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Jud Motsenbocker |
What happens to botched jobs? Who comes in to clean up someone else's mistakes? How do you charge for a job that's already been paid for? These are some of the questions that will be answered in today's discussion.
Read the complete discussion below or link to the podcast to listen to the conversation.
Jud: Today, our topic is "Taking Over Botched Jobs." I'd like each of you to give me an idea of what type of company you have, where you're located, number of employees, volume, etc. You want to go ahead, George?
George: Everyone calls me Geep. And that's Geep with a "G" instead of a "J." I'm in northwest Louisiana. I've been in my business 25 years and I'm third generation contractor. The bulk of what I've done my entire career is remodeling and property damage repair, but these days I do a little remodeling but mostly construction defect consulting as an expert to the court. That's pretty much what I do. At 55 years old and having worked my butt off, it kind of fits my lifestyle a little bit better than what we've done in the past, so botched jobs is right up my alley.
Jud: OK, that's good. Greg, how about you? You want to tell us a little bit about your company?
Greg: I'm Greg Antonioli, 16-year owner and founder, Out of the Woods Construction & Cabinetry in Arlington, Mass. We're 6 miles north of downtown Boston. Historically, we've been working in the suburbs, but we're doing more and more work in the city. We've got nine staff in the field and five in the office. We're a design/build firm.
Jud: Greg, do you make a concerted effort to seek out some of these botched jobs, or do they happen to just fall into your lap?
Greg: They fall into our lap. At the very least, I'm consulted on a lot of things. I've become the go-to-guy for advice. Even if they haven't hired us, I have a reputation for being a nice guy. It's our reputation; for value, you've got to call Greg and he'll help you out even if you don't hire him to help you out.
Jud: In the process, Greg, do you do any professional witness work?
Greg: I have, I think, twice.
Jud: Do you prefer not to do that?
Greg: I haven't found it to be a lucrative use of my time. I do see it is my duty to the industry.
Jud: Geep, I understand that you're doing more of that court work. Did you start out looking for it?
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George "Geep" Moore Jr. |
Geep: No. It came to me because of my background. I'm third-generation. I have a degree in construction engineering, and I have six designations now. I've gotten a history and reputation of being able to fix whatever someone else can screw up. Economically, it might be expensive, but I've yet to fail to go in and figure out what the problem was and how to fix it. In fact, we don't only do that from a construction defect standpoint and testify in court, we actually go in and fix the problems. We have an extremely high success rate with that. I have about three contractors who I work with several times a year. They run into problems and really don't know where to go with them. I go out and charge them a consulting fee, show them where to go with it and how to correct it and move forward with it. I have several others who just call me that are in the home builder association. They just bounce stuff off of me. It's been a great change of pace after running my company for 20 plus years and my dad's company before that. It just works very well with my lifestyle.
Jud: Did someone else take your company over?
Geep: No. My company is still intact. We do a lot of structural drawing here. In the past few weeks, my equipment has been out full time for about four weeks due to some flooding in the area. An 8-inch rainfall in 30 minutes! That'll do it every time! I've looked at several of those for other people just to tell them how to approach it, because we're out of equipment, so some of them had to wait, and that sort of thing.
Jud: Greg, are there certain elements in this type of work that make some of it easier than others? Are there some that you would even walk away from and wouldn't get involved in?
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Greg Antonioli |
Greg: Absolutely. I'd say with the majority of the ones that come to us, unfortunately, all too often the reason and responsibility for getting into a botched job is not thrown on the homeowner's back as much as the contractor's. The homeowners made some bad decisions. They convince themselves that they can do an $80,000 project for $40,000. By the time they come to us, they've spent $30,000 to get $20,000 worth and the place is half gutted. And, they didn't have the money to begin with to do the entire project, let alone now having to pay twice to do it. I'd say the majority of the time it's not economically feasible now for our company to get involved in it. In that case, I end up coaching the people through hiring and try to refer them to some small guys with no overhead to go in and piece the things back together. Every once in a while, though, there is that client who still made some bad decisions, but luckily they still have enough money to bail themselves out. They'll spend 20 percent over what they thought they were going to spend to begin with to actually get it all fixed. Rarely are we involved where insurance will bail them out. It's usually their personal finances that they're digging up to bail themselves out.
Jud: Geep, how about you? Are there any particular ones that make it easier than others?
Geep: Every one of these jobs has certain challenges and expectations. I tell my clients right up front that I have a protocol to go through: this is what it will take to fix your project and this is what it will cost. When you sign a contract, you're going to sign a hold-harmless clause. I didn't create this situation. I'm going to do the very best I can do to come in and fix it. For the most part, we've been almost 100 percent successful at that. However, in the outside chance that this doesn't work, it's the best shot I can give you, and it's the best chance you've got to clear up the problems that you have. That being said, I can't be held liable for something that I didn't create. You can only do so much. From an economic basis, they may not be able to take it back. You tackle everything in a priority basis and do the things that seem to be affecting the project the most. Things that are affecting it the least may just be cosmetic in nature, and they'd have to live with that or come up with the money to do it. Of course, when they want an $80,000 job for $40,000, I call that a champagne taste on a beer budget. That's how we approach it. Most of the time when I get involved with this stuff, I'm called in as a defect consultant. We do documentations with pictures and reports. My documentation is very explicit and very detailed with the pictures, and everything ties one to the other. We go in with a methodology. We show what the problem is, what's causing the problem, the effects the problems have caused, and here's the protocol it will take to correct the problem. And finally, the cost to correct the problem. They can decide how to go about it. We suggest that they use this person or that person, because they're smaller and don't have quite the overhead that we have. You might hire these individuals to do parts of the job and piecemeal it in yourself.
