A Simple Tip for Negotiating with Contractors

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The overloaded orange hand truck was filled high with ceiling fans, light fixtures, door hardware and faux wood mini blinds. I made my way slowly from the Home Depot pro desk to the parking lot, careful not spill any of the precious cargo.

Yes, I could have made two trips to the car with my stuff. But that’s not how I roll. I’m a guy and guys get it done in one trip, not two.

I loaded the items into my chariot, a 2004 Chevy Tahoe with the back seats folded down, like a master puzzle solver. Each box was arranged so that not a spare inch of space went unused. Just as I was about to put the last piece in place (the light bulbs because they are delicate), a man approached.

I wondered what anyone would wonder when a total stranger appears out of nowhere in an empty parking lot at 6:30am. Is this random person going to shoot me? Ask for money? Jumper cables? Directions to Lowes?

Instead he asked if I was going to install the ceiling fans, light fixtures, door hardware and faux wood mini blinds myself. The thought crossed my mind I said. The man told me he was an electrician and could do all of the work in 3-4 hours. Naturally, I asked what he would charge. Without hesitation this parking lot solicitor said “$400”.

Wow. $400. For 4 hours of work. I know doctors who don’t get paid that well.  When I broke down the math out loud the man quickly revised his quote. “I’ll do it for $150”, he said.

I learned valuable lesson in the Home Depot parking lot that day. While material costs (i.e. cabinets, countertops, windows, doors, ceiling fans, blinds, etc.) are pretty much fixed, labor costs are very negotiable. By asking the contractor for a price and estimated job completion time I quickly determined how much he was getting paid per hour. And $100 per hour was way too much to hang a few ceiling fans and window blinds.

These days I ask all new contractors “how much and how long?” If there are material costs included in their bid I ask for those to be separated from the labor costs. Then I know exactly how much I’m being charged per hour. For the typical handyman-type work $25-35 an hour is reasonable.

Of course, when dealing with licensed trades like roofers, electricians and plumbers, all bets are off. Most have set hourly rates. But, I’ve found even those can be negotiated. I’ve had success lowering my labor costs for HVAC and major appliance repair just by asking “how much and how long?”

When the laborer has to really think about what they are charging on a per hour basis their perspective may change a little – which puts a little extra change in my pocket.

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About Author

Marty (G+) is the Chief Financial Officer for Rising Sun Capital Group, LLC, a real estate investment firm based in Gilbert, AZ. His firm purchases homes at the courthouse steps and public REO auctions. They have two exit strategies, either fix and flip or seller financing.

23 Comments

  1. Thanks Marty, I am going to implement “How much and how long?” right away! I always calculate their hourly pay in my mind, but I never thought to bring it to their attention… awesome!

  2. I don’t think you would get too many actual tradesmen soliciting you at Home Depot.
    An actual tradesman would most likely not return your call if you were suppling material and asking how much and how long? At least not in my area of the USA.

    • I have been solicited many times at Lowes or Home Depot by tradesman. They are just hungry tradesman that are needing work. Rehabbers like to find those “hungry” guys to keep our costs down!

      • Tradesmen at home depot parking lots are doing illegal work. They don’t pay taxes have work comp or other insurance to protect their clients. If they cut corner there where else will they cut corners? It takes money to build right. Rehabbers are a problem and give remodeling a bad name. You don’t hire a REAL contractor in a parking lot. YOU GET WHAT YOU PAY FOR!! It takes money for us legitimate contractors to keep up with industry standards. It takes money to buy the latest tools that make us faster, more productive and most importantly SAFE. My HEPA filter dust collection keeps harmful toxins out of peoples homes. It cost 500 dollars and the filter 155 it needs replaced often.

  3. 4 hours for $150? They might be tradesmen but they are not businessmen. A decent electrician or hvac company will be charging that much per hour or more. No $100 dollar an hour doctors here either.

    I think you are dealing with employees working on the side, with no insurance and most likely not licensed.

    • Dennis, where is here? In Phoenix, contractors are starving. The construction industry almost went extinct when the market crashed. Skilled tradesmen and contractors are very receptive to negotiating their labor costs.

  4. I use tradesmen who are moonlighting & doing side jobs all the time in rehabs. I don’t do much work that would require a permit in my area, but you can’t beat the speed and efficiency of having a “real” plumber or electrician on the job.

    Example – I’ll pull out the bathroom, “set” a new tub, and hire a moonlighter to re-stub the plumbing out, just like a “new” house. My drywaller comes in, repairs & textures the drywall, then I’ll paint & call the plumber back to set the sinks & drains, & finish the tub/shower spouts, etc. My side-job plumber is happy to have the work, he’s cheaper/faster & does a better job than I would, and no “businessmen” were harmed in the process, because it wasn’t a job they ever had a shot at getting.

  5. Hi,

    These are great tips and learned few new things from here. Especially loved the tips of how much and how long. And I think that’s sums up all when you are doing contract with any contractor.

