5 Customer Red Flags

Our previous two articles discussed red flags to look for when hiring a residential contractor.  Well, homeowners, now the boot is on the other leg; this one is for the contractors!  For every bad contractor out there looking to take advantage of a homeowner, there is another ill-meaning homeowner looking to make a good contractor’s life hell.

I know a handful of excellent residential contractors who gave it all up because of that one last homeowner that took advantage of them.  Identifying homeowner red flags isn’t nearly as easy; many of the signs don’t rear their ugly heads until after a contract is signed. Let’s dive right in and do our best to identify behaviors, how to deal with them, and what to do in the future to disarm them and protect yourself.

And homeowners, if you’re not careful you just might learn something before it’s done!

1. Scope of Work is Disproportionately Large to the Home Value

Let’s say (hypothetically, of course) that a couple in a 1920s bungalow valued at $150K wanted to: remove first-floor walls in order to create an open-concept space; remove lathe and plaster interior wall covering to re-insulate; completely renovate the kitchen including re-plumbing gas and water, new appliances, new cabinets, create an island; renovate and completely reconfigure two second floor bathrooms including relocating walls and all water supplies, plumbing sewer lines and vents, etc; move doorways; add closets; convert a spare room to a laundry room; modernize all related electrical and plumbing along the way.

The theoretical contractor might silently ballpark the project at well over $250K and consider other relevant factors (the amount of their refinance loan, how long they plan to live there, and the like), and realize very quickly that something doesn’t add-up. How much time would you want to devote to providing an accurate number to the customers? You can’t even begin until an engineer has come in to assess the structure, and lead & asbestos testing has been done.

This is classic tire-kicker behavior, and you’ll be having none of it! You have better things to do with your life than waste it by helping someone live out some fantasy whereby they are able to take superficial steps forward to a dream remodel way outside of their grasp, on someone else’s dime.

How to Handle It

Like many of these red flags, a comprehensive pre-qualification program can weed-out jobs that will never materialize and save your company countless hours of wasted time.

Start by researching the property address here:

Property Data | Johnson County Kansas (jocogov.org)

Property Records Search – Missouri (Assessments, Deeds, GIS & Tax Records)

For other states and counties, it isn’t difficult to find the public property records online.

There are tons of useful data points in the records beside property value; one of the most valuable to you is seeing if the potential customer is really the property owner, and if there is more than one owner who will need to sign contracts.

2. They Balk at Consultation or Proposal Fees

This is perhaps the greatest ally in defending your business from tire-kickers and low-price shoppers, and a healthy part of a complete pre-qualification program!

Everyone likes to think they’re a savvy consumer, spouting wisdom like “there’s no such thing as a free lunch,”  and “you get what you pay for.” Then it comes to handing over gobs of money in exchange for alterations to their biggest investment and many of these same consumers not only blindly look for the lowest estimate, but they want that estimate at no cost, even disqualifying contractors who charge for their time.

The philosophy of the “free estimate” is beyond the scope of this article, but will be covered in-depth another time.

The homeowner wants to shop for the lowest possible price around by having every contractor they can find provide a free estimate or proposal, while having no skin in the game at all.

How to Handle It

Your time and expertise have come with years or decades of sweat equity, education, blood and figurative tears.  Many homeowners will be unaware of the extent of this, many more will simply not care.  First and foremost, stop participating in the race to the bottom, respect yourself and your company’s time, and charge for your services.  Educate homeowners on what it will take to get them an accurate number and charge a fair proposal fee.  If they pass, you would have been nickel-and-dimed by a homeowner, who has no respect for your services, throughout the project anyway.

If you’re putting together a number blindly in 10-20 minutes, then this isn’t for you. You’re probably planning on making up for your low estimate through a stack of change orders and add-ons.

3. Frequent Complaints About Previous Contractors

Asking all the questions you can think of during customer pre-qualification is critical to forming a great relationship. Among those questions should be “have you worked with remodeling contractors before? What was that like? Tell me about it.”  And then listen. Take note of what they were dissatisfied with, but also take note of the frequency of complaints throughout the pre-construction or proposal development stage.  As you explore the job site, ask questions about things that look like they’ve been worked-on, things that look “off” or in ill-repair.  If another contractor was responsible for it, they’ll let you know.

More often than not, homeowners who have been burned by a bad contractor in the past are looking to exact their revenge on you.  Confirmation bias has led them to seek knowledge from all the worst sources (lookin’ at you Angie’s List/Home Advisor – shameful), and now their defenses are up as they look at you as “one of them.”

