How to negotiate w/ contractors

Question

Hey BP,

I'm in the process of hiring my first contractor (for major renovations). I've worked with contractors in the past but for smaller jobs as I typically do most of the work myself but now it's requiring some licensed professionals.

I'm starting to get estimates back and as I figured they are all over the place. My goal is to not get the cheapest contractor, but to start building a solid relationship. My gut instincts are telling me that the most expensive contractor right now will be someone I would actually want to work with on future properties (he's very timely, he's thorough in his estimates, and communicates extremely well, even to the point he came back to explain the estimates to me vs. just sending me a pdf with prices). How would you go about sharing other estimates you've received explaining that you want to work together but can we get costs down?

Open to any and all suggestions. Again this is not only my first big project (3rd property), but I'm also finally in the state that I would like to stay in for future properties so I have relationship building top of mind.

Thank you

Scott M. · Answer

The strategy for this always depends on the market.  And right now, it is a contractors market.  Prices are up (both materials and labor) and there is a shortage of crews and workers so everyone is competing for the best.  There are times when contractors can't get work and are willing to deal but today, the good contractors are booked, and booked far in the future so your ability to negotiate may not be as strong.

That said, when we have a price issue we simply tell the contractor what our price is.  This eliminates back and forth and gamesmanship.  His price is 12K but you only have 10K tell him you have 10K and the job is his if he can do it for that and if not you need to look elsewhere.  Then do so.  If you make this a long drawn out painful process he is not likely to work with you again.  Best to be upfront and straight forward and if you don't end up working on this one at least you leave with mutual respect.

Tough market to be looking for new ones, just keep that in mind as you are going through the process.

Nicholas Weckstein · Answer

I think you could just be forward. Show him your other estimates, tell him that you want to work with him, on this and in future deals. And was wondering if he can do any better. Worth a shot. If he says no, will that make you pick a different contractor? Price is very important but if this contractor seems to be the best for for you then take a chance

Scott M. · Answer

@Jonathan Greene is spot on about "future deals"  Also, just yesterday someone posted about a plumber that said he would do a job in a few weeks and now it is 18 weeks later.  Communication and living up to deadlines, even with paperwork and return calls are all super important and indicators of how things will go.  Pay attention.

Jonathan Greene · Answer

Most contractors don't want to hear about the future deals because that almost never pans out in real life so it isn't a negotiating tool unless you have a verified list of projects you completed and then he or she will want to know why you aren't using that contractor anymore. Most contractors also won't care about the other bids. I would ask questions like this before deciding based on price: (1) how many crews do you have? (2) will one crew be on my job every day for the whole day? (3) how many work in each crew? (4) do you send an itemized work list?

Anthony Simboli · Answer

@Nicholas Weckstein Thanks for the response. Yes price is definitely important. At the moment I'm considering using 2 contractors potentially, 1 for exterior work and the other for interior, but I'd prefer to use just one. It's a live in/BRRR type situation. The numbers from the start have been a bit skewed from what I would traditionally do given I want to live in the first unit for a few years as I settle so I paid a bit extra plus the high prices in the market. Just trying not to stray too far from what I would normally want to see in numbers to make a BRRR work. Still learning so appreciate the input.

Matthew Paul · Answer

In this market contractors are busy , good contractors are even busier . You could ask for a lower price , but I doubt you will get it .

Anthony Simboli · Answer

@Scott M. thanks for your feedback this is helpful, and exactly the position I'm in right now with one of them. We've been going back and forth. I expanded the scope a bit so obviously prices went up and next thing you know I was looking to do too much. Luckily he's been great and willing to work within the new numbers I feel comfortable with given the property. Appreciate your help!

Waylon Zook · Answer

@Anthony Simboli i told the last guy that tried that with me the other quote is a heckuva deal !

How to negotiate w/ contractors

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