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The Key to Eliminating Your Rehab Problems: a Scope of Work

by Kevin Perk on June 16, 2014 · 15 comments

  
The Key to Eliminating Your Rehab Problems: a Scope of Work

Rehabbing can be one of the most trying, but important parts of the real estate investing business.

A good quality rehab will make your property shine in the retail or rental market. Getting to the quality rehab can, however, try your patience.

Things can quickly start running behind schedule, and cost more than expected. Plus, disputes can arise with contractors over when and how the work should be completed.

What is A “Scope of Work”?

One of the best ways I have found over the years to significantly reduce (notice I did not say eliminate) these issues is with a detailed scope of work. A scope of work is just what it sounds like.

It is a detailed description outlining all of the various parts of a rehab job. A good scope of work can eliminate many headaches, for both you and your contractors before you even begin work.

Related: Your Real Estate Scope of Work: The Drama Eliminator

Here is how. Let’s say you have a relatively simple job to paint a room. Instead of using a scope of work, you simply ask the contractor to “paint this room.”

Well, what does “paint this room” mean? I would suspect you and your contractor will have differing opinions as to just what “paint this room” means.

For example, what color should be used? What grade of paint? What finish? Should the trim be painted as well? Should the trim be the same color?

The same finish? What about the ceiling? Should door knobs and other hardware be removed before painting? Who should be making these decisions?

If you do not take the time to make all of these decisions beforehand and leave them up to the contractor, you may be in for a surprise when the job is “done.” You may feel that the paint job is not at all what you wanted or nowhere near “done.” So why leave that up to chance?

Instead all of those decisions and perhaps more should be outlined in a scope of work.

In the above example, your scope should have specified paint color, finish, grade, etc. And you should provide this information to the contractor up front, so they can provide and accurate price based upon the material and amount of labor needed to complete the job.

The Benefits

Using a detailed scope of work will eliminate much confusion and confrontation at the end of any job.

I prefer to develop a scope of work for each contractor and for each room at a job. I like to outline what is expected of each person room by room. I can even post copies in each room if I need to so there is no doubt.

Related: Our Flipping Journey: The Scope of Work

Your scope of work does not have to be anything fancy, a simple hand written list or spread sheet will do the trick. The key is to just have one. I then make the scope of work part of an independent contractor agreement. This has saved me many headaches over the years.

As you get more experienced in this field and develop relationships with trusted contractors, you will each learn what the other prefers and how a job should go.

In Conclusion

So you may not need to use a detailed scope of work every time on every job for every particular thing. You may be able to tell your plumber or electrician what you need and they will be able to figure it out to the standard you wish. But in my opinion, bigger jobs still need a detailed scope of work. Everytime. How detailed? Well, I’m still learning that myself.

How detailed are your scopes of work?

Do you have a good example of haw a scope of work saved you some hassle?

Be sure to leave your comments below!

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{ 15 comments… read them below or add one }

Michael Woodward June 16, 2014 at 12:24 pm

Kevin,

I agree with this wholeheartedly. My contractor has known for a long time what I want my houses to look like when he’s finished so I didn’t give him a Scope of Work on the last few projects. I didn’t think it was necessary because he always does good work and never went badly over budget…….boy was that a mistake!! Since I got relaxed about it, so did he. The result was a beautifully renovated house…….that was $16,000 over budget!!! ……now I’m waiving goodbye to most of the profit on that project.

From now on, not only will I meet with the contractor to go over the Scope of Work (right before I tape it to the wall inside the house) but I’ll have his signature on it as well. In my opinion, a Scope of Work is a non-negotiable, must-have, never going to go without again, element of my projects.

Thanks for the article! Mike

Reply

Kevin Perk June 16, 2014 at 11:06 pm

Mike,

Thanks for taking the time to write in.

I agree with what you said. Big projects can quickly get out of hand. Best to have everything defined up front.

Thanks again,

Kevin

Reply

Shaun June 19, 2014 at 3:51 pm

While I don’t disagree that having a detailed scope that is agreed upon beforehand is a good idea.
That is a lot different then letting the contractor do $16K in work without telling you or getting it authorized at that price.

I have a similar situation with a guy that I have done a ton of jobs with. We walk the place talk about what is to be done. Hit the high points in the contract and he STICKS TO HIS NUMBER. Sometimes he needs to change something and he just absorbs it sometimes there is a real issue and we talk about it and he gives me what it will cost.
On occasion there are a few minor things I think aren’t up to par, he usually just fixes them (this is the minor “all items to make the house ‘finished and ready for resale’ ” stuff, not big things).