How to Handle It

Ask questions, listen and take note of answers, cater to their worries when needed, educate when needed, and take pictures. Have your attorney review your contract to make sure it complies with state law, and protects your time as well as your customer’s investment. Make sure your Scope of Work is detailed and includes any specific exclusions. Then take pictures, followed by pictures, pictures, pictures, and pictures. Take pictures from the driveway, through the front door, and every horizontal and vertical surface on the way to the work.  Take pictures of every ding, scratch and scuff in wood and paint; every carpet fray; the ceiling below the work area; every existing water stain. And silence your phone – no one wants to hear that constant shutter sound and you’ll make it weird.

When you’re wrapping it up and the homeowner comes to you with an accusatory list of damage that they or someone else actually caused, you’ll have dated pictures showing its pre-existence.  Then save those pictures throughout the duration of your guarantee or warranty period.

Make sure everything is detailed in your Scope of Work. Ev. Er. Y. Thing. Detail any exceptions, and specify that any and all things not specified in the Scope of Work are not included in the contract.

And while mistakes and unforeseeable hiccups will happen, do your best not to repeat the exact same mistakes that the customer complained about with the last guy!

4. Subcontractors Refuse Work for That Customer

I don’t think a lot needs to be said about this. 

How to Handle It

Your specialty subs probably see a great deal many more homeowners than you do in the GC role. If one declines to quote based on the address or name, proceed carefully but open-mindedly.  It’s easy to ask the sub what the problem was, but it will take a little finesse to get the homeowner’s side of the story.  Ask questions about the work in question and try to get them to bring up the subject and the sub.  If the sub was truly a bad contractor, they probably would have tried to get the money and at least do some of the work the last time they were there.

If it’s a systemic issue with the owner, you’ll have plenty of time to see it during the proposal phase. Then politely decline the work once you’ve completed the proposal.  I’ve had to do this twice, and my best subs call me if they encounter something odd, about which they think I might know something.

5. Chronic Indecision During the Design or Proposal Phase

This red flag is contingent on you doing your job in the first place by understanding the homeowner’s wants and wishes, and providing the resources and expertise they need in order to make their choices.  If you don’t have a background or solid understanding of architectural or interior design, don’t pretend to by regurgitating played-out ideas from Houzz or some third-party inspiration-draining website.

By the time a homeowner has gotten to the point of hiring a designer or design-build contractor, they should have a fairly solid idea of what it is they want to do (more functional kitchen layout, mid-life crisis “man cave”, day spa-inspired master bath).  As the initial floor plans are developed, pay attention to how many times significant aspects of the plans are changed and, if possible, the source of the change.

Common sources of chronic indecision are:

  • boredom/daydream surfing on the home design websites (of spaces that don’t resemble theirs)
  • a friend who is a “designer” (but wasn’t hired to complete the design)
  • a friend who is a “contractor” (but wasn’t considered for any of the work)
  • a friend who is a real estate agent and swears this new thing will get you way more when you sell it (it won’t)
  • a spouse with a better handle on budget and general practicality (stay out of it)

Constant design and selection changes now can carry-over to frequent Change Orders later, and those are a pain in the brain for everyone.

How to Handle It

This is the easiest to handle provided you’re documenting every decision in your job log and/or proposal development documents.

Charging for your design and proposal development time, and billing regularly for it, can help customers focus by placing a monetary cost on indecision.  If you’re providing this service at no cost, best of luck to you – you’re screwed!

Make sure any pre-construction agreement you might have clearly outlines payment for your services.  It’s one of the rare times I charge by the hour, and for this phase I bill weekly.  It motivates customers to answer messages, review selections, and do whatever else it is that might be causing delays.

My pre-construction agreement also has an appendix that acts as a log for all of these changes.  I list the selection, and the customer initials. When it changes, I list the change, and the customer initials. This prevents you from being blamed for delays, and as the list of changes grows, it can genuinely help customers gain focus and decisiveness.  This agreement becomes a permanent addition to the construction documents, and referred to by reference when the proposal becomes a contract.

Two or three of these can be identified and handled during a phone or Zoom pre-qualification, and certainly all of them can be identified and resolved before a construction contract is signed. Listen to your customers, identify potential pitfalls, and take the appropriate measures. Sometimes that will mean passing on the job, but the reality is that you either never had a chance to begin with, or you were about to take a loss.  Either way, catastrophe avoided.  Now go forth and build!