How to search for a good contractor in real estate: the dos and don’ts

One of the most challenging tasks in the real estate business apart from the negotiations is hiring a trustworthy contractor that can help you turn properties into profit or a house into a paradise.

In real estate, most people are careful when dealing with buyers, sellers, and agents, but their good judgment and logic seem to fade away when it comes to contractors. They think only of the profits to come and most often end up choosing the cheapest contractors. These stitched-up deals usually end with unforeseen costs, delays, and loss of work, which slowly eats away at your chance of making a profit.

Here, we have listed a few tips to keep in mind while choosing a contractor and some red flags at the end to look out for if you don’t want to get scammed. Now let’s get cracking.

Invite bids

When looking for contractors, the best way to get a good deal and perspective is by inviting bids. A minimum of three or four bids should be enough to give you a good understanding of the market. Never settle for the first contractor you come across; always compare and ask questions.

If you are in the business of flipping houses or take on multiple properties throughout the year, contractors will consider you a repeat customer. You will have the upper hand in negotiations, and they will try to win the bid with more appealing offers in hopes of getting more work from you in the future.

Familiarize yourself with the local laws

Every state has its own laws and procedures regarding construction and permits; it’s best to get familiarised with them. So that you won’t be caught off guard if any problems arise down the line concerning the contractor or government officials.

Ensure the contractor you plan to work with has a valid contractor license and is insured in case of accidents on-site; check their physical offices and verify their claims.

Reach out to recent clients

The contractor will show you photos and reviews of previous work, but these days those are pretty easy to fake. So get the contact info of the previous clients, call them, or visit them, ask them about the additional costs, the personality of the contractor, and the quality of work.

Know your contractor

Some contractors are hands-on; they work alongside others and spend most of their time on-site. They will be able to answer most of your questions on the spot and give you an accurate update on the progress. Others are managers; they visit the site once a day with a checklist to make sure everything is going according to plan, but they never get directly involved.

Now, some growing contractors try to juggle multiple crews on different sites throughout the day in hopes of expanding their business and getting more work done. These people will always be busy; communication will be sloppy, and they will rarely have time for you if something goes wrong.

Communication

This is a crucial point to keep in mind; you don’t want to be dealing with someone who never takes your call or always makes up excuses to cut the conversions short. The ideal contractor will update you every step of the way and always respond to your inquiries with a smile.

Team player

Sometimes when renovating a newly acquired property, in addition to the general contractor, you may have to bring in a specialist for pool tiles, wood carvings, or restoration. Some contractors do not like others interfering even if it’s not in their work area, so only bring in a contractor who is okay with you hiring outside help. 

Hire specialists

A general contractor provides all the materials and hires subcontractors/specialists for the work. If you are willing to be on-site all day long to supervise and provide the material, then hiring a handful of specialists instead of a general contractor will save you money and maybe time. This is recommended for small projects like maintenance on the house or remodeling with no strict deadlines.

The materials

This depends on your preference; some like to pick and provide the materials for the contractors to work with(labor only contract). Others like to sit back and want the contractors to handle everything from beginning to end. Never pay upfront for materials when dealing with contractors, buy them yourselves or pay in installments as the work goes on.

Payment schedules

Ignoring this is the best way to be conned by contractors; following a predetermined payment schedule agreed upon by both parties saves you and the contractor from payment-related headaches during work. You want to give them 10% to 20% to solidify a bid, then divide the rest of the payment into three phases depending on the progress; never pay upfront no matter what they say.

Make sure the contractor follows your timeline

Timing is everything in real estate, so if a contractor takes longer than previously agreed, it may hurt your profits. Having said that, this is construction, so there may be a few hiccups here and there, but unless they have a good reason for falling behind schedule, don’t let up too much. 

Negotiation

Negotiating with contractors is a balancing act between time, price, and quality. The cheapest contractor will save you money, but they will use cheap materials to do so. Those that promise speed may compromise on installation quality, so you will have to find the middle ground appropriate to your budget.

Also, whenever contractors discuss price, they take the time, materials, and installation into consideration, so ask them where they are making compromises. Choosing the middle bid is the best choice, don’t forget to ask them about the details concerning materials and installation workers/specialists.

Get it all in writing

The number one rule of doing any deals, no matter the industry, is getting the terms in writing. A detailed contract outlining the payment schedule, additional costs, and everything agreed upon will go a long way in protecting you and the contractor in case trouble comes knocking.

Your expectations

Most people who hire real estate contractors under a budget usually expect too much from them for the price. Understand that contractors have their own problems to deal with, and most of the money earned goes to paying the workers, and of course, taxes, so don’t expect them to do miracles with a medium budget.

The red flags

No websites or social media presence

In this day and age, almost every business, no matter the industry, has an online presence, so hire contractors who at least have an Instagram account that showcases their work unless they are a new startup.

Asking for too much money upfront

Asking for a significant amount of money upfront is very suspicious, best to look for an alternative.

Not letting you contact previous clients

This is pretty straightforward, ask for info on the past three clients; their refusal would mean that the clients weren’t happy with the work.

Sudden discounts after mentioning completing bids

When you mention the competition, contractors try to become more appealing and lower their price, but a sudden 10% discount is out of the norm; they must be cutting corners somewhere, maybe the permits or materials.

Beware of hustlers

These are the sales peoples; they talk and talk till you agree but never deliver on the promises. They may also start complaining when you show them the actual property so that they can justify the delays down the line. 

Cash only

Some companies offer a cash payment option to save on taxes, but these companies will also have VISA and other payment options. You need to look out for contractors that only accept cash unless it’s some you know personally.

Congrats on reaching the end; we hope the information you have read here will help you in your future endeavors.

Disclaimer: The views expressed above are for informational purposes only based on industry reports and related news stories. PropertyPistol does not guarantee the accuracy, completeness, or reliability of the information and shall not be held responsible for any action taken based on the published information.