By William Srenk:
When hiring a general contractor for a home renovation, it's vital to understand the difference between viewing them as a vendor versus a partner. Most people think about this relationship from the customer’s perspective, but it’s equally important to consider how the general contractor (GC) views the homeowner. A successful partnership relies on mutual respect, clear communication, and a collaborative approach.
Unfortunately, something terrible has happened in the home renovation industry. General contractors and homeowners stand at opposite sides. Contractors frequently feel undervalued when customers show poor treatment, while homeowners often doubt the trustworthiness of their contractors, even labeling them deceptive. This lack of trust between both parties destroys their working relationship, creates conflict and makes building strong professional bonds more challenging.
Homeowners and contractors have to admit their collective part in creating these problems. This pattern of mistrust will stay active if we keep finding the other party at fault. Let’s take a closer look at the root causes of these problems and how we can work toward a better, more productive home renovation experience for both homeowners and contractors.
Houseowners Obsession with Low Pricing for Home Renovations
Most homeowners place too much emphasis on finding the cheapest option for their home renovation projects. Your desire to save money by looking for deals can sometimes lead to more problems. The search for cheapest prices can lead to frustration, strained relationships, and ultimately, a lower quality product.
Every step of the construction process reflects a strong desire for affordable pricing. GCs and subcontractors perform renovation work with reduced quality when they feel undervalued. Instead of focusing on the estimated cost of the project, homeowners should consider the final cost of the project in relation to the quality and value they expect. Trusting capable professionals and building a strong relationship based on transparency will lead to better outcomes for everyone involved—and ultimately, a home renovation that’s more satisfying and cost-effective in the long run.
The Dangerous Cycle of Lowball Bids in Home Renovations
General contractors ensure owners receive affordable services because owners want the most affordable option. Who can blame them? While this seems like a good strategy to save money, it creates problems for both homeowners and contractors.
General contractors are often forced to compete with each other by offering unrealistically low bids to make sure they have work. This forces subcontractors to quote prices that don’t align with the true cost of the work. Once a general contractor wins the project, they face the challenge of completing the renovation within the estimated budget, which is usually impossible.
This results in change orders—unexpected costs added to the renovation cost as original estimate proves insufficient. These price hikes only deepen the mistrust between homeowners and contractors. The low bid mentality becomes a vicious cycle, with contractors underbidding to win the job, then struggling to justify additional costs later in the process.
The Subcontractor Dilemma
Each subcontractor partners with the a general contractor as an expert in their trade. More then any other factor, the renovation cost mainly depends on the combined price of all subcontractors working on the project. However, when low pricing pressures mount, subcontractors face difficult choices that can affect the quality and outcome of the project.
Subcontractors may be forced to make tough decisions: should they bid based on the actual cost of the work, knowing there are issues with the plans? Should they communicate the challenges and propose changes to the project scope, even though doing so may make them appear overpriced? Or should they submit a low bid, knowing that they will likely need to request additional funds later through change orders?
Unfortunately, many subcontractors choose the latter option, bidding low to win the work and then recouping their profits through change orders later. This practice can lead to delays, increased costs, and greater dissatisfaction for homeowners. It also fosters a sense of disillusionment and distrust between contractors and homeowners, making it harder to break free from the cycle of lowball bids.
Everyone is frustrated with the next stakeholder... and with good reason. It doesn't have to be this way. If each member of the value chain owns up to their end of the dysfunction and commits to a higher level of honesty and transparency, the entire industry will rise.