7 Things to Never Say to a Contractor

You’re about to discover 7 things that you should NEVER say to a contractor; or said another way; here are 7 common ways that contractors can screw you. Whether a big or small job, hiring a contractor is serious business and you must adhere to the following guidelines in this video or else you stand a good chance of being taken advantage of. You’ll learn real world wisdom on hiring and dealing with contractors as well as get free access to a contractor agreement which can help you avoid some of the pitfalls that so many other investors experience.

Contractor Contract Template Download

 

If you’re looking to hire a contractor for a job, big or small, you need to read this blog. I am going to educate you on how to develop a fair relationship with your contractor. Contractors can be a source of a lot of stress and anxiety in the world of real estate. They can be masters at extracting the maximum amount of profit, while putting in the least amount of work.

I want to share some important information to ensure that you’re in a mutually beneficial and fair relationship with your contractor. This information might offend some contractors, but that’s a small price to pay, for sharing the truth. I have been a part of transactions involving hundreds and hundreds of different contractors. I have also been screwed over by a ton of them, which makes me uniquely qualified to educate you on what not to say to contractors.

 

Seven Things to Never Say to a Contractor

 

1.  Never Tell a Contractor They are the Only One Bidding on the Job

Always get a minimum of three bids, in fact, the more bids you get the better. Separate each bid into the cost of materials and the cost of labor. This will help you tremendously when comparing each contractor.. Don’t ever tell a contractor that they’re the only one bidding on a job, because that gives them too much power. You need to lead them to believe that you are considering many contractors for a job, so that they are held accountable for their bid.

2. Don’t Tell a Contractor Your Budget

If you tell a contractor that your budget is $20,000 they will find a way to make their bid $20,000, even if it should be lower. Instead you should have them provide a bid for the work you need done, so you can compare the cost of material and labor with other bids, to make an informed decision.

  • Cost of Materials

Be aware that many contractors will upcharge you for the cost of materials. It is important to independently verify the cost of materials after receiving a bid. I have had contractors look me right and the eye and inform me that material cost is $850, when I know for a fact the cost is only $550. I refuse to hire anyone tat will lie to me about the cost of materials, so I always verify costs.

 

3. Never Ask a Contractor for a Discount if You Pay Upfront

It is an extremely stupid to offer to pay a contractor the entire amount owed upfront. If you pay a contractor upfront, they can end up not doing a good job, or some will even take your money and disappear.

I have actually seen some real estate traders on Youtube teaching people to do this in order to save money. It is very dumb advice, because you have to be very careful about payments to your contractor. You will have to pay some money upfront to cover the cost of materials, but I actually try to work out deals where I am purchasing the materials myself. I dont trust contractors to buy the materials for me, because in the past I have had issues with contractors using leftovers from prior jobs, or purchasing cheaper materials then requested, thus scamming me out of money.

Now, there might be some attorney’s reading this, that would argue that the moment you purchase the materials, you are crossing the line, and the  contractor can now be considered an employee. I find this theory completely bogus, because the contractor owns a contractor’s license, and work with many other clients. I have the right to purchase my own materials, so that I know they are purchased correctly.

  • Paying a Contractor

Personally, I give my contractors a little bit o money upfront, and then pay them over the course of the job as it is completed. I always save the final payment for after the job is finished, in order to protect myself from being scammed.

About a month ago, a hurricane began to approach Florida so my family and I decided to evacuate early, in order to get ahead of traffic. I own a large home, so I hired someone to put approximately 50 hurricane shutters up around my house. When it came time to leave, he was only about 3/4 of the way done, so I ended up paying him before he was finished.  This resulted in me being screwed, because he never put up the rest of the shutters once we left. I had to get real serious with the guy I hired, and was able to get some of my money back, but I consider myself lucky for that, because some contractors just disappear after they screw you over.

So be advised that if you pay somebody upfront, there is no guarantee that they will finish the job. Don’t give a contractor their final payment, until after the project has been completed.

 

4. Don’t Tell a Contractor That You Aren’t in A Hurry

If you tell a contractor that there’s no rush to complete your project, they will give your job the lowest priority possible. They will take on other jobs and spend their time doing other things, besides getting your job done. You need to communicate timelines, and actually chart out the weekly expectations you have in terms of job completion. Be sure to set dates and deadlines, and let the contractor know that they will lose money if the job is not completed within a reasonable amount of time.

