This month, the Remodeler’s Exchange features two remodeling professionals who have extensive experience in dealing with natural-disaster emergency repair and insurance restoration work. Professional Remodeler’s Tom Swartz spoke with David Caputo and John Quaregna about how to prepare your business for storm work and how to handle clients following a natural disaster.
TOM SWARTZ: How does your company prepare for natural disasters?
DAVID CAPUTO: When we know there is a large storm coming, we get materials ready in case we are called upon to assist clients and local homeowners. We own a couple of portable backup generators, which have come in handy following past storms. We also keep in supply any materials that might be necessary, including plywood and tarps for any windblown damage that might occur to homes.
JOHN QUAREGNA: Preparing for a storm is the hard part. We just had Hurricane Sandy come through two years ago. We own a home along the Jersey Shore and we know a lot of people down there. In preparation for the storm, homeowners placed their personal items in sheds, buckled everything down, and hoped the winds wouldn’t be too strong. No one expected the storm would bring in water at heights we’ve never seen before. The water was 4-feet high in the middle of the street. Even as well prepared as we were as homeowners, it didn’t work out. After the storm, you go into emergency services mode, make sure everyone is safe, get in touch with the insurance companies and have them visit your home, look at the problems, start making estimates, and eventually get people back into their homes. Hurricane Sandy caused such destruction to the Jersey Shore that even though we are two years removed from the storm, we are still knocking houses down and still starting insurance restoration jobs. Some people are back in their homes, but most people are not.
This month features:
David Caputo, CR, Partner
G&L and Sons Renovations LLC, Cedar Grove, N.J.
Founded in 1985, G&L and Sons is a full-service remodeling firm completing a wide variety of jobs as well as insurance restoration work. The firm has four full-time employees and bills approximately $850,000 in annual sales.
John Quaregna, CR, President
Jay-Cue Construction, North Bergen, N.J.
Founded in 1976, Jay-Cue Construction is a full-service remodeling firm specializing in residential and commercial projects. The firm has eight full-time employees and a volume that averages $2 million annually.
SWARTZ: Do you deal with the client who has damage to their home or with the insurance company adjusters?
CAPUTO: In our company we typically deal with the homeowner, and we don’t deal with the adjusters. If we need to we will speak with the adjusters, but the way our business is set up we work directly with the client. We are not set up to deal with the volume of work that comes with working directly with an insurance adjuster.
QUAREGNA: It depends. If it is one of our clients, we deal directly with them and handle the project from start to finish. If I get a call from someone that already has an insurance adjuster, I will work with them, but sometimes it is more difficult because the adjuster is also recommending other contractors. You may end up in a bidding war. Your best bet is an existing customer or a recommendation because I would rather deal with the homeowners. If I am dealing with an insurance adjuster, and I feel they are not being fair or I cannot get the number I want, then I will bring in a public adjuster.
SWARTZ: Can you define the public adjuster and their role in a disaster situation?
QUAREGNA: The public adjuster is someone that works for the homeowner, although insurance companies have their own adjusters. If it is a major storm such as Hurricane Sandy where hundreds of homes were damaged, outside independent adjusters are called in to work for the insurance companies. A public adjuster does not do construction and they do not have a direct affiliation with any insurance company. They assess the damage, assign a number to the damage, and help the homeowner work with the insurance company to get the proper number to complete the construction successfully. It is the same when it comes to the home’s contents, the public adjuster will create an inventory list for the homeowner to replace every single household item that was destroyed to get the homeowner every dime they deserve.
SWARTZ: Are you required to give individual estimates on insurance repairs, and how does that work?
QUAREGNA: If the homeowner calls, I will give them an estimate based upon our evaluation. If they have an insurance adjuster, they use Xactimate that will list every item. If you already have the job, then you must do the breakdown. If you are just bidding the job and not getting into that specific of detail, I let the insurance company use their detailed estimate. The insurance companies want you to do their work for them, but it is a very timely process.
CAPUTO: When we estimate, we are doing that breakdown initially. I know that 95 percent of the time, the insurance companies have asked for the detailed breakdown. We will provide the insurance companies the breakdown of every item they are looking for in linear feet or square foot—however it needs to be defined. This way the insurance companies have this information and they know what it is going to cost to complete the work. It is easy for me using my estimating program to provide that level of detail, so I can just print out the breakdown and give it to the insurance companies.
SWARTZ: What is the estimating program you use for this work?
CAPUTO: It is an off-the-shelf estimating program. We use Sage Contractor 100 estimating software that gives us the ability to provide detailed breakdowns.
QUAREGNA: We used Xactimate but we no longer use it as much because we have an outside company doing the estimating work on major insurance claims. Xactimate is used by most companies today.
SWARTZ: How are you able to make a profit given the strict insurance pricing guidelines?
QUAREGNA: First, you can change the numbers in Xactimate to whatever you need; it doesn’t have to be the numbers in the program. If an insurance company says it’s going to pay 68 cents per square foot for painting a wall, and you’re going to paint an entire house, the 68-cent estimate might work; but if you are only doing one wall, it is not going to work. We adjust the numbers as we go. You can adjust the pricing because pricing in the Northeast is different than other areas of the country; we have pricing that is higher than most. Insurance adjusters working on a major storm such as Hurricane Sandy were coming from the Midwest and South; therefore, their numbers were completely off. When you list all of the subcontractors that are coming in to do work, you can list your estimate and also add additional estimates for price adjustments. The insurance companies will ask about the additional costs, but it’s because the labor is more expensive. You have to create the proper mark-up somewhere in the estimate.
SWARTZ: How do you “man-up” or increase staff size to handle an influx of storm-related work?