  6. From a contractors side of the fence the most important part of a job that is more then just labor should also include a few specifications written down on a contract.

    Such as will there be extras or is the price a closed price for a particular task.
    Is there a warranty, does the fellow have a physical address, or is he an Irish traveler.
    Even a small job requires someone to have insurance, or you are taking on the risk without insurance the contractor is your employee if he falls off a ladder while installing that ceiling fan.
    Understand middle class western values have gone out the door, quite a few folks want to get rich or just get a money without leaving their Xbox. Using moonlighters is a crap shoot maybe 99% of the time there is no problem, when there is a problem have your assets well secured there are many underemployed lawyers.

    Your REI business is just that a business, I have owned my investment properties for 8 years or so, and I learned along the way (hard way) that using uninsured workers is a bad idea.
    Talented, hard working drug free workers do not have a problem gaining employment they do not need to hang out at Home Depot or Quicky Marts. You are either employing criminals, illegals, or those who might come back to your vacant property to borrow the copper.

    Insurance is not really a risk business, once your house has burned down you are out of luck if you try to secure a policy to cover the loss. Insurance is for the rare instance when something happens.
    This is what the non moonlighter is for, to lessen the hassles and get your business to the next level. You will all learn this lesson if you enter REI in a serious manner. Time and having a task done right the first time is of great value, especially on a long term hold. If you are a flipper no need to use any one but the cheapest.

    • Dennis, I understand your point of view. I, too, have been investing for many years and have used both licensed/insured and unlicensed/uninsured trades. I insist on using licensed/insured trades for roof, plumbing, electrical and HVAC work. For the cosmetic stuff, like cabinets, countertops, light fixtures, blinds and flooring I don’t require the trade be licensed. A licensed flooring contractor in Arizona will charge between $7-10 a square foot for tile installation, while an unlicensed contractor between $3-4. I’m willing to take the risk because of the savings.

      • I feel so sorry for the people buying these flips. Here in Minnesota we just got a lemon law on housing because of flippers and the shoddy work they employ

  7. Well, the truth is, you can negotiate for the goods that you purchased at Home Depot as well. There are a number of ways to do it, including the bid desk or simply asking for a 10-15% discount at their business desk. If you are in “the business” or you remodel homes, you refer business to them or you are doing something that brings business back to HD or Lowes–they want to make you happy. Discounts will follow if you are nice and persistent. I negotiate with them all the time.

  8. Great tips Marty. Amazing how a small change in how you ask the question can really change everything. Your tip works really well with general contractors as well asking “how much and how long?” – especially when doing your initial numbers for repairs. Im always suspect of round numbers when I get a quote out of thin air. If you can do the math quickly in your head, all the better.

  9. Hi Marty,
    Awesome tip. Knowing the negotiation tactics is crucial in fixing and maintaining properties. It’s sometimes a bit of a struggle to get it right. Your tip gives somewhat clearer picture on how to do this.
    Cheers,
    Derek

  10. Great topic. I was just talking to my wife about this today. We were discussing the labor costs for a HVAC install and my wife wanted to get a break down of the costs.

  11. Just curious, what benefit would you gain with a break down of the costs?

    I ask this because when a customer asks to have the costs broken down, I alwaya take it as a que that price is the only factor in the customers decision making process. When I get that idea I refer them to my nearest competitor.

    • Dennis –
      People want to know where their money is going. Transparency is the name of the game. When I hire any kind of contractor, I want to know upfront what my money is getting me, and no, money is not at all the only factor. I look at a contractor who is unwilling to do so as someone that has something to hide.

      If you’re referring people who want to know what you’re spending your money on to your competitors, you’re probably leaving a lot of money on the table.

      Just my $0.02

      • Joshua,

        Oh, that makes sense, but that’s called a detailed proposal. What most people that experience the bad contractor syndrome fail to add to the equation is having a detailed contract written up. Funny when folks hire a “contractor” who does not want to give them a contract, has no physical location, and will give only a cell phone number for contact.

        The above is a recipe that is used by 100% of the scam artists and weekend warrior contractors. You will save a lot of money, but you have a 99.9% chance of getting burnt.

        On my contracts I spell out model numbers, and exactly what the customer is going to receive for the end price, also an exact payment schedule is given based on the customer staying slightly ahead of the value to payment curve.

        To tell you the truth my business is after 30 years near 100% referral and most customers are allowed a payment upon completion contract. Which as you can figure is pretty safe from the customers point of view.

        The above scenario is what happens if you form a relationship with a contractor that has you best interests ahead of their own. But then again most landlords are trained to look for the price first and the quality last. and because of that idea they have repeated maintenance issues.

        Just a heads up, the hvac system in my own home has never had a break down in 27 years and most of my landlord customers can vouch for the same excepting life cycle issues.

        • Dennis – It sounds like you’ve got it down . . . if only other contractors “got it” as well, the residential construction/renovation business would have a little less of a black eye.

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