Never tell a contractor that you’re not in a hurry, or else your project can end up delayed more and more, until you are pissed off and losing money. 

 

5. Do Not Let a Contractor Choose the Materials

It is very important that you make the decisions on the exact materials you use for your project. With each type of material, there is a high end product, low end product, and something in the middle. Educate yourself on the difference between each type of material, so that you can choose based on your needs. If you allow the contractor to make all of these choices for you, they can really screw you over. They could use materials from other jobs, choose materials that are too expensive, or even too cheap.

In my contract with my contractors, I specify which materials they are to use. Picking the right materials can make all the difference in the world.  If a contractor picks the wrong materials, the project is bound to go wrong.

I need you to choose the materials. Be specific on what materials they purchase, where they purchase it, and the price they pay for it.

 

6. Never Hire Anyone Illegally 

Some contractors might offer to bring in people that aren’t legally licensed to work on your jobs. You should never hire anyone that does not legally have the ability to do the job. If you are not diligent when hiring a contractor, you risk a huge liability if someone is injured.  Make sure that the contractor is licensed and insured, and has evidence of an insurance policy. Be aware of any subs brought in by a general contractor, to ensure that they are covered under their policy.

  • General Contractors

You must be critically careful that the subs hired by the general contractor are getting paid.I always pay the subs directly, because if you only pay the general contractor, there is no guarantee he will pay the subs. If the general contractor does not pay the subs, you could end up with a lien filed against your property. Always pay the sub contractors yourself.

 

7. Don’t Agree to a “Gentleman’s Agreement”

Always, always, always put your agreement with a contractor in writing. I don’t care if it is a simple, one page piece of paper, just get the deal in writing. I have a link where you can download a copy of a contract I use with contractors. It is very simple, and ensures, that you and the contractor both understand what you are agreeing to.

Having everything in writing has nothing to do with trust. It helps ensure that everyone is on the same page and remembers what the agreed terms are.  So that months down the road, we don’t start arguing to what we agreed to in the beginning. I write out very detailed contracts, with my exact expectations and a list of all expenses.

If you decide to let the contractor purchase the materials, have them provide receipts to prove each material cost.

 

Conclusion:

Those are the seven things to never say to a contractor. They all might seem like pretty simple guidelines, but they’re a lot more difficult to practice in real life. Oftentimes, we get busy, and try to take shortcuts in life. Do not take shortcuts with contractors or you will regret it. Take the time to do things right, and be very careful when working with contractors.

A lot of contractors actually have a criminal background. This doesn’t make them bad people, it is just important to know someone’s history from an ethics perspective. If you do not fully understand how serious working with a contractor is, you will get taken advantage of.

On the opposite side of the coin, don’t try to screw over your contractor. It is very important that the people you hire make a profit.  I actually have a great video that further explains why making a profit is a good thing in business.. I encourage contractors to make a profit, just not at the expense of you.

 

Comments

  1. Michael Vinson says:

    You hit the nail on the head. Thank You..

  2. TITO FERN says:

    Thanks. Very helpful and smart ideas when dealing with contractors.

  3. john e gibson says:

    As always phill killer contentt!!

