My friend, however, who is also the realtor who sold me the house, made a smart suggestion to seal a hallway closet that abutted the bathroom and use that space for bathroom shelving. This made perfect sense because (a) there were too many doors in the hallway, making the space look smaller and (b) I desperately lacked storage in the bathroom.

Why didn’t my contractor come up with the brilliant idea? Perhaps it’s what we call tunnel vision. You go into the project by first listening to what the customer wants, you tell them whether or not it’s doable and then you create their vision. But if you looked around, you might get ideas that will greatly enhance the space and make it more functional for the homeowner.

Now, I know there are hoards of contractors who do make suggestions. But for those of you who don’t, it would not be considered an insult if you did. Most homeowners don’t have vision – they can’t see beyond the walls. I know, I’m one of them. If you can make my life easier by making the space in my home more functional, then I’m all ears.

So, here’s my suggestion to build more value and earn more money per project. Let’s say you’re working on a job and you pass by a staircase with unused, wasted space underneath (and the people have a lot of clutter). Suggest how the homeowner could utilize that space more efficiently with built-in storage. Bam – more money for you. Or you’re working on a job unrelated to the kitchen but notice that the kitchen is dark and small. Suggest installing skylights and removing a section of the wall to form a window through an adjoining room – wham-O, more $$.

Trust me, I’m a homeowner who needs you. These suggestions will pay off. Don’t just go into a job for the sake of the job. Go in for the client and help make their home a better place to live.

So we have a market that encourages remodeling, however hesitant consumers are to spend, and an Internet that is fast becoming a home improvement tool in its own right. This combination has spawned a major rise in online referral services. These companies, such as CalFinder, offer homeowners an online resource on a smorgasbord of home improvement topics and an easy-to-use link to contractors in a given area. You, the contractor, pay to have these homeowners connected to your company, in the form of their contact information.

Working with these Internet leads can be a bit tricky, requiring more work on your part than traditional leads. As Dave Lupberger pointed out in a related post for Qualified Remodeler, an Internet lead will likely fall short, in terms of information provided, when compared with traditional referrals. Unless you work with a service like CalFinder that pre-qualifies every lead, you generally won’t have a personal view of the homeowner, you won’t know how serious they are, you won’t know their budget situation, and you won’t know when they want to start.

What you will have is their contact information, which is something to work with. Homeowners are generally serious about wanting to remodel, but they may be very hesitant, given today’s economy, to jump right in. Therefore Internet leads may require a little work on your part, some more aggressive marketing. Lupberger put it very nicely when he stressed the importance of developing “a good marketing pipeline.”

You note and keep track of homeowners, Internet-lead or not, that have expressed interest in your services in the past. You then be sure to make regular contact (every few months at least) with these prospects, by way of marketing tools like company newsletters, new project notifications, open houses, and more. The idea is to engrain your company’s name and services into the minds of these homeowners, so that when they are ready to remodel, it is your name that will first come to mind, and your phone that will ring.

Of course when you get a homeowner’s contact information, do not simply send them your next quarterly newsletter. Be sure to make contact with them, offer free estimates and start building a professional relationship with them. Online referrals allow you to specify the region or areas which your company services.

You know the neighborhoods and relative income levels of your best past clients. You can use this a priori knowledge, combined with a lead’s contact information, as clues to who your best prospects are likely to be. But in this day and age it is unwise to ignore any lead, especially as personal referrals give way to Internet leads as a major marketing source. Develop your pipeline and work to expand it; these are the benefits of Internet leads and your task at hand.

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

Such a question can be easy or difficult. Take remodeling contractors; for you the answer is probably simple — expansion. The reason being that remodeling inherently involves many different facets of construction from carpentry to electrical to plumbing and more. Being able to offer experience, knowledge, and advice in many of these areas is a big plus.

However, if you offer a unique service, one which sets you apart from the field, then specialization may be your best route. Say you’re a custom tile setter or mason with your own formula for creativity, something that is a valuable selling point. It makes sense that you would want to hone that skill and accentuate it during interviews.

At the same time homeowners and their remodels can be very fluid things, changing as the days go by. While it is generally accepted that a well-planned remodel is the smoothest remodel, that is not always how it goes. Therefore an extensive list of skills and services, including a heightened ability to think on your feet, may be the best way to go.

Another way to expand your offerings is to expand your knowledge of new building products, especially the eco-friendly ones. As remodeling gets greener than ever, there are a lot of well-hyped products coming out to fill the need for better energy efficiency. So in these tough times, if you do have free time on your hands, feel free to spend it researching appliances, building products, and other trends that are dominating trade shows and expos. Today’s remodeling homeowners are bound to have more questions regarding the quality and longevity of these new products. Can you answer them?

