Your Real Estate Scope of Work: The Drama Eliminator

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– “You said to keep the carpet in this room!”

– “No I didn’t! I said to remove the carpet in this room and install wood laminate.”

or…

– “Why did you replace that light fixture? I said not to! I’m not paying for that!”

– “Excuse me? I remember you pointing to that fixture and saying you wanted it replaced! You ARE paying me!”

Yuck. Sounds like something you’d hear on a Jerry Springer episode entitled  He Said. She said.

Although I’ve never been in a situation like this, I’ve heard stories from others who have and have never envied a fellow investor who ‘has’ been caught up in a conversation like the above. Am I some sort of genius for never being in this kind of situation? Heck no! Is it just pure luck that I’ve dodged this bullet so far? Absolutely not.

The good news is that avoiding the above types of circumstances is not rocket science and is very easy to accomplish. How so? Easy. By using what I call ‘The Drama Eliminator’, or in real estate lingo: the scope of work.

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The Real Estate Scope of Work

Besides the purchase agreement that maps out all the numbers of a deal, The Drama Eliminator is the most important document when part of your exit plan is making improvements to a property (to be honest, I may even argue that it is more important than a purchase agreement. Not sure I could win the argument, but I could see myself at least trying).

Not to pat myself on the back (trust me, I made plenty of stupid mistakes when first getting started), but this was an area where I chose wisely in terms of processes to implement into my business. After doing my research and chugging through a couple of educational sources, the scope of work made a lot of sense to me and was something I wanted to at least “try”, and needless to say, I’m glad I did and have never looked back!

Scope of Work: Definition

What is a scope of work? Put simply, it is a “To Do List” for the property you are working on. There are many formats for the scope of work, but I will share the way my company structures ours. Essentially, we cover three things in our scope of work. The “Who”, “What” and “Where”.

Logistics

Before you even get to the “Who”, “What” and “Where”, you should address something that may seem obvious (but I overlooked it on our first scope of work). Having an area that maps out all the logistical details will ensure maximum efficiency.

1) Have a professional letterhead. This lets the contractors know you are a professional company and aren’t here to play games and waste their time.

2) Depending on the size of your company, you may only need to list your contact details. The point though is list “how” you want contractors to contact you after they have their bids ready.

3) Define any terms and conditions of the job and bidding procedure.

The “Where”

This is the most crucial part. Think about it, if your people are NOT in the proper location, then all hope is lost. A flooring guy doing something in the bedroom that should have been done in the living room is pretty darn useless.

Make sure you define the exact location in the property you are talking about. Many times, I am not at the home with the contractors (saves me time) so I need to ensure they understand the area I am referring to is the area they are physically at. I would recommend for your first couple of projects that you meet contractors there; however, when you put together your scope of work, write it as if you plan on not being there.

As you can see from the image above, not only do I specify “Hallway”, I also add a few more details (“main floor leading to bathroom”) so that the contractor, painter and flooring person know to be looking at the proper hallway.

The “Who”

I’ve found many contractors appreciate this. Remember, their time is valuable too, so when they know exactly where they are needed on a property, it helps them access the bid and ensures they are doing the work in the proper spot.

It is very evident that the four people needed in the main floor bedroom are the contractor, painter, flooring guy and electrician. As I alluded to earlier, if at the final walk-through I see the old light fixture is still in this bedroom, it’s going to be extremely difficult for the electrician to say, “you never said I needed to do anything in that bedroom”.

The What

Now that you have the right people in the right location, tell them what to do! One thing to keep in mind, a ‘true’ professional shouldn’t need every detail spelled out. In other words, you shouldn’t need to tell them ‘how’ to do what you are requesting. If you find that the case, odds are, this person bidding the job isn’t the best choice. On that same note, you need to tell them “what” to do for sure,  but if you find yourself typing out exact work instructions on how to remove cabinets, not only are you overdoing it, you will probably be insulting the intelligence of the person bidding the job (assuming of course they are a ‘true’ professional).

Final Things to Consider

The Drama Eliminator

…ensures contractor bids are “apples to apples” and not “apples to oranges”. When you do ‘verbal’ instructions, unless you are recording your voice, odds are that you are not telling each person the EXACT same thing. Therefore, one bid may look cheaper than another, but that’s simply because you told the contractor something less cheap than another.