  4. What about when all of these things are followed, you know where the guy lives, he is a maintance man at a local apartments complex, has no contractors’ liscense, and drags on and on one to two hours per week (we are on month 3 and still trying to do the work he was paid for) The job: Tile, Granite, and Cabinets / new can Lighting, move laundry room to the garage, and install a gas line / water line to the kitchen for gas stove and modern fridge ($4,000 flat).. I paid him $1,000 to start for tile he kicked ass but didn’t seal it. After that he delivers the large slabs of granite and on that day he did not break it but actually set it flawlessly cutting the pieces and setting them in place.. no sink hole.. he asks to get the next check and I oblige after all tile is done that is a huge job and alone worth $2,500 – $3,000 so I write the check gladly. From that day he flies to Denver. HA HA HA dissappears 2 weeks doesnt reply to a phone call or email and seems to have jipped me. However i had a gut feeling he was in some sort of trouble. He calls on the 15th day stating he was back in town and ready to continue. SO seriously 1 month passes he misses the deadline.. so we redo the contract again this time he promises to complete it by August 30th, he comes and completed the can lighting in both the office and kitchen in a day (with electrical for everything, following day demo the cabinets, install the new ones I bought. 4 days later comes in and asks for the 3rd check. I am pissed. SInk aint cut and tile is not sealed. Still pending was the 1/3 the work so I say noway but he insists and threatens to not complete the job stating that he underbid thinking I was a good guy.. I feel bad as he was right that he was doing a lot for a little and write him the 3rd thousand although at the time we only had $1,300 in the bank. He completely disappears again for a week just having assured us he would be completed by Sept 10th (his 3rd promise and that was the day before my wife’s birthday) to think that not 1 day he worked between that check and her birthday save him breaking the granite while moving it to cut the sink hole.. I feel assured when he tells me it broke where right where the sink hole was so no one will see that tiny crack in the front and the back of the sink (2″ or whatever). For my wife that was the end but i was so convinced he could buff it out. Still hasn’t. SO I add on some work to make up or it and have him knock down a wall to the kitchen to make a pony wall capped delivery style open concept to the dining table. I tell him I will call it even if he builds the pony wall and pantry for the $1400 slab was not to be cracked and I didn’t want him to have to pay to replace it over such a hairline crack. A new pantry and open concept kitchen would surely shut up my wife and bring him back to favor with her. Which it did. However he realized this $4,000 job a rip off when I told him the final $1,000 is paid when all things are completed. He has not been back for 13 days now. He came today though I dont know what to do but I like the idea of never paying him the final $1,000 the job gets finished.

    • Phil Pustejovsky says:

      Contractors always show up on payday

    • John ronald says:

      LOL the same issue is going on with us. Someone else who has been involved with the same contractor (no license) has had work completed by them took out the entire check for the deal before the job was completed causing them to have to pay him extra. DO NOT make the same mistake they did. Pay him only on the day the job is completed or this could give you a serious headache.

    • Jay Williams says:

      Your doing the righ thing-just like Phil says, NEVER pay all of the money until the job is complete. Also don’t let them guilt you into paying ahead of schedule either. I’m a real estate investor and a contractor, so I’m fortunate in knowing both sides. Contractors are also masters of story telling, to make you feel sorry for them and pay them in advance. Only pay for what has been completed. You seem like a good and good hearted person, but you made several mistakes. Don’t compound them.

    • J. K. Ross says:

      I think you are inexperienced in remodel work. Please work with real professional contractors. Not maintenance men trying to moonlight full remodel jobs involving electric, plumbing, etc. You do not know his background and or his training. He may just be a basic handy man that is barely qualified for the job he has. If you are going to take on projects of this nature, do not hire someone who already has a full time job. YOUR PROJECT will be a second job and be treated as such. A SECOND JOB, not his primary focus. Good Luck and Better luck next time.

  5. Eugene Povolotsky says:

    Thank you Phil. Great lesson

  6. Thanks again Phil!

  7. I am a contractor / investor .
    Was a contractor for 30 years before starting to invest. Can tell everyone one thing.” Walk a mile in a contractors shoes .”
    and then you will know.
    Another point I will make , I am considered to be fairly intelligent .If there were such great profits in being a contractor , I wouldnt be phasing out the contracting part of my business . I would not be moving towards full time investing .
    I dont leave good deals to get a bad deal.
    I am an investor and can say this will all certainty .Some not all investors but alot, have ruined the whole residential housing game. Budget is important, but lets not forget there is a buyer that will have to deal with the shoddy work that is performed.
    They have driven everything towards price. Well I am a custom home builder and a third generation one at that. “Good work aint cheap and cheap work aInt good” .
    I dont work for the seller or the buyer. I work for the property. Then booth sides win.
    Regards , Todd
    Cutting Edge Renovation & Design LLC

    • Phil Pustejovsky says:

      Other videos of mine handle the issues related to investors screwing contractors and customers. That is certainly horrible too. I appreciate your comment.

  8. Percy Gilmore says:

    I think it’s better that you hire a manager to over look the subs. Skip the contractor thing all together… what’s your thoughts?