The concept is simple. Past clients are a familiar resource whom you’ve worked for in the past. Their repeat business or recommendation to a new client has a certain, predisposed measure of validity that is just not possible with strangers. Now, in 2003 when the original survey was taken, times were very different. The housing boom was coming into its own and contractors had more freedom to pick and choose projects.

Those times may have come and gone but the fundamentals of remodeling and lead generation remain, even though it may be contractors calling past clients to check in rather than the other way around. Yet despite the fact that homeowners are in the driver’s seat, you are still more likely to generate quality leads from past clients because both homeowners and contractors tend to trust the word of a friend or known client than a phone book or random ring of the phone.

Another interesting trend that came out of the 2003 survey and remains relevant today is the need for personal interaction. Most contractors surveyed stated that they put “gut reaction” and face-to-face conversation on a higher pedestal than any number on a lead sheet. The lead sheet may itself lead to the interview, but it would always be the interview that took precedent.

Again, now that the tables are turned and it is often the contractor doing the hunting, the same rules apply. Better leads come from past clients and should be prioritized. Homeowners running through the phone book or search engine are essentially window shopping. That is not to say that every lead isn’t important — there is a contractor for every job regardless of lead origin — but the odds are much better when familiarity is involved, not to mention contact onsite.

The point of all this being that keeping in touch with past clients is an excellent idea. The remodeling season is soon forthcoming, the stimulus package is pouring plenty of money into weatherizing and home repair, and every quality lead starts with the mention of your name…now may be a good time to make sure past clients remember it.

If a homeowner was planning a second story addition or a new wrap-around redwood deck, those plans might slide down the list of priorities and get stuck on the back burner for a year or two. The homeowner may instead choose to take advantage of the 2009-2010 residential energy efficient tax credits. The time limitation definitely creates a sense of urgency and may put all other projects on hold.

So, it depends on your forte. If your identity is strictly associated with decking then business may slow down a bit – you may want to add some new tools to your belt and wear a different hat. The good news is a lot of homeowners will be saving a ton of money on their energy bills after their green renovations are complete and they’ll be ready for that new deck in no time.

If your forte is in insulation, windows, doors, roofing, solar, HVAC, piping, and anything else related to the tax credits then you should see more jobs coming your way. In fact, congressional estimates show that the new expanded tax incentives will increase total remodeling activity by over $6 billion.

As far as energy consumption goes, it’s the older houses that need retrofitting much more then all those aggressive efficiency goals for new homes. Look in the neighborhoods where the homes were built in the 20’s, 30’s, and 40’s, and you’ll find single pane windows, poor weather stripping, and old doors that aren’t energy efficient.

Per a study conducted for the California Homebuilding Foundation last fall, 70% of the greenhouse gas emissions related to single-family envelope energy consumption is attributed to homes built prior to 1983. The study demonstrated that pending $10,000 retrofitting a 1960’s home could save 8.5 tons of carbon.

So, take advantage of the stimulus package and go after homeowners living in old homes.

Recap of the new tax incentives for non-business energy property:

• The 10% credit for building envelope components is increased to 30%.
• All energy property that was previously eligible for $50, $100, and $150 credits is now eligible for a 30% credit.
• The $500 lifetime cap ($200 for windows) has been replaced with a combined $1,500 cap for 2009 and 2010.

Some changes have been made to the standards that property must meet in order to qualify for the credit. The changes take effect for property placed in service after 2009, except for the change regarding biomass fuel stoves:

• Insulation must meet the prescriptive criteria for that material or system established by the 2009 International Energy Conservation Code – as in effect on February 17, 2009.
• Exterior windows, doors, and skylights must have U factor equal to or below 0.30 and a solar heat gain coefficient (SHGC) of 0.30.
• Electric heat pumps must meet these standards:

A seasonal energy efficiency ratio (SEER) greater than or equal to 15, energy efficiency ratio (EER) greater than or equal to 12.5, and heating seasonal performance factor (HSPF) greater than or equal to 8.5 for split heat pumps.

A SEER greater than or equal to 14, EER greater than or equal to 12, and HSPF greater than or equal to 8.0 for packaged heat pumps.

• Central air conditioners must meet these standards:

A SEER greater than or equal to 16 and EER greater than or equal to 13 for split systems.

A SEER greater than or equal to 14 and EER greater than or equal to 12 for packaged systems.

• Propane, natural gas, or oil water heaters must have either an energy factor of at least 0.82 or a thermal efficiency of at least 90%.
• Biomass fuel stoves that burn biomass fuel to heat a dwelling, or to heat water for use in the dwelling that the tax payer uses as a residence, must have a thermal efficiency rating of at least 75%.
• Furnaces and boilers – there are 6 categories:

Qualified natural gas furnace means any natural gas furnace that achieves an annual fuel utilization efficiency rate of not less than 95.

Qualified propane furnace means any propane furnace that achieves an annual fuel utilization efficiency rate of not less than 95.