Greg: There is one big differentiating factor that I see; there are two types of people coming to us. There are the ones who just come to us out of the blue. Then there are the ones who may have consulted us but have not hired us. There is a step up in the ones who have consulted us and came back and said, "You were right. We made a mistake, and we now see the value in your system." They're already sold, and they're more humble coming forward.
Geep: Overall, what makes the project easy or hard as far as correcting it is the client and their economic means. Also, being able to make them listen to what you've got to say and heed your advice, and let you do what you do best. That is, to correct their situation without them getting too involved other than paying for it.
Jud: Going back to the $40,000 project that costs $80,000, it was because the person who talked to them originally sold them $40,000 when it was an $80,000 project?
Greg: Yes. You read in the news about all the bad contractors out there. But, the homeowners have to "fess up" to their side and the responsibility they share in the situation. Some of them brag about what a jerk their contractor was. There are two sides to every story. If you think it, say it! I will confront the homeowner: You didn't have a feeling in the beginning that was too good to be true? What would you have done differently? "Well, we didn't do anything". If they're absolving themselves of any responsibility for any of it, you know that they don't listen and won't differ to your judgment when you have to give it to them.
Geep: If it's an $80,000 job, you tell them it's an $80,000 job. If you or a contractor out there who is trying to make his living and trying to please his customers and take some risks, he's going to listen to the guy say, "I really want this project, but all I've got is $40,000. Is there any way you can do it?" Yes, we can do it, but we're going to have to cut here, cut there. All along the way, the guy is trying to get the job done for $40,000, and he knows he's having to make cuts. He's making these cuts probably with some admissible liability from the client. Many times, they've already told the client they can't do this, or it's really not going to work the way you want it. They say, "This is what I want, and I have the $40,000 to spend". They look at it as a $40,000 job, not as a $40,000 liability, which is how they should look at it!
Jud: Geep, on these projects, do you normally only work from the top of the foundation up, or do you get involved in stuff underground?
Geep: In my area, we have almost no basements. That being said, I looked at one that flooded last week. We do foundation work as well. I have two consulting jobs right now that are probably in excess of three to four years old that are just now going through serious depositions with court work on them. These foundations have moved. It's been our responsibility to determine what's caused that movement. You'd be surprised what we've found out. We opened a foundation and the drill pier shafts underneath had as much as 1½ inches of dirt over the top of the shaft between it and the beam. That's just absolutely not allowable. The concrete pier footing has got to be in contact with the beam. If these homes are cracking and the brick veneers are cracking and showing signs of stress and movement and contraction/expansion, we're trying to figure out what the cause is, and what the effects from the cause are. If that is against the builder or previous homeowner, and everyone brings in their experts, it becomes a war of experts — his opinion against your opinion. It comes down to who has the most qualified opinion and who the court is going to believe. It's not necessarily all based on how many degrees or certifications you have; it's more about your experience and what you've looked at. We get involved in just about any aspect of a problem that you can have.
Jud: Greg, are you working below ground sometimes on these projects?
Greg: The botched ones we've been involved with have not included a lot of below-ground.
Jud: Greg, do you have a specific contract that you work on in these jobs, or do you just use a normal contract that you have?
Greg: We try as best as possible to inflict our normal system regardless of the situation. We tell the homeowner that the reason they got into this is because you didn't follow our system or whatever. We may tweak certain protocol here or there. I think it is more difficult for a design/build firm to take over a botched job. We're used to a multi-month-long planning process before we go into ground. Usually, in these cases there is a sense of urgency when they haven't been able to cook a meal for six months already. They're looking for someone who can jump on this within the next few weeks, if not immediately. It all depends on the level of empathy or sympathy we have, and backlog. I abhor doing time and material work. One we did recently just happened to be a partner of a very close friend of mine. I knew that the money was there; even so, we didn't make our margins. There was too much involved. And the PATH guy was responsible for supplying cabinets, and there was a gray area there. Luckily, it was the dead of winter and we had some people to work there. It was better that we took it.
Jud: Geep, have you got a special contract?
Geep: We use our standard contract. I have an additional indemnification hold-harmless clause, which will explain what we'll do. These problems were caused by a previous contractor or a previous development within your home. We are going to make an attempt through our process to correct it. We will do everything in our capability to correct your problem. We have to be indemnified and held harmless for any results that we're not able to correct or results from what we do that we have no control over, because we could not change the overall design. You change things like flashings and jointage and drains. You put sil..? pans on the doors and windows to stop the leaking. You tighten up this and tighten up that. Sometimes your very best effort just isn't good enough. It's so botched up that short of tearing right back down to it's