What would you do if you were me?

dragon1952

To try and summarize this quickly. We had a house built with a construction loan. The builder agreed to an amount and I added a $20K contingency amount to the loan for extras. There were some concessions made during construction that saved him some money. We added extras. Some he specifically priced and said they would have to come out of the contingency, some he didn't. We mentioned several times how some of the concessions should cover some of the extras and he agreed. By agreed I mean, saying ' well, yeah..' nodding his head with a thoughtful look on his face. Bottom line, the loan closes, everyone gets paid. 5 weeks later he comes up with an itemization of the extras and a balance due of $7K and asks if we think we can work something out.
The guy is not trying to be dis-honest, he's a great guy and does quality work. He does most of the work by himself with a 3 man crew. I don't think he is used to working with construction loans and banks. He flies by the seat of his pants and does his own haphazard accounting. This is a very small town and I think people just tend to trust each other. He knows I'm not legally obligated and when I stated my case he just kind of goes, 'well, I guess i should've kept better track'. The problem is, he does have to maintain my house as things pop up. It is his fault for not keeping track. I know he's got a lot of bills as he's trying to build his own house in between jobs and he's juggling money. It took him so long to build mine that it cost me an extra $8K in interest on the construction loan. I don't owe him crap, but he did build us a beautiful house with a lot of attention to detail. I know he did a way above average job. I probably shouldn't, but I feel bad about the situation. What does anyone else think?

nadams

go half? It really depends on if _you_ can spare the money. if you go half, it shows you're not a complete ****, but you're also not a pushover for jobs in the future.

There's very few contractors out there anymore with an eye on detail and quality. I feel that they should be adequately compensated for their expertise. I hate housing companies that are out to throw up as many houses as possible as quickly as possible. It makes it worse when they're stick-built, because they're not done in controlled circumstances at a factory!

dragon1952

Actually he left the balance due paper on the counter about a week ago without saying a word. We've had a week to talk about it. First we were shocked, then mad. Then we figured, well he's not actually going to ask for it. He knows the loan closed. Maybe he's just showing us that we got a good deal and he screwed up. Then you try and think if you actually signed anything at some point that would allow him to collect it. Then I'm checking out the lien laws and freakin' worrying about it.
So he comes out to build this bench seat for us and as he's working I ask if he's figured up the cost yet, and he goes 'well did you see the balance sheet I left..I figured I could just add it too that.' 'Did you have a chance to look at it? I was hoping we could work something out.' And then he's like, 'oh well...I guess I better be more careful next time.' And he's still out there working on the bench and smiling as we speak.
But yeah, I thought of maybe splitting the difference.

opus

Dragon, Did you keep track off the extra's and the concessions? Is his number legitimate?

dragon1952

You know, I really don't know how much he actually saved on the concessions. I know pretty much what the extras were but I have no idea what they cost him. We'd almost be willing to sit down and discuss it with him but, like I said, he's so disorganized I don't know if I could trust his accounting.

opus

Well you really don't have to "trust" his accounting. But you may get a better feel as to whether or not his numbers are fair. you said that he is a nice guy and does good work, it would seem that this is the kind of person that you can deal with. Maybe when he see's your side of the equation that he will change his mind(could happen).

shack

If he did the work and can give you a good accounting of EVERYTHING...including the items within the contingency...I would say pay the man. If he did the work, he should get paid. However...I would want a good, acurate itemization...not a guess. I always stress the importance of formal Change Orders when one builds a home because they help to avoid these situations. If he can't prove the amount then it's your call. IF I was convinced it was due, my conscience would not let me stiff him, regardless of what I was legally obligated to do. Likewise If I didn't think I owed it I wouldn't pay unless he could prove me wrong. Maybe the 50/50 is the way to go. Tough call.

wizzy

^ +1

dkg999

This is an example of why every change in the plan should be documented by a running change order. This way each change is documented and the impact/costs to the builder or buyer can be documented. If you made concessions (ie changes) that resulted in cost savings, then those savings could of been estimated and noted as a result of that change.

This type of scenario is common with small builders/remodelers and one of the main reasons they don't do well financially. In your case neither you or the builder really have any record to go on to see if the claim is legit. In your favor is the fact that there is usually (and I would guess always) a date set by the bank that all bills/claims must be submitted by.

