- January 17th, 2015
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As consumers we are often hyper-focused on getting the lowest possible price on goods and services. And that strategy generally works when you’re buying a commodity of some kind. Televisions, cars, clothes and other consumer goods are commodities in the sense that they are mass produced and largely contain consistent quality. In that kind of purchase, it makes sense to search for the lowest price. However, when any kind of service is part of the purchase, going with the lowest bid can be hazardous to your consumer life.
Home repair and remodeling is one of the most dangerous categories for taking the lowest bid. Because home improvement and home repair requires both supplies and specific labor skills, low bid contractors oftentimes will cut corners on product and service quality. The roofing industry is a good example of this issue. A low bid roofer can use existing or old materials on a home in such a way that the quality cut back is not easily detected by the homeowner. Another less common tactic sometimes used is the co-mingling of customer funds to finish the current job at the expense of a future one.
Taking the lowest bid can sometimes result in increased liability for the consumers. To lower overhead, low bid contractors often operated without proper liability and workman’s comp insurance. If there’s property damage or injury connected with the job, it can come back to haunt the consumer in several unpleasant ways, the worst being exposure to lawsuits from injured or dead workers and their families.
Even the auto industry, which I listed as a commodity above, can have low price issues. Low price tags can signal that there are hidden defects in the vehicle. Flood and body damaged vehicles are the common reasons for a car to be bargain priced. On a side note, don’t believe Carfax reports. There are a number of ways to game this system.
As consumers, our challenge becomes finding the sweet spot between price and quality. Here are several thoughts:
Multiple Bids: On The Consumer Team our weekly mantra is ‘get a second opinion’. On big purchases it’s advisable to get more than 2 bids.
Ask Questions: Challenge your low bid contractor to show you proof of insurance and referrals from the last 30 days. Never simply take the referral sheet they give you. They’re simply not reliable and oftentimes not current.
BBB: Forget Angie’s List and Yelp because they can be gamed. The Better Business Bureau is the best way to see if consumers are mad at a company you are considering.
Brick & Mortar is Good: Call me old fashioned, but I like companies that have a physical location in their community. “Chuck in a Truck” and “Pete in a Pick up” can disappear easily.
Become an Expert: Before putting installing wood flooring in my home, I attempted to learn about both the art and science of hardwood floors. As I really learned about the materials and labor issues in the field, I was much more able to understand the quality of the companies giving me bids. It also made me value, much more, the quality I was receiving from a middle of the pack bid that I eventually selected.
Don’t Be Afraid to “Pay for Excellence”: I learned this lesson over 15 years ago when shopping for wood flooring for a new home. As a result of getting 4 bids, I was able to learn about the important factors to consider relative to high-end hardwood floors with a plywood subfloor. Even though I had several aggressive ‘low bids’ for the project, I selected the second highest bid because of the company’s reputation in the marketplace. The floors turned out great and continue to be one of the best features of my home.
Be Smart With Money: I don’t like companies that require me to pay for supplies up front. If they don’t have enough nails and glue to start the job, there’s something wrong. I also only release money in stages of completion during the job. And I always leave at least 20% at the end for final inspection and approval of the job. In some cases, paying by credit card can offer consumers an additional layer of protection because contractors can be pursued through the credit card company.
The expression “If something seems to good to be true, it usually is” is very appropriate for low bids. Keep both hands on your wallet and ask questions and you won’t be disappointed.
Editor’s Note: The Consumer Team with Pete Thomson is broadcast Saturdays from 5-7 PM Central on 1080 KRLD Radio. The Consumer Team combines interviews with leading consumer advocacy journalists with information on ‘best in class’ businesses from North Texas. The Consumer Team is produced by McQ Media, Dallas, Texas