  9. J. K. Ross says:

    Hi Phil, Almost every point you made has truth in it. I am a small contractor. I remind people / potential clients, all the time to be careful. However when you go shopping and have people bid jobs for you over and over and you go for the cheap price, you will get what you pay for or possibly worse. A Legitimate contractor in my state ( FLORIDA) is registered with the state and must adhere to the LAW. This costs $$$$$$ the ones you find on craigs list or other cheap ad places are usually fly by night bozos.They will underbid work to get it. Now after someone has had me bid for them a few times and they keep giving the work to a low ball, and call me up to FIX THIER screwups, ( THE CLIENT ) that is, I say the client , because they did not listen to me in the first place,and hired the BOZO, who thinks they know what they are doing. I tell them No THANKS. I gave you a proper bid. I do not fix client mistakes. The client is the client. It is their responsibility to Hire a REAL Contractor not a Con Artist with a clip board and a tape measure in a work truck. Make sure you are working with legitimate HONEST contractors and look for a bid somewhere in the middle and yes SPECIFY the quality of the material and the quality of the workmanship you are looking for. And yes YOU BETTER have a BUDGET in YOUR MIND or you will probably find out to do a good job is going to cost more than you think. Just like going to auto repair or a Dr. or lawyer or accountant. Accept those professionals do not come do the work at your house you go to theirs. It costs $$$ to go to pick up materials that can not be delivered and if they can, They usually charge for that service. Note…. Nothing is FREE. Sorry you are so jaded. I suggest you change your contractor referral source to the one that offers Legitimate contractors. Other than that I agree with most of what you say. Good luck with your students. I am also a real estate investor. My brother and I buy fix flip etc. As well as my installation business. My Brother is an Attorney, in CT. We had a General Contractor business in Westport, Ct. back in the 70’s & 80’s. He got tired of chasing Clients and Contractors for our $$$$$.So he went to Law School and became a lawyer instead. He and I were raised by our father, a former Officer in the U.S. Army who was born into the depression and served his country during the Korean Conflict.He was also a manager for A.T&T. & an entrepreneur of many labels as well as a Deacon in our Church. Oh I forgot to mention, my brother also attended West Point Military Academy Yes Phil, there are Honest Contractors out there. It’s a shame there aren’t more of us. As I said before good luck with your continuing investment strategies. I just think you might want to tell your students, that there is an acception to the rule, they must look in the right places for us. We do not advertise in cheap or free ad services if we advertise at all.We come highly recommended and do not have to look for work ,( usually) & we do not go looking for cheap work. We do not provide cheap work. The services we provide cost $ for our offices, help, insurance, tools trucks office equipment , accountants Lawyers as well as our registration fees and license fees etc. Sounds like you may need a handyman. Not a Contractor for a lot of your needed projects. There is a vast difference between a Legitimate Contractor and a handy man with a clip board. Research the Contractor and make sure they are a Real Contractor. I noticed this was near the end of your lesson on how to deal with Contractors. I think the first part of the lesson should be this POINT….:) Have A Nice Day
    J.. R. in Fl.

    • Rev. N. A., Washington State says:

      Your video on contractors is very helpful. My older son is a small contractor in Colorado, doing jobs that cost the client about $1800 per job. He, as a practicing Lutheran Christian has alerted me to some of the points that you have made.

      The Word of God, His Law) states many of the same things: First, regarding a contractor’s temptations: “Thou shalt not covet” (9th and 10th Commandments (Exodus 20; Romans 7). Regarding motivations, which apply to contractors and clients, “The love of money is the root of all sorts of evil” (1 Timothy 6). Consolation both for client and contractor: “God works in all things for God, for those who love Him and are the called according to His gracious purpose in the Savior of sinners, Jesus Christ, the crucified and righteous One, through faith in His blessed Name” (paraphrase, based on part of Romans 8)

  10. felix mlaki says:

    Thanks for the great insight. I shall be having a conversation with my contractor next 2 weeks and have picked useful new insights

  11. Jerry Hofrock says:

    Wow. Great information and even better presentation. I’ve done this business for more than 20 years and appreciate the accurate information. Another “con tractor” trick is to overorder materials, later the contractor takes materials back and gets a refund. Makes you value the honest contractors more. Thank you Phil.