If someone pulled that kind of BS you described I wouldn’t give him a more detailed scope next time, because there would NOT be a next time.

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Alex Craig June 16, 2014 at 3:32 pm

Basically what you are trying to do is make this idiot proof. I used to get amazed what people would do if there instructions were not completely detailed with everything written on paper. Our scope of work includes every SKU that we use from supply houses and Home Depot. The more details the better.

Reply

Kevin Perk June 16, 2014 at 11:08 pm

Alex,

Yep. I use sku numbers as well. Like you said, the more detail the better.

Thanks for taking the time to comment,

Kevin

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Samantha June 16, 2014 at 8:32 pm

Oh, I wish it were that simple. We have used incredibly thorough scopes of work since we started rehabbing last year. We’ve done 5 homes so far and we still have enormous contractor problems. We just can’t get them to work on our houses in a timely manner without having to completely babysit them every. single. day. I would like to know how to find mature, grown up adult professionals who run their businesses like a business. Oh, and not charge us retail pricing. Maybe we are searching for the mythical unicorn, but it is the faith that such contractors actually exist that keeps me going.

Reply

Kevin Perk June 18, 2014 at 11:17 pm

Samantha,

They do exist but you do have to search for them. I found many of the people I work with through referrals from other investors at my local REIA group. It took a while and I did have to go through some losers before I found some good folks. Remember though that no one is perfect and you will generally have to keep up with things on a daily basis . Keep trying. Take everything as a learning experience and I bet that in time you will find some folks you can work with and trust.

Thanks for reading and commenting,

Kevin

Reply

Drey Taylor June 18, 2014 at 12:08 pm

I completely agree with utilizing a scope of work, if anything it keeps a reference list of everything that needs to be touched during the rehab. More involved projects can include lots of intricacies that are easily overlooked. Was the oven supposed to be deep cleaned? Were we supposed to replace this bent door stop? etc.

Samantha,

There is a saying used with my developers (day job) and in many other fields that rings true. You have quality, speed and price… choose two. Typically, if you want to work with adults, you’ll have to pay.

Reply

Kevin Perk June 18, 2014 at 11:38 pm

Drey,

Wise words. It is amazing how much I learn to add to a scope with every rehab job.

Good advice to Samantha too. Competent adults demand a price. But you know what, they are soooo worth it.

Thanks for reading and taking the time to comment,

Kevin

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Shaun June 19, 2014 at 4:02 pm

Start off by saying I KNOW that there are a LOT of crappy irresponsible contractors out there…

That being said if you micro manage them, hoover over them constantly, treat them like incompetent children all while expecting them to bust their asses for you at the lowest prices possible why SHOULD they treat you and your job with any respect?

There is nothing wrong with checking in, making sure the work is getting done on schedule and to the right standard. However if you feel you have to be on site every day telling them exactly how to do things you have the wrong guys working for you or you need to back off until there is a reason to freak out. I typically visit my job sites once a week and snap progression pictures. Almost always do this on the weekend so I don’t interfere with them working. I often, but not always, give a call during the week to see if there are any issues but expect them to call me if there are. If during my walk through there is something unexpected I call and ask about it on Monday. Usually there is a simple explanation and it is rectified before my next inspection.

Oh and in respect to the main topic, having a detailed Scope is NOT a condescending and disrespectful thing, it is a good idea for all parties.

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Kevin Perk June 23, 2014 at 10:53 pm

Well said Shaun.

Thanks for taking the time to share,

Kevin

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Barbara June 20, 2014 at 9:26 pm

I find it always pays to write out a contract spelling out exactly what you want done and all of the specifics. It doesn’t have to be long and involved but all necessary information needs to be written down so all parties know what is to be done. Then both parties, owner and contractor or sub contractor will sign two copies and each gets a copy. It will save a lot of grief and miscommunications in the end. If something needs to be changed, then a ” change order” is written, two copies are signed by both parties. This also worked for ordering materials such as custom size windows. If your supplier makes a mistake, as happened to me, you don’t have to pay for their mistake.

Reply

Kevin Perk June 23, 2014 at 10:56 pm

Barbara,

More good advice.

Thanks for taking the time to comment,

Kevin

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Andrew June 22, 2014 at 8:12 am

Hey Kevin,
Great article. Any chance you can post an example of your scope of work as a template in the file resource here on BP?

Thanks

Reply

Kevin Perk June 23, 2014 at 11:00 pm

Andrew,

I really do not have a set format. I just type out what I need. For example, paint living room walls Dover White, flat finish, use x brand of paint, etc, etc.

Work with your contractor to fill in gaps.

Good luck and thanks for reading,

Kevin

Reply

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