You wouldn't dream of forking over your checkbook to a stranger to buy $10 worth of groceries.
So why allow someone to control your checkbook for multi-thousand dollar home improvements, repairs or new construction?
Yet that's what thousands of homeowners do when they cede their checking account to contractors for the purchase of tens of thousands of dollars of materials and labor.
A truism of construction and repair is this: when you know where, when and how your money is spent, you help to contain your costs.
According to The Associated Press House of the Week Homeowner Guide on Building and Remodeling Costs (available at aphouseoftheweek.com), homeowners should adhere to several principles of project finance:
* Set a budget for the project.
* Don't advance large sums of money.
* Sign off or approve all significant purchases.
* Avoid "change orders."
* Don't give contractors carte blanche on purchases.
Without a practical budget, your project is never a "closed-end" job. You won't know what you want to spend or can afford. The existence of a budget applies constraints to the spending. This is important for contractors and subcontractors to acknowledge and agree to before the first nail is ever driven into a board.
Sound fiscal management dictates you rarely -- if ever -- advance money for materials and labor. Contractors who demand cash advances should raise a red flag, and your hackles. Pay for materials only as needed.
Homeowners should approve significant purchases at the time the purchase is made. This assures you of the quantity and quality of materials.
But the real damage -- the big dollar damage -- occurs with change orders. Change orders are midstream amendments to budgets or material lists that drain project budgets in a hurry. Homeowner whim or contractor oversights contribute to eyepoppingly expensive change orders.
Examples of change orders include brass instead of contractor grade faucets, stone rather than laminate countertops, or upper-end windows because the contractor "forgot" to include this cost in the original bid. Shady contractors like switcheroos because they yield a higher margin windfall on materials. Avoid change orders at all costs.
Contractors on the edge financially want you to look the other way on expenses. Solid, established, fiscally solvent contractors shudder when homeowners blithely say "Just do it" because they know that means trouble.
"Just because a homeowner gives contractors carte blanche, the bottom line is there is still sticker shock on anything we buy," says Larry Lyon, aka Mr. Fix It in a Midwestern market. "The customer can say "yeah, I meant carte blanche but I didn't mean gold-plated door pulls." Most good contractors will have stepped into that trap once and won't make that mistake a second time."
Lyon says he appreciates when customers have faith in his long-standing reputation, but he resists the concept of an open checkbook.
"Let's be real clear with customers," asserts Lyons, "they need to set a budget, tell me their expectations and help me spend their money. If there's a problem with their money, it leads to a bad relationship which leads to no referrals from the customer, and any good contractor doesn't want that to happen."
E-mail questions on homeowner-contractor relations to: david.bradleyaphouseoftheweek.com
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