Quick-Tips by Steve Gonzalez C.G.C.|
How to Negotiate Home Improvement Contracts by Steve
In the building profession, a contract is generally defined as a legal document
between the contractor and owner(s) of a property where one party agrees to
perform labor and/or services and/or supply necessary materials to complete a
project and the other party agrees to make payment for same. In many states,
contracts are legally required.
It should be noted that proposals and contracts are often one in the same. When
issued separately, their con-tent and specifications should be checked to be
sure they are identical. The following categories should be included:
Discuss with the contractors any specifications pertaining to your project which
you feel should be included in writing. Specifications are any and all items you
wish to be noted on the contract.
If you are not using an architect, your list of specifications should be given
to each contractor upon his initial visit so that he may properly price the job.
Add to your specifications list a request for both partial and final releases of
lien from major suppliers and all sub-contractors.
Be sure the contract states that the contractor will be the receiver of any and
all permits and variance approvals.
Make certain you provide each contractor with a final list of specifications
and purchase allowances or model numbers. This will ensure proper bidding
guidelines and allow the contractors to bid comparatively.
Ask each contractor to supply you with product samples or brochures with the
written proposal. Hold on to the product samples you are given to compare with
the actual products provided to you at the time of installation.
Contracts with allowances included in the price afford you the opportunity to
shop for and choose fixtures of your own choice. These allowances also give you
the breakdown you need to see how much money is being spent on fixtures.
For example: for a bathroom project, you may request allowances for plumbing
fixtures, tile, electrical fixtures, mirrors, wallpaper, cabinets, shower
doors, towel bars and other fixtures.
In the event the amount of money paid for the allowances exceeds the amount
specified in the contract, the amount in excess is due to the contractor.
Accordingly, if the amount of money paid for the allowances is less than was
specified in the contract, the customer should receive the difference as a
refund (provided there are no other arrangements in writing).
Contractors generally prefer to purchase the allowance items on their account(s),
thereby keeping the project on schedule and coordinating measurements and
specifications of the fixtures being selected. If you decide to choose your own
fixtures and let the contractor do the purchasing, he may charge you an
additional handling charge for purchase, pickup and delivery. Many contractors
offer their contractor discounts to homeowners, therefore, after deducting any
handling charges, you may find you are still getting the best price on the
If you decide not to have purchase allowances, make sure the contractor
specifies in the contract the fixtures (including brand name, color or shade,
model and model number) to be used on your project.
Ask each contractor how much time is needed to submit the proposal for your
project and on what date the work can be commenced. Inquire about other jobs
the contractors are currently working on.
Confirm that the contractor you choose is readily available to commence your
project with full intentions of starting and supervising your project on the
commencement date listed on the contract.
If you've hired an architect, inform the contractors that you will schedule a
meeting between homeowner, architect and contractor prior to the signing of the
contract and job commencement. This is an important part of your project
planning. Having two professionals consulting about your project with you prior
to commencement can save you time, money and aggravation. Architects are
design professionals, while most contractors are concerned with the physical
development of projects, the cost of materials, labor and numerous other
factors. Coordinating their services will help keep your project on schedule.
Your project may require interior design, landscape design, or other design
services. Be sure to consult with the tradesperson who will be performing the
design work before your draftsperson completes your plans. This can also help
you avoid delays in your project schedule.
Duration of Project
Discuss the estimated duration of project with the contractor. Request a date
of completion in the written proposal.
A clause may be added for penalties when a project is completed after the
completion date listed on the contract. Penalties may then be assessed, as long
as the reason for late completion is not listed as an exception (weather, acts
of public authority, etc.) in the contract. Keep in mind that if you request a
penalty for late completion, the contractor may request a bonus for early
Control your budget. Proper planning of the project will eliminate the need for
extras or change orders, which can be expensive. Written change orders and
extras, including prices, should be signed for by both the owner(s) and
contractor prior to their production.
On small jobs (under $10,000), many contractors require up to a 50% deposit to
commence work. On larger jobs (over $10,000), usually a 10-20% deposit is
required as first draw.
When a contractor submits a proposal, the draws are scheduled (as needed) with a
retainer (generally 10-20%) upon completion of the project. Some states regulate
both the amount of deposit and the payment schedule through home improvement
Be sure a minimum 10% retainer is held on the final draw until final inspection
and satisfactory completion of all items noted on punch lists (lists of items
that need to be completed, mainly detail work).
If, for instance, the contract amount is $100,000 and the project is a 2
bedroom/2 bath addition, 6 draws should be adequate. Draw amounts will vary
according to type, duration and cost of a project.
Thoroughly inspect the entire project before signing a certificate of completion
and making the final payment. All final releases of lien should be in writing
and in your possession before you release the final draw.
The contractor should supply you with a final release of lien and final invoice
showing that the contract has been paid in full.
Be sure the draw schedule states what work shall be completed to date for each
Before signing the contract, be sure all of the information on paper is to
your expectations. If any aspect is unclear, call the contractor and/or
architect and have them verify what it means. If you are still unclear about any
part of the contract, you may want to consult an attorney. NEVER sign a blank or
incomplete con-tract. Cross through all blank spaces that do not pertain to your
job. Do not be rushed into signing. Obtain a copy of the contract for your
Be sure all warranties and guarantees (including their duration) of both
materials and workmanship have been stated in the contract.
Your specifications should be included as well as the contractor's. The
contract should state specifically the work being performed, the duration
(including commencement and completion dates) of the project and should specify
the types of materials (including brand, model, model number, color or shade,
weight and/or thickness) that will be used.
The allowances or model numbers should be listed with prices included. The
total contract price and a detailed draw schedule must be included.
A place for the owner(s) and contractor to sign and date as acceptance of the
agreement is generally located on the last page of the contract. The signing of
the contract should be witnessed by one or two other persons or a notary.
All change orders should be in writing and specific, including cost of changes
or additions, and should be signed by both the contractor and owner(s) prior to
When dealing with "cost plus" or "hourly rate" contracts, obtain written
estimates with maximum amounts allowable to be charged.
Be sure the contract states that you will be released from all liens. Make
certain to obtain all releases of lien with each payment.
Confirm that the contract specifies the contractor as the applicant and
receiver of any and all required permits for the project, not the homeowner. If
neither is stated, do not assume that the contractor is the receiver. Get
everything in writing.
Make sure a clean up clause is in the contract. Clean ups should be done at
regular intervals throughout the project, with a final clean up upon completion.
The following is a checklist of what should be included in a contract:
Name of Owner(s)
Permanent Address of Owner(s)
Job Phone Number(s)
Total Contract Amount
Payment Terms or Draw Schedule
Contractor License Number
Contractor Phone Number(s)
Project Delay Clause
Lien Release Requirements
Warranties and/or Guarantees
Statement that work performed will meet code requirements
Unforeseeable work clause (for example: leaking pipes or electrical wiring
problems behind walls)
Substitution of materials clause
Financing Information, if applicable
Clean up Clause
Days weekly and hours per day when work will be
Termination Clause (in case of poor workmanship)
Steve Gonzalez is a master home builder / consultant / and author of “Before You
Hire A Contractor” / ConsumerPress.com / Copyright 2008
For more information about how we can help you or to obtain a quote call
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