Our place is too small, and so about a year ago, my husband and I decided to put in an addition. Nothing fancy, just a 10x12 room so he has a place to work and a 5x8 bathroom with a tub, but no shower. Like every standard homeowner, we called three remodelers: two of them I knew personally and one was a referral from a friend.
I am no stranger to this industry and expected the bids to be high, but it wasn’t the prices that surprised me. It was the variance. Granted, these were fairly casual estimates—there was no design agreement or anything—but the difference between the lowest bid and the highest one was $170K, more than half the total project price.
Both of us were left anxious and confused.
Was the highest bidder ripping us off? Was the lowest one pulling a bait-and-switch? Should we hire the middle one because, well, he was in the middle?
We ended up doing nothing and becoming ever more cramped in our tiny place. Fast forward to today. We sold some investments to free up cash, and are once again planning the project, expanded now to encompass a new garage and ADU.
The difference between the lowest bid and the highest one was $170K, more than half the total project price.
My point in telling you all of that is this: Most areas of the country are facing a softening market. There’s a variety of reasons for the slowdown, but inflation is a big one.
In one recent study, 85% of respondents considering a remodel agreed that “Inflationary pricing right now puts supplies and labor costs out of reach on my budget.” Homeowners are anxious about the economy, and anxious people generally don’t want to spend money. Nor do people who feel uninformed.
So what’s the answer?
How does a remodeler help a homeowner get comfortable enough to make such a large purchase? First is to explain the reasoning behind the pricing. Inflation is widely publicized, but how that relates to material and labor costs is important. It’s helpful to present facts.
Industry expert Mark Richardson recommends reminding clients that prices never go down long-term. That helps clients feel they are making a good investment today and that waiting will only make it more expensive (This is exactly what’s happening to us).
In addition, I am a fan of transparency in estimates, and while this can be a contentious topic, I believe now is an especially good time to be open with homeowners regarding your numbers.
While the bids we received were fairly informal, in all three cases, the next step was investing in a design agreement. It would have helped our willingness to commit if we had been given more detail on the logic behind the figures we received. I certainly could have asked but didn’t want to feel pushy.
As my husband and I embark on our project for the second time, I remain mindful of two things: the remodeler’s need to maintain their margin, and my own need to be a good steward of our resources. We are entering a time of consumer anxiety.
The best way to counter that is with information. Homeowners who see their remodeler as a trusted partner make the best clients.