Many homeowners who received remodeling bids a year ago are finding that the same project today would cost thousands less.

Take for example Michael Perkocha and Tina Stott from Oakland, who just purchased a bungalow for $630,000. Last year they were getting quotes in the $250,000 range and decided to postpone remodeling because they couldn’t afford it. This January they got quotes ranging from $102,000 to $170,000 and ended up going with a contractor whose bid was $129,000. That’s a $121,000 savings!

Such deep discounts allowed them to upgrade their flooring from laminate to oak and upgrade their countertops from Formica to granite. They’re also able to add crown moldings and energy efficient windows.

Besides saving a huge chunk of money, the work is almost complete at three months, opposed to the six months they had figured on, and they’re under budget. These are huge marketing points for contractors: big savings, ahead of schedule, and under budget.

At the beginning of the year, Jack Schocker decided it was time to remodel his vacation condo in Sarasota Florida. He got estimates for replacing a couple cabinets in the kitchen that were damaged by water from the condo next door. After talking with one of the contractors he realized that for less than $30,000, he could completely redo the kitchen and remodel two bathrooms. He and his wife were going to redo everything anyway in a few years down the road. So, even though they hadn’t planned on a total redo so soon, with prices so low they decided to take advantage of the times and do the big remodel.

The word is getting around and making homeowners think, labor costs are down by 10 to 20 percent, prices for materials like lumber, steel, and copper are down, contractors are readily available, and the job gets done faster…hmm, maybe remodeling now would be a smart investment.

Homeowners who are remodeling this year are able to spend less, get a higher level of quality, and enjoy their new remodel much more quickly, and this is what contractors need to get across to homeowners. If you’re bidding a small job like Jack Schoker’s replacement cabinets in Sarasota, it pays off to mention that you can completely redo their kitchen at XYZ dollars.

Resource:

http://www.nytimes.com/2009/04/23/garden/23renovation.html?pagewanted=3&_r=4&emc=eta1

But it is work.

While the article in Money Magazine is geared toward homeowners, there are some important lessons for contractors as well. Mainly getting to know the homeowner in today’s market. Even those with the means to put on a new roof or expand the master bedroom are thinking twice about it. For a few reasons:

• the return on investment is at a low point in the current housing market
• the future is incredibly uncertain

Fortunately, however, there are more reasons why homeowners who can, should remodel:

• material costs are falling fast (especially for oil-based products such as vinyl, asphalt)
• smaller, necessary “fix-ups” still need to be done
• increased competition means lower prices, more concessions
• putting money into the home now, while costs are low, will help the home maintain its value

Still, it’s a very touchy game on all sides. Contractors desperately need work, homeowners still need or want upgrades, but the housing market is not finished declining. It is therefore very important that homeowners understand which projects will have the best return on their investment and will likely be meticulous about choosing a project and a contractor, as the Money article itself encourages.

As a contractor, being able to understand and answer homeowner concerns regarding payback, efficiency, and long-term benefits may just be the key to getting hired. The majority of homeowners will be fully aware of their newfound power to persuade. Instead of coming into the conversation resisting this fact — with a salesman’s attitude so to speak — come in understanding it. Show the homeowner that you can save them money, perhaps by encouraging the use of current low-cost materials. Even if your bid is a bit higher than the next guy, if you’re confident, honest, and able to ensure their satisfaction, well that’s a foot in the door right there.

It will also be important to be clear and concise with your bid. Homeowners will want itemized bids and proof of licenses, insurance, and other documents. Interviews will be longer and more detail oriented. Having answers to these questions is vital. Also, if a homeowner is NOT asking these sort of questions, you can volunteer the information and encourage them to be aware of suspiciously low and vague bids from other contractors.

You must also be ready to offer a price break. In a survey, 70% of contractors said they would offer at least a 10% discount on work. The remaining 30% went even further.

These are tough times for the economy and subsequently complex times for bidding remodeling work. Doing the homework is as important as ever. There is a different brand of homeowner now, different from even a year ago. That is how volatile the market is right now. But so far as it goes, remodeling contractors are sitting relatively well right now, if certain forecasters are right. It is a surprisingly good time to remodel. But the ball is in the homeowner’s court and developing trust and a good rapport is as important as ever.