The First Time I Was (Knowingly) Ripped Off By a Contractor

by | BiggerPockets.com

The Pareto Principle

If you’ve read no fewer than five business books, you’ve probably heard of the Pareto Principle. Named after economist Vilfredo Pareto, it specifies an unequal relationship between inputs and outputs. I have this condo that will. not. stop. bothering me. I’m not sure yet that I want to get rid of it because it’s so easy to rent out, and the profit margin is pretty darn good. Over the past few months, my average hourly rate for this property has still come in above $100 (despite the events listed below and tenant turnover). I haven’t placed poor tenants, per se, but my first tenants in this property divorced. Right before they moved out (after they had finished out their lease) someone in the building started a fire. Luckily, there were no injuries, and there was no damage to the units on the side of the building where my condo is located.

Unfortunately, there was fire damage in the attic, which rests directly above my unit. The HOA hired contractors to fix the damage. While they were working on it, they accidentally loosened some wires, cracked my ceiling, and damaged my unit’s air conditioning. Did I mention these tenants have four kids, one of which is a newborn? And while we’ve had a mild summer here, this particular week we had nothing but beautiful weather and temperatures in the 90s. Sigh.

Related: The 6 Commandments of Working with Contractors on Rehab Jobs

On Trusting People

My first move was getting a technician in there who I had used before. His pricing had been reasonable in the past, and when he saw the property and the damaged AC, he, like many other contractors, quoted me for both recommended repairs and necessary repairs. The recommended work would cost nearly $800. I settled for a charge of $500 to clean the evaporator coil. The tech said that he’d fix the cooling issue and he’d do it the same day I called him.

Only it didn’t fix the cooling issue. He was nice enough to come back and troubleshoot the issue. Suddenly he was on the roof of the building telling me the condenser needed to be cleaned. Normally, this would be “a free service,” he said, as he could “just clean it with water,” but “since he was on the roof without water access,” he’d need to clean it with nitrogen and charge me $250. This news activated my spidey sense. (Regrettably, it took this long to get there.)

Saying No

Sensing my hesitance, he immediately dropped the price to $125. Half off! Awesome! I still said no. This guy sent me photos of a condenser that didn’t belong to my unit to demonstrate how dirty it was and why it definitely needed to be cleaned. I still said no. Guess what? All of a sudden he offered to do it for free! What a nice guy. Too bad my tenants were still living without air conditioning.

At this point I was definitely not paying this guy any more money. I called around and found out that the max I might have paid another contractor to clean an evaporator coil and condenser was $250. Let me remind you that I paid nearly $500 for one of those services. But at least I got a $250 service for free, right? No. This guy told me he cleaned the condenser off with a brush.

Related: The Ultimate Guide to Finding an Incredible Contractor

Moving On

As with most things in life, you win some, you lose some. A two-minute call after I received the initial quote would have saved me almost $300. It’s easy to get complacent, and one positive interaction with a contractor doesn’t always indicate good future ones. If you vet one contractor, vet them all. I do this through Thumbtack, which provides customer reviews for anyone who responds to your bids for work. Unfortunately, in this case, I had been too complacent and didn’t use Thumbtack or shop around before giving this guy the go-ahead. I’m happy to report that since then, I’ve been able to adequately avoid similar situations.

Vetting Contractors

If you choose to use a tool like Thumbtack, you’ll want to ask the typical “contractor questions.” Are you licensed and insured? Have you had any issues with the law? Ask for references and call them. Some contractors are insured but not licensed. Once during a roof-replacement project, the insurance company sent over a man who had been convicted of some hardcore drug charges. We went with someone else. Another highly recommended handyman we worked with was later arrested for violating a restraining order. Sometimes even referrals with references can let you down! Ultimately, you may not be bulletproof, but due diligence can help you avoid facing more issues than you may have otherwise encountered.

Have you had a bad experience with a contractor? What did you learn from the experience? 

Drop me a line in the comments section below.

 

About Author

Sarah P.

Sarah has achieved Financial Independence as a result of her real estate investing. She has a great time blogging about her personal experiences throughout the process. Currently she's enjoying the ride, but possibly looking for remote positions in the near future.

14 Comments

    • Sarah P.

      You know what, you’re right! I suppose I meant to establish the idea that I’ve had one condo that has caused me a lot of grief, my first rip off being one of them. Although I know plenty more people who have lost so much more in fraudulent work. That’s life I suppose. If you know any great contractors in the Denver area feel free to send them my way!

  1. Christopher Smith

    I’ve had some issues with HVAC “repairs”. It’s taken awhile to find a guy that I have nearly 100 percent trust in, but ultimately looks as if we have found one who is both honest and reasonably priced.

    I have found this to be the most difficult service of all maintenance issues because of the technical aspects of the work. It’s a little like auto repair work, unless you are a mechanic yourself it’s very difficult to evaluate the purported problem diagnosis or the repair work performed to resolve it.

    My resolution was for the technician to let me know precisely what was going to be done, an all inclusive estimate to fix it, some warranting of the work, and all replaced parts provided to me upon completion. Additionally, I let them know I will do my own research on what they have found and the prices they will charge for the parts.

    I don’t do this now with my latest guy because his diagnosis and fix estimates have proven very reasonable and as long as they stay this way I don’t need to perform the comprehensive follow up that was needed with the others.

  2. lisa odonnell

    I had a rough carpenter essentially build the outer shell of my house — lots of work! He did it fine and I eventually moved in. Later when I went to finish the basement and needed partition walls, I asked him for pricing. Maybe he didn’t think I’d ask anyone else and it would be his for the taking. Well, I did and the price by someone else was less than half the cost. The problem can exactly be that when you have a regular repair person, they can pad the pricing bc they know you’ll go with them. Alternatively, maybe he was busy and threw out a super high number to see if I’d bite. In either scenario, always get other bids.

    • Sarah P.

      Sometimes an easy google search will show it. If you know the county they live in it’s public record. You can ask them to show you licensure and possibly even have them sign a contract for work with an addendum saying they certify they aren’t a convicted felon by agreeing to do work here. Although I’m not a lawyer so don’t quote me on that.

  3. Christopher C.

    The only part of property ownership / management that makes me feel like its a “job” is dealing with contractors.

    Even good contractors are difficult to work with. I have 2 contractors that I know do a good job and are reasonable with costs. Getting their undivided attention is the hard part. Looking at it from the contractor point of view it kinda makes sense, they make money by getting in and out. Having to return to a job site to fix up a problem, even one they created, is a double loss. They aren’t getting paid for the time, and they aren’t spending that time working on new paying jobs.

    Pay on completion and using different contractors for different parts of the job has been “ok” for my wife and I.

  4. Christine Wallace

    I am ashamed to say I was taken “big time” By a local contractor because I did not do my due diligence. Also I paid half down before work started so he could “order materials and cabinets”. Needless to say, these things never materialized.
    Later I find out the guy has liens on his home 2 prior bankruptcies. I thought because he did some small jobs for me, I could trust him with the big job.
    Learn from my mistakes, do your homework!!!
    Anyone from the Cincinnati tri-state area he wants to know this company’s name, please PM me. I’d love to help others avoid the same experience.

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