  12. Jonathan Passey says:

    Phil, I am a contractor. I love your passion and would love to work with you.

  13. I’ve experienced paying based on completion of a project in increments (20% 40%, etc) from the balance of the amount. Can I stipulate in the contract if the I have to pay for corrections based on an inspection, the cost be deducted from the balance of the contracted amount.

  14. Can you do a video on how to develop the materials list?

  15. This is why you’re on top. You’re not kidding. You’re the Bob Munden of real estate.

  16. Thanks Phil! I really appreciate your sentiment. You expressed yourself how I feel. I’m going through a similar situation, although not by my own volition. I have partnered with someone who hired a contractor who on the start date failed to show up; and in between does not return calls and is in my opinion, at face-to-face, one of the nicest guys -right?, but out of sight is atrocious. Already I don’t like him.

    The funny thing is that there are many suspicions that run around in my head about contractors about there unscrupulous ways and this (your) video confirms many of them.

    Thanks Phil for the video. That’s real service.

    by the way, I also appreciate your integrity in your overall business approach. This world is crawling with cockroaches…

  17. Love your talk so much, your points are always very helpful and honest. Thanks Phil!!!

  18. That was great! Thank you.
    I can relate.

  19. Phil your the man I love your energy and use all your advice !!love ya Gabriella

  20. I own 3 houses from your advise you are a blessing to me! Keep up the good work! God bless you

  21. Peter Pasquale says:

    Great video, every word of it 100% true. In my experience (one top to bottom remodel of a duplex), top tier (read expensive) contractors give you a fairly professional and detailed estimate, but then again you are paying TOP dollar.

    Almost everyone else writes the estimate in sloppy hand writing or in a cryptic email. I’m overstating it a bit, but to get 3 half way decent estimates you have to call 30 guys.

    Any tips on where to find a good contractor? I’ve tried Angies list, Yelp (totally unreliable, they virtually force businesses to pay monthly to get the good reviews to appear) and grabbing guys out of Home Depot.

  22. Peter Lopez says:

    Phil! You will lose the rest of your hair if you keep hitting yourself like that! I’m a fan of yours, this may be the funniest and at the same time most powerful video ever… Thanks for sharing your wisdom…

  23. Ruth Woods, Realtor (Needing this good guidance for Investing side says:

    Put in a new kitchen upgraded faucet while getting repair of a kitchen sink leak not even a month after husband, very qualified engineer always kept house in good repair.

    Found out leak was coming from need of a new garbage disposal. Found a very good resource from Home Advisor who put in a new garbage disposal. I checked around many other internet resources like mentioned above for comparables first. This was a hard decision to make but the Home Advisor person did do a good job & also gave me a so many years guarantee. I am lucky in one way, the person who guaranteed for years has ownership of a home not far from me. I think I could take him to small claims court myself if he does not stand up to the guarantee? Since he does have a home legally as an asset of his, then I could file a lein against his home for the total lein that might become in my favor against him to be paid before he or anyone could sell his home, even though I would upfront have to pay for court filing & recording of the judgement (not that much compared to a possible total judgement. Very worth doing a study by any individual plus, for individuals to check person/company/contractor, etc assets in same state.

  24. Kim Daskam says:

    🙂 love this guy~ LOL

  25. Lisa Phillips says:

    They can SNIFF the newbie on you. And will always align it so it is maximized for themselves, NOT for you.
    There is a monetary amount that determines how much you should pay up front, and there is a science behind it. But as you said, they will always make it better for themselves AND have a straight face when they tell you someting BS that lines their pockets more than yours. Good video, I approve.

  26. Avery Birchard says:

    I was almost laughing, it so painfully true on so many levels. Like give the answers on test to 5th grader 5 minutes before test time… They will use it and then tell you they passed honestly, it helps no one in the end. And we can file this under control the deal and don’t spill your candy in the lobby.

    In short, excellent video on common sense.

  27. Barbara Pollard says:

    Great video (my husband is an Electrical Contractor, but only does Commercial), and have seen this type of activity first hand. I am in the process of doing a partial Reno in our kitchen. I researched/purchased all the materials, and hired a GC to act as the Project Manager. Doing it this way saved me several thousand dollars. Totally agree, buy as much of the materials yourself.

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