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$77,000 Down Payment
If the following true story doesn't take your breath away and CONVINCE you to get on the phone with me BEFORE you call up a contractor for a bid, NOTHING WILL EVER CONVINCE YOU.
You will be DOOMED and no doubt suffer financial RUIN.
This past week I did more 15-Minute Consult phone calls than I ever did in a seven-day stretch.
I also broke a sales record in my Draw Plumbing Plans business. I draw DWV riser diagrams, water line drawings, gas line drawings, etc. One of my orders this past week was for a 9-bathroom mansion!
One consult phone call stood out among all of them. It was deeply disturbing. After the call I sat in silence trying to figure out HOW TO STOP this madness.
I decided to write a national column about it. I'm doing that tomorrow morning.
In a nutshell, here's what happened.
A couple decided to build a small 200 square-foot room addition on their home. The plans were drawn last spring and a contract signed about five months ago.
The couple took out a home equity loan to pay for the job. The contract sum was just a tad over $100,000.00.
The ONLY work that's been done since May is the disconnection of an outdoor heat pump that was no doubt in the way of where the room addition is going to be.
About five minutes into the call I asked the husband, "How much money have you given to the contractor?"
There was a pregnant pause and then the homeowner said, "$77,000. The contractor said he needed to buy supplies."
I had to do a double take in my brain in less than a second.
My brain SCREAMED at me, "WTH??? How could someone give that much money away up front? How could a contractor make that ask with a straight face?
You do realize a
contractor doesn't pay his employees or subs in advance, right?
You do realize a contractor doesn't pay for supplies in advance, right? Or, if he does have to this means his CREDIT IS SO BAD no supply house TRUSTS him to pay!
So if he doesn't have to pay for things in advance, WHY SHOULD
YOU?
Trust - It Goes Both Ways
A couple of weeks ago I shared a similar story. Both situations are dire.
Both could have been avoided.
You MUST STOP TRUSTING
contractors.
You MUST NOT GIVE AWAY your only leverage.
Money is the ONLY THING you have that entices most contractors to show up, do great work, and then leave to work on another job.
If you're an honest contractor you know I'm right. I'd love to hear from you. Tell me your story why
you don't ask for outrageous deposits and I'll share them in an upcoming issue.
When a contractor asks you for a huge deposit, he's saying, "Listen Mr. and Mrs. Homeowner, I don't trust that you'll pay me."
He might also be saying, "I NEED your money to pay the bills from my LAST job. I don't have enough money to make payroll. I need to make payments on my NEW TRUCK, etc."
The man I was talking with TRUSTED the contractor. My guess is he felt the contractor would treat him with respect, honor the contract, and make good on anything he, the contractor, promised in all the conversations.
The homeowner had only one question for me, "What recourse do I have?"
My
answer was, "You have no real weapons other than the threat of telling the story on any and all social media platforms. Be sure you don't commit libel."
Several weeks ago I shared why pursuing legal recourse is a dangerous decision. READ
THIS past column.
The Atom Bomb
I then proceeded to share the atom bomb story told to me years ago by a great Cincinnati attorney, Louis Katz.
You see, when you're negotiating with anyone about anything and you have the upper
hand you need to fly over your opponent in your bomber.
You open the bomb bay doors and show your opponent (the contractor) that you have an atom bomb. You say you'll drop the atom bomb if X, Y, or Z doesn't happen.
If you do have an atom bomb AND if the other party realizes it, they usually capitulate to your terms.
If you DROP the atom bomb before you get what you want, you know what happens, right? You get NOTHING because you've blown up the negotiations.
NEVER DROP THE ATOM BOMB before you get what you want.
How Honest Contractors Do Business
Here's how honest contractors do business.
They have tens, perhaps hundreds of thousands, of dollars in their business financial accounts. They might have enough operating capital to last four or six months.
They can make weekly payroll with ease. They can pay all their bills with ease.
They're NOT UNDER ANY FINANCIAL STRESS.
They negotiate REGULAR WEEKLY or MONTHLY PAYMENT terms in their contracts so they get paid for the work as it progresses.
The SMART contractors request to get paid by the 3rd or 5th day of a month so they can deposit a check and then pay THEIR suppliers by the 10th of the month.
When this happens, the contractor gets a small discount on the bill. Those discounts can add up to a very big number at the end of a year.
Honest contractors know they'll satisfy you.
Honest contractors SHOW UP TO WORK because they promised they would. They realize that time is money and the FASTER
they finish your job, the faster they'll complete the next one in the queue.
Just Say No
When you're sitting down negotiating a contract and someone asks for a deposit, STOP AND ASK WHY it's required.
If
you get spin or don't get an honest answer, STAND UP and tell the contractor the meeting is OVER. Walk him to the door.
You MUST MAINTAIN ownership of the frame. You must wield your power and not give it up.
There are a few instances where advancing money makes sense. If your job requires something
to be purchased that's custom and non-returnable, it's common for the contractor to ask for 50% down for that item.
But even then you can get burned. Some contractors in the past have taken this money and NOT ordered the product. They disappear with the money.
If you worry this might happen, negotiate that you pay for the item directly yourself. If the
contractor agrees, that's a good sign. If he makes up some story that you can't do it, it's a huge flashing red light. Bad jujumagumbo is just around the corner should you sign the contract.
Talk to Me First
Are you sitting down?
Do you realize that 99% of
all my 15-Minute Calls are often frantic life-preserver calls? The homeowner is in trouble and is flailing in the icy waters of financial ruin. They're frantic trying to get me to SAVE THEM.
Only 1% make the call BEFORE they talk to contractors.
I did one of those earlier in the week with a woman
who's getting ready to restore a home her dad built. She recognizes the significance of the undertaking and wants to make sure it progresses with NO ISSUES.
I BEG YOU TO GET ON THE PHONE WITH ME BEFORE YOU DO ANYTHING.
On larger jobs like room additions and new homes, YOU SHOULD BE TALKING WITH ME BEFORE YOU START TO DRAW FINAL PLANS!
I'm currently consulting with a homeowner who had plans drawn that contain lots of oversights, in my opinion. The cost to redraw parts of the plans can be enormous. I offer a service where I look at preliminary drawings and offer up suggestions.
In this case, I would have caught right away that the wood stove location was in the WRONG PLACE! I could go on and on
about the other things I see wrong in the plans.
GO HERE to order up a $50 phone call that's guaranteed to save you THOUSANDS of dollars.
Or, if you decide
to proceed without a call, then get your arse to the Bellagio in Las Vegas and sit down at the $100 blackjack table.
Let me know how that goes.
BTW, it will go somewhat
well for you if you read this book.
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