Qualified oil furnace means any oil furnace that achieves an annual fuel utilization efficiency rate of not less than 90.

Qualified natural gas hot water boiler means any natural gas hot water boiler that achieves an annual fuel utilization efficiency rate of not less than 90.

Qualified propane hot water boiler means any propane hot water boiler that achieves an annual fuel utilization efficiency rate of not less than 90.

Qualified oil hot water boiler means any oil hot water boiler that achieves an annual fuel utilization efficiency rate of not less than 90.

The above is effective for property placed in service after February 17, 2009. The change for biomass fuel stoves takes effect for tax years beginning after December 31, 2008.

Energy efficient property credit limitations, effective for tax years beginning after December 31, 2008:

Taxpayers are allowed a non-refundable residential energy efficient property (REEP) tax credit for 30% of expenditures made during the tax year for qualified solar water heating, geothermal heat pump, fuel cell, small wind energy, and solar electric property. This includes labor costs properly allocable to the onsite preparation, assembly, or original installation of the property and for piping or wiring to interconnect such property to the home.

Previously, the tax credit was limited to:

• $2,000 for qualified solar electric property costs;
• $2,000 for qualified solar water heating property costs;
• $500 for each one-half kilowatt of capacity of qualified fuel cell property for which qualified fuel cell property costs are paid (no limits);
• $500 for each one-half kilowatt of capacity of qualified small wind energy property for which qualified small wind energy property costs are paid (not to exceed $4,000) and;
• $2,000 for qualified geothermal heat pump property costs.

New for tax years beginning after December 31, 2008 – There is no dollar limit for solar electric property. The new law eliminates the REEP credit caps for qualified solar water heating, geothermal heat pump, and small wind energy property but retains the credit cap for quailed fuel cell property.

A few other things to remember:

• A qualified “home” includes a house, houseboat, mobile home, cooperative apartment, condo, and a manufactured home that conforms to Federal Manufactured Home Construction and Safety Standards.
• Garage doors are eligible for tax credit – doors installed in 2009 or 2010 may be eligible for the tax credit provided the door is installed in or on an insulated garage as a component of the home, the garage door meets the other requirements of the tax credit, i.e. it has a U factor <= .3 and a SHGC <= .3, and the garage door is certified by the manufacturer.
• Tax credits do not offset self employment tax, social security tax, or IRA’s, so cover your bases and make sure your customer is informed.

Sources:

http://www.homefinder.com/content/Blog:Retrofitting_Older_Homes_to_be_More_Green

Form 5695
http://www.irs.gov/pub/irs-pdf/f5695.pdf

http://www.qualifiedremodeler.com/online/article.jsp?siteSection=21&id=1246&pageNum=2

http://www.creative-architect.com/pdf/Energy-Efficient%20Improvements.pdf

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.

They surmised the following reasons for this unexpected behavior.

It is difficult for homeowners to sell their homes.

They realize this, and are looking for improvements that will make their homes more appealing and competitive with other homes on the market.

When unable to sell their homes, some people opt to improve the one they have to better accommodate their family.

If more space is needed, they add an addition, or they try to improve the areas that made them try to sell in the first place.

There are a growing number of homeowners preparing their homes for retirement and their later years.

This trend is called “Aging in Place,” and entails revamping the house to accommodate their changing lives. Whether it is wider doorways, more conveniences or walk-in showers, they are doing their best to plan ahead.

The article also touched briefly on the growing number of homeowners converting to a greener lifestyle. They are looking for ways to make their homes more energy efficient with alternative energy, along with more eco-friendly materials throughout the home.

One point the article didn’t mention is that with the slower construction industry, contractors have more time and more competitive rates. How do you compare?

I spoke with the general contractor and owner of a construction company recently. He spoke about how he is giving out his personal cell number and answering all calls. In a fairly rural area, he is willing to drive a couple of hours each direction to give estimates if it leads to more contracts. He has a crew to keep busy, and he knows they depend on him to generate business for their own livelihoods. Not only must the small business owner carry the burden of their own finances in this economy, but those of their employees as well. As this contractor realizes, he must be available at all times to potential clients to make sure he doesn’t lose any prospective jobs.

Using this same company as a firsthand example, they have also increased the amount of services they provide. They have implemented high-tech software to facilitate plan drawing and design, created a website integrated with local real estate companies, and volunteered their services at a few high-profile community events. This progressive approach to advertising has helped their reputation and made their company name more recognized throughout the community.

The key to customer satisfaction is quick follow-through and reliable service. If someone experiences a problem with a job you’ve done for them, the longer they have to deal with the inconvenience, the more resentful they become of you.

If times are slow for you right now, resist the temptation to charge more for your services. Homeowners know there are a lot of hungry contractors out there, and they have their pick of the cream of the crop. Remember, customer satisfaction is the key to repeat and referral business.