Do you plan to have any other construction done, ie garage, out-building, etc? You might work out a way to reimburse him for any costs you feel are fair when you have him do the work for those. Tough situation, and no you really don't owe him anything as he didn't submit his claims on time or accurately.

dorokusai

I would show up to formal discussions with the contractor, naked.....problem solved.

dragon1952

Thanks Mark...I knew I could count on you for some stellar advice. If your tubes weren't already in the mail I would have to have included a bonus for that :rolleyes:

daboyz

My question is do you find what was done to be reasonable for the price? Is what you have in your home as the market in your area supports for his price? If so, I would work out a payment, 50/50 sounds reasonable. I'm not going to beat a dead horse on the importance of itemization because it seems we are past that.

PolkThug

Contractors are just like hookers, if you kill them, you don't have to pay.

dkg999

I'm telling my employees back in IA if a guy named PThuggy from KC shows up in a hot Mustang, don't do any work for him :eek:

dragon1952

daboyz wrote: »

My question is do you find what was done to be reasonable for the price? Is what you have in your home as the market in your area supports for his price? If so, I would work out a payment, 50/50 sounds reasonable. I'm not going to beat a dead horse on the importance of itemization because it seems we are past that.

I think he did it for a lot less than a big builder...maybe even up to $75K less. I don't know. The first assumption you have to make is, is his accounting accurate?
Based on the feedback he gave me during construction I still had $8K left in the contingency. You can't keep your own secret tab and then say, oh gee you went over, pay me. I don't agree that we went over based on the verbal and non-verbal feedback I got. If he could show me I might listen but I don't think he can.
Secondly, I am assuming my character read of him is correct. Maybe it's not. Some of these people up here see $$$ when us Californians show up. They think we all just made a fortune off of our properties. I think he's in a little difficulty right now. He's trying to get his house completed so that he can get it refinanced and get equity out. I think he's been juggling money for the past year and a half.
Those types of things make me want to say screw it. But then what if it is all genuine? I've got to continue to deal with this guy. Do I blow him off? And if I do does he blow me off? It might be worth it to fork over some cash just to stay on good terms but then I fell like I got blackmailed or something. I don't have thousands to just give away for free. I'm screwed in a way either way. I tell you what though, I will never, ever do this kind of project again. It's not worth all the hassle.

schwarcw

Be open, and considerate. Tell him you want to be fair and pay him his due. However, you would like to better understand how the contingency was drawn down with changes during construction, and validate the $7K of itemized charges. If you believe the $7K is legitimate, work out a plan. Good contractors are hard to come by. Try to do the right thing and treat people like you would want to be treated in the same circumstance.

dragon1952

Man, I'd hate to get this hopes up and then smash them again. "OK , I'm willing to listen...bring you're figures over and we'll go over them and talk about it" and then, nah, I still don't think I owe you ****.

SKsolutions

One change-order with a larger outfit would run a couple of grand before anyone picked up a pen. The extras are where it's at with respect to margin. That's the benefit to using a smaller and more nimble craftsman. It sounds like you got a good product, and you can also appreciate it. I frankly don't know what I'd do, but I'd sit down with him, have a cup a coffee, and figure it out. He sounds like he's got a better head for building,. than for business, which is better than the other way around.

dragon1952

OK...thanks guys. Some good input. I need to sleep on this. If he hadn't cost me all that money in interest I'd be a little more understanding for sure though. At this point I'm more worried about him being there in the future to back his work than anything.

nms

I second what these guys are saying. Tell him to bring all the figures he's got and you guys will talk it over, but mention explicitly that you aren't promising anything.

It sounds like he's worth some extra money to stay on good terms with him, especially if he's supposed to maintain the house.

mule

I am in the business and I see it from both sides.

On one extreme, I worked on a job that the home owner thought we were his personal slaves, "Hey while you are on the roof can you clean my gutters?" "do you mind taking my trash down the driveway?" That kind of stuff, hell we don't care, its t&m at that point. When he got the bill for extras and it was roughly $85,000.00 he ****, but it was all documented and he lost the court case.