…ensure you don’t end up on Jerry Springer. I’ve had a few instances where contractors have missed something. No big deal, everyone is human, but boy oh boy is that an easy phone call to make. “Mr. Plumber, we wanted the toilet replaced which was in the scope of work”… the plumber: “Oh sorry about that Clay! I’ll get over there bright and early tomorrow morning and get it changed out”. (and of course, no “last minute plumber trip fee” since they fully understand it was their mistake)

…ensures you are on good terms with your contractors. I can’t tell you how many times I’ve been told, “we really  like your scopes of work. It makes our job so much easier”. I’ve found contractors are willing to cut their prices back a bit more simply because they know it will be a drama free transaction.

Photo: Ludovic Bertron

About Author

Clay (G+) is a licensed real estate agent and the owner of Huber Property Group, LLC, a real estate investment company located in Grand Rapids, MI. His company purchases distressed properties with the main exit strategy of fixing them up and reselling with owner financing, particularly, land contracts.

14 Comments

  1. Some good reasons and points as to why a scope of work is critical. You had me until you said you’ve never been in a situation where there were ambiguities or dispute about what work needed done.

    Even with the best scopes there are always problems but IT IS absolutely critical to have one to work off of. The art I find is how detailed a scope to have.

    On one hand when there is to little information problems happen and when there is to much info you can have problems because in a large remodel something is ALWAYS forgotten and if you have a super detailed scope they will say they didn’t do the work because you didn’t tell them to. I.e. You said install toilet not install toilet, interior flush kit & wax ring and caulking around base. Those are additions sir flipper.

    Very good post though.

    Here is a perfect example of an EXTREMELY detailed scope of work including finish material schedule etc.
    To access this shared file, visit this link:
    https://gii.box.com/shared/y0ii6hk5xoxlhukbubrg
    This actually ended up being one of the craziest and most difficult project ever. Even after sitting down for hours with the contractor clarifying this scope there was still issues. As a matter of fact this is the first project police helicopters were called in to one of my projects https://sites.google.com/a/gabhartinvestments.com/rincon/updates-and-announcements

    You are 100% correct about the Importance of a scope (and contract & and specifications) but by no means will that insure that there will not be any disputes. As a matter of fact just assume that a dispute will arise if at least 1 hammer and 1 nail is used on a project!!!!

    • Hi Curtis,

      In regards to https://gii.box.com/shared/y0ii6hk5xoxlhukbubrg

      I signed up to “Box”, and sent in a help desk ticket # https://support.box.com/tickets/109476

      Basically they said the following:

      “Please contact the account administrator (this is likely the person who originally provided you with the link) or the webmaster for further assistance. For privacy purposes, it is only the file owner who can give access to their files and folders.”

    • So far so good with my scopes of work. Granted, I’ve only done 8 projects since getting started a year ago, but I haven’t had any massive mishaps.

      In my experience, if you have a true professional bidding, they will either A) Call you with questions or B) show their assumptions in their bid that they give you.

      Thanks for the comments. Checked out your site, you do some good work!

    • Thanks Keith.

      I’m a big fan of the K.I.S.S. method (keep-it-simple-stupid), and from the feedback we’ve gotten from our contractors, they find the simple approach very easy to follow along with more importantly eliminating the majority of the “gray” areas.

  2. Clay–excellent article! I couldn’t agree more. I too have used an official scope of work as an addendum to my contracts with my renovation crews. I have some boilerplate items (like keeping the site clean, etc.) like you mentioned, and then I get very detailed about exactly each item that needs to be done. I tend to break my scope of work down by trade, but I can see where your system would work in some of my cases too (especially when it’s a lipstick job, and most work would be handled by one contractor).

    I keep a copy of the SOW on site and one with me, at all times. Contractors like having it handy so they can refer to it. It’s helped in many ways, including one trade perhaps finding a conflict with another trade’s task–helping me to find the mistake before it becomes a headache. Of course, it’s very helpful at the end, when you need to make sure everything has been done as requested.

    And I agree with you–I do think it’s even more important than the actual contract!

    • Thanks for the comment Terri.

      That’s what I love about real estate, it isn’t an exact science, so you can do whatever makes your life easier. No scope of work will be the same, but if it works for what you’re doing, then great!

      “It’s helped me in many ways” – I can relate to this statement 110%.

  3. Clay:
    I love your reminder to compare “apples to apples.” So often, if it’s not in writing, you’re correct – you get a better bid from someone because you left out an important detail so you’re comparing apples to oranges!

    Thanks for your great post.

    • And the thing is Karen, its amazing how “in your mind” you may think you’re verbally telling each contractor the same thing, but from there perspectives, they may be hearing two totally different requests.

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