a difficult contractor dispute.

Unfortunately, this is a common occurrence. Over fifty percent of homeowners have a negative experience with their remodel or a poor contractor. Many homeowners attribute their discontent to the fact that the contractor overcharged them and asked for more funds beyond the budget.

There are a number of ways in which you can end up dealing with a contractor’s extra charges; the following advice and suggestions will help you avoid this or discover solutions to these problems if they have already developed.

How to Prevent Being Scammed by a Contractor

If you have not yet hired a contractor, there are a number of steps you should take to prevent contractors from overcharging you. The most crucial thing you must do is locate a professional, reliable, and dependable contractor. In general, in order to keep their clients satisfied, competent contractors submit competitive bids at the outset and strive to incur as few additional costs as possible. They place too much emphasis on their reputation and make customer satisfaction a top priority. They desire your satisfaction so that you will refer them to others in the future.

Select the right contractor

Bad contractors, on the other hand, utilize change orders as a routine business practice. They will initially submit a cheap quote in order to win the contract, and then demand additional payment from the homeowner in the form of change orders to make up for their loss. Clients typically know very little about construction, but contractors are extremely knowledgeable. This mismatch makes it easy for a dishonest contractor to “pull the wool over the eyes” of the customer with regard to extra fees or prices, without the client having any means of knowing.

Before choosing a contractor, you should contact several of their references and inquire whether the contractor requested additional funds or overcharged them in any way. If previous clients were satisfied with the contractor’s pricing, you may be confident that the contractor will likely be fair with you as well. Also, you should explicitly communicate your expectations to the contractor upfront.

What Factors Cause Contractors to Overcharge for a Project?

As previously stated, some unscrupulous contractors would submit a cheap bid for a project solely with the intention of getting the contract and “making up the profit” through change orders (additional expenditures), which enrages clients. If a homeowner is in the midst of a project and the contractor requests payment for an unanticipated item, the homeowner has little ability to negotiate a fair price.

If the contractor proposes a price that the customer deems exorbitant, the client’s sole recourse is to stop the project and find a cheaper alternative, which is an impractical course of action in the middle of the process.

It is crucial to maintain realistic expectations once a project has begun. Homeowners should anticipate that the majority of projects will cost more and take longer than anticipated. It is important to note, however, that there is a delicate line between excess costs and budget disagreements.

Be realistic during your remodel

What Overages Should I Expect For My Remodel?

Although a 10-20% cost overrun is typical for even ‘excellent’ contractors, a 50-100% cost overrun is not typical and may be symptomatic of a dishonest or unreliable contractor. Some cost overruns are typical since contractors must make assumptions about unknown variables. For instance, it is impossible to determine with certainty what is located inside a wall that needs to be demolished, what kind of structural framing is inside that wall, or whether there is termite damage or dry rot inside the wall.

The best, most trustworthy contractors typically include some of these ‘surprises’ in their initial estimate to the client, while others choose to give the client the lowest cost upfront and then request ‘change orders’ (additional fees) to address these concerns.

Dealing with additional charges during a renovation can be unpleasant and often lead to a quarrel between the contractor and the homeowner. 

Is This Change Order Appropriate?

Contractor change order

The first question that can become problematic is whether or not this “additional work” was included in the project’s original budget. Due to a lack of specificity in the estimate or contract, it might be difficult to determine exactly what is and is not included in the job’s scope. A contract may contain the clause “paint walls”. The homeowner may believe this includes completing drywall repairs prior to painting, while the contractor may believe this should be billed as an extra item, resulting in a budget dispute.

When the homeowner agrees that an additional item is necessary, but believes that the contractor’s price is astronomically high, a second disagreement with the contractor may ensue. As noted, the contractor has all the leverage in this circumstance because the homeowner must have this item completed and would find it difficult to hire ‘another’ contractor for this specific service.

The majority of homeowners rarely renovate and lack an experience in construction. Therefore, it is difficult for them to determine whether or not a contractor is overcharging. Typically, individuals have a gut feeling that these additional fees are excessive.

If you’re having trouble with this, I recommend conducting online research to determine what other people are spending for the materials and labor of the extra item. Also, if you know anyone in your network (or even social networks) who has experience with construction (retired builder, home inspector, etc.), ask them what they believe to be a reasonable fee for the additional services.

When contractor overcharging becomes a problem, there is recourse.

After conducting research and determining that the contractor may be ripping you off, the first step is to have a chat with them about it. It is preferable to sit down with the owner/contractor in person and provide them with written documentation of what you discovered/heard about the acceptable cost for each additional service. Be sure to be moderate and diplomatic.

Explain politely and firmly that you are spending significant funds on the original budget and must be frugal with change orders and additional charges. Inform the contractor that you are open to negotiating on price, but that the price must be acceptable based on your study. Remind them that you both want the project to be completed and for them to get paid in full.

Focus On Getting The Job Done

You must remember that your primary objective is to complete the project and extra work at a reasonable cost, not to engage in a stressful contractor dispute. Your best bet is to negotiate a price that you can live with, even if it is more than you had hoped to pay because the other options are not ideal. You can attempt to bring in another contractor to perform the work, but it will be difficult to find someone willing to work on a project that is already underway.

In addition, you might choose to fire your contractor and hire a new one to complete the renovation, but bear in mind that this could result in a budget dispute. Your present contractor will still expect a payment, and it is unlikely that you will agree on the amount owed for services completed to date. However, if it’s evident that you’re dealing with a terrible contractor who is demanding more money or overcharging, you have every right to report the contractor, file a claim with their Surety Bond or state license board, or even file a lawsuit.

Before taking any of these significant actions, you may consider emailing or mailing a warning letter to a bas contractor after you’ve had a face-to-face discussion with them. A first warning letter should be sent in a ‘cool’ manner so that the contractor is not offended, but takes the warning seriously and continues to cooperate with you.

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