But in your case, it is a very common situation. We as contractors tend to be people that like to work, we like to build something with pride and at the end of the day or week you look and it and know its there for a long time for someone to enjoy, but sitting in front of a computer documenting a change order is just tiresome with no real enjoyment. Yeah we know we should do it and every job I do I swear I will get more organized so I don't end up in the situation you described above. Unfortunately its just the nature of the type of person that takes up the trades, if we were inclined to do paper work we would be lawyers or accountants and not craftsmen. And as someone stated above, the guys that do run their businesses as though they are a law firm have a much higher overhead and only about 5% of the population could afford to hire them.

Good luck, I'm sure it will work out ok, the level head allways prevails and I know from experience that a calm discussion between adults has a way of solving what sometimes seems to be an insurmountable problem.

MillerLiteScott

I am in the business also. You are in a tough spot. I can see both sides and I tend to side with the owner in this situation considering your additional interest cost due to the project running longer than scheduled. On the same hand his cost were also increased by the project running longer but that is his own fault.
98%-99% of the time construction takes longer and cost more than the original schedule and budget.

I have been keeping much better records of extra work because as you found out it adds up in the end. He should have keep better records, documented the changes and had you sign a change order with the associated cost. That way there are no surprises and/or assumption of payment. That being said it is hard for a hands on guy to estimate and prepare all the change orders in a timely manner while still keeping the job moving and the employee's busy.

I would certainly sit down with the guy and lay it all out on the table. You do not have any real obligations to pay him but a small concession may go a long way for anything down the road. I have found it is always better to bring it to closure than to let it drag on.

My 2 cents

Scott

heiney9

As a practical matter once the property closes, legally it's a done deal. If he wasn't properly represented at the closing and didn't address the issue prior to closing you are not liable for his miscalculation.

Now morally you have to make that call. If you really feel he is owed this amount and he has become an acquaintance you can certainly work something out if you feel you need to sleep at night. The excuse of him not working with construction loans, banks or escrow just doesn't fly. He shouldn't be in new construction if he doesn't know the ropes.

If it were me I'd try and figure out why he didn't address this at closing. It's a harsh learning experience for him but I bet it won't happen to him again. He has to take some responsibility for the mistake or his ignorance. If he were dealing with anyone but an individual he'd be S.O.L.

If it were me (of course I don't know all the details) I'd say he's S.O.L.

H9

P.s. I've been in the Title Insurance business for about 10 years. All negotiations are done prior to the final closing; many times at the closing table during the closing.

heiney9

When you are doing new construction and a bank or other type of financing is involved there is a certain protocol involved. The bank dictates certain procedures which are followed by a title company. Mostly having to do with the disbursement of the money among other things

My big question is why did he sign final lien waivers at or prior to closing if he knew there might have been some pending charges? Even if he wasn't sure of the final $ amount you both could have negotiated to set a certain amount in escrow to pay final bills after the closing.

I personally wouldn't do business with someone who doesn't keep good records and "flies by the seat of his pants". For new construction projects this is not a good way to do business. There are to many variables and other entities involved.

He dropped the ball and it sounds like this is common practice for him and his way of running his business. A handyman business might be able to be run like he does, but not a new construction business, he'll get eaten alive with mistakes and carelessness like this.

H9

dragon1952

Appreciate the additional response guys. Some really good insight here.
Just to elaborate, this guy does do new construction but remodels are his prime business. I'd say 90% of the stuff he does is semi-custom to custom. He's slow and he doesn't have a large crew. His time estimates were so far off it's ridiculous. It was always.."about 6 or 8 more weeks." In fact, his cost estimates went up maybe 4 or 5 times and ended up almost $100K more before ground broke. We did have a difficult lot and anal city government. It took him 16 mos from the time he broke ground, although in the beginning there was terrible weather. We ended up paying around $155 per sq ft I guess, not including what we paid for the land a few years ago. If you include that it comes to around $180 per sq ft. That's including financing. We ended up with a little over $100K in equity. I have no idea if that was a deal or if it was just average. That might play a part in my decision if I had a better idea.

venomclan

Time is money. He took longer than expected and it cost you more $ at the end of the day for the extra mortgage payments. If anything, deduct those from his bill. If you feel that he went above and beyond, worked overtime himself to make it right for you, then work something out. If he did not make the deadlines because he was taking his time, not wanting to pay his workers overtime, or was juggling you with another job, forget about it. It is his problem for being unorganized.

At most, perhaps work out an upgrade or extra project he can complete on his own for you. That way he does not have to payone else, and only his time is used. On full completion, pay him.
Venom