Reviewing a Contractor’s Quote or Contract
Before signing the dotted line, I recommend reviewing your contractor’s document(s) to ensure they include the following information:
This checklist is a guideline only and is not a substitute for seeking advice from trained professionals. All information should be reviewed and amended to suit your personal investing situation.
Due Diligence on your Contractor & the Work Being Quoted
- Have you received quotes from more than one contractor for this job?
- Is the contractor part of the Better Business Bureau (BBB)? What is their BBB rating?
- Have you seen examples of past work, read reviews, or contacted references for the contractor?
- Is the contractor able to show proof of liability insurance?
- Have you consulted with the city or municipality to confirm which renovations require permits?
Reviewing the Quote/Contract
Before agreeing to and signing a contractor quote or contract consider the following:
- Is the contract in writing? Verbal agreements can result in a he said/she said in the case of a dispute or legal proceeding.
- Fixed-Price or Time-Plus-Materials contract? A ‘Fixed-Price’ contract spells out exactly how much a project will cost including all permits, building materials and labour. This type of contract locks the overall cost into place, preventing the general contractor from raising the price once all parties sign off. It can benefit the homeowner because the general contractor will have to pay for any price increases, or additional time it takes to complete the project. A ‘Time-Plus-Materials’ contract bills the homeowner by the hour for the labour and materials involved in a remodeling project. A time and materials contract is subject to change so any additional costs that arise during the project will be paid for by the homeowner.
- Explains all required building permits and inspections required.
- Outlines whether it is the homeowner’s responsibility or the contractor’s to obtain permits and schedule inspections.
- Detailed payment structure. Multiple payments structured to align with detailed work milestones completed, not calendar dates. Multiple payments structured to align with detailed work milestones completed, not calendar dates. Keyspire recommends holding back at least 10% of the total project cost until the job is completed to your satisfaction. If there are still deficiencies, do not make final payment until they are fixed or the contractor has no incentive to continue. (Be sure to check your local guidelines to understand your rights and responsibilities with respect to payment hold-backs).
- Building materials and finishes to be used clearly outlined in detail.
- Procedure for material cost overages or material substitutions.
- Whether materials are paid by contractor or homeowner directly and timeline for these required pay-outs.
- Who is responsible for which tasks and duties? This should include what work will be complete by the contractor directly and what will be subcontracted out to other trades.
- Detailed site drawings/renderings of kitchen, bathroom, and structural layouts that are signed off on by you as the homeowner.
- A clause that states any and all changes to the scope of work or materials being used must be put in writing and signed off on by you as the homeowner.
- Contractor’s warranty on work completed.
- Details on any exclusions or anything not covered by the contractor’s work.
- Termination clause. Under what terms can the contract be terminated if the business relationship fails or cannot continue due to unforeseen circumstances.
Once you have completed your review of the quote or contract and feel confident in your contractor you are ready to proceed.
Remember, as an investor you want to build a solid team of trained professionals so ask questions, obtain answers in writing wherever possible, and don’t focus on choosing what appears to be the cheapest or easiest.
By completing the proper due diligence, you will experience less stress and have more time to focus on your ‘Why.’
Be Your Own Bird Dog
Bird Dog Techniques: Marketing – We Buy Houses for CASH Auto dialers Mailing circulars Public databases (MLS, Divorces, Deaths etc.) Cross reference with pertinent information Layoffs in a community Dropping values in recent tax assessments – underwater mortgages Watch for signs: Builder, Private, Vacant lots, Vacant houses A bird dog will have a network of investors…
Should You Flip Real Estate?
If you’re considering flipping real estate, there’s a lot to know, and what you’ve seen on TV about flipping homes only tells half the story. Here at Keyspire, we offer real estate investment courses to teach people how to make smart decisions about real estate investing. Learn more about making a decision to flip real…
What You Need When Applying for Financing
Being prepared before meeting with your Mortgage Broker or Lender to complete a financing application can make the process more efficient and less stressful. Use this document as a guide to begin preparing your personal documents for your financing application. Note: This checklist is a general guide only. Each party applying on the financing application…
How To Understand Real Estate Market Signs
Just like any other market, the real estate market has its own set of signs that can help you understand what is happening, so you can make wise decisions with regards to residential and commercial real estate investing. Learn how to understand real estate market signs below. SIGN UP FOR OUR MASTERCLASS TODAY…