CAPUTO: One of things we’ve been doing over the years is building up our trade contractor resources. If we are in need of additional resources such as framers, plumbers, or electricians, we have the ability to go to multiple vendors where we can get additional labor to help us with the work. It’s very important to build these relationships before there is a disaster because when the disaster hits, you are not going to find anyone readily available. I know that for work being done on the Jersey Shore, there are quite a few contractors doing work and they are not as reputable as other contractors. We are hearing stories that contractors are walking off the job because they’ve got too much work; taking people’s money and not finishing the work; they walk away from a job to start another job—things like that are still happening two years after the storm. Therefore, it is important to have your resources available prior to any disasters.
QUAREGNA: We have a large number of people we can rely on to handle an increased workload. We have subcontractors that can do more work in the areas of masonry, electrical, and plumbing. Getting full-time, steady workers is probably our biggest problem right now. We are very busy and we are looking for two installers that can handle work full-time. It’s hard to find these people right now.
SWARTZ: What about the fly-by-night contractors that feast off the misfortunes of homeowners. How do you deal with these people?
QUAREGNA: When I give a price and someone says they were given a price that was half as much, I know this is not my type of customer. I know this is someone that is looking to put money in their pocket and not use the money for a remodeling project. I typically walk away from these people. As far as fly-by-night contractors and the work they do, they make the industry look bad. The homeowners need to be educated as well. Homeowners can get 15 different prices for work that is similar, and then there is one bid that is much, much less. The homeowner chooses the lesser bid and ends up getting ripped off. That is no surprise but that is the problem today. There are licensed and trained contractors that homeowners need to hire. Hire the reputable contractor. On the Jersey Shore, there are so many homeowners that are still getting ripped off, and it’s a shame. The National Remodeling Foundation recently put together a brochure on mold and how to hire a reputable contractor; we put it online and homeowners are reading it in order to understand how to hire the right contractor.
CAPUTO: I agree with John’s comments 100 percent. We also need to try and educate the homeowner about fly-by-night contractors that are coming in with lower prices and suddenly hitting the homeowner up with change orders throughout the project because something was not included. These contractors have not been preparing detailed estimates for their customers. It may just be a paragraph saying what work is to be completed along with a price. The estimates do not spell out any of the work and once the project starts, the contractor is saying specific work is not included and it will be more money to complete the work. It’s important to educate the customers so they know to compare estimates and make sure every detail is included in the estimates.
SWARTZ: What do you do about existing customers during a storm-related emergency, and how do you explain why their project may be delayed?
CAPUTO: Because insurance restoration work takes time, you are not going to go in and start the work immediately after the storm. You have to provide detailed estimates to the insurance companies, and it takes them time to respond. We are not dropping current projects to handle insurance work, but if it is emergency work we do explain to the homeowner that is currently under contract for work that we need to take time off to handle the emergency work. We will not step away from existing work for too long, and we ensure the existing customers we will return. We also explain to the insurance restoration project customer that we do have other projects ahead of their work. We understand they want the work done as quickly as possible, but we do have to take the insurance restoration project and put it into the project schedule; therefore, we won’t be able to start immediately.
QUAREGNA: The biggest concern is that remodelers don’t know how to say “no.” We receive a call about a big job that needs to be done right away, and you don’t want to say you’re too busy so you come down to look at the job. Now, we interview the homeowner on the phone about what needs to be done, what other companies have visited the jobsite, and eventually we will evaluate exactly what the project needs in terms of time and labor. If they need an emergency repair, we will be onsite immediately. We do have a large backlog, and once a client signs on for a project they go into the rotation. It could be three-to-five weeks before the work starts once they get into the rotation. Homeowners will tell you another contractor can start tomorrow. I usually tell the homeowner, “Good luck with the project,” if they chose a contractor that can start immediately. These are the contractors that have the cheapest price, and it results in the problems we discussed earlier. We are providing a price for a complete job, and there should not be any extra costs unless the homeowner makes a change order. In New Jersey, we have to provide an approximate start and completion date. We have to tell the homeowner we will start and finish on specific dates. The completion date can be extended and the start date can be moved as long as it is mutually agreed upon by contractor and homeowner. You do have to provide a specific start date in the contract. If you don’t start on that specific date, the homeowner can take you to court; of course, there are exceptions such as weather.
SWARTZ: What advice would you give to remodelers to ensure their business is storm-ready?
CAPUTO: One of the first things is to market your business as being capable of handling emergency repairs or insurance restoration work. Update and post information on your website about the types of insurance restoration work you could do for customers. A lot of homeowners are using the Internet to find remodelers that do insurance restoration work. One of our biggest lead sources right now is our website. You also want to be able to provide detailed estimates and have systems in place to get detailed pricing to customers.
QUAREGNA: It depends on if they want to get into complete restoration, whether it is fire or flood, and they have to be able to provide emergency services. The first step in getting these jobs is by being the first person onsite following an event. We do a lot of board-up and emergency service work in many towns. If it is an emergency and the homeowner doesn’t know who to call, the town will call my company and we will go in and do the work. All of my trucks are loaded with everything we need; our shop is loaded with plywood and tarps so we are already prepared. For someone who wants to get into this segment of the business, be prepared to get a call at 3 a.m. to board-up 40 windows and tarp a roof. You cannot wait until 7 a.m. to do the work, you need to be prepared and have everything in stock. You have to rely on your employees. We discuss what time they may need to go out and the pay scale for this work, so they are prepared to do this emergency work. If you get there too late, the first company that did the emergency work is going to put a bid in for the remainder of the work. They saw the project before it was boarded up, so they have the upper hand for the bid. Advertise that you can do emergency repair and insurance restoration work. Also, reach out to the local government and let them know you are available for this type of work 24 hours a day. Of all the board-up jobs we have done, we’ve probably landed more than 50 percent of the contracts to do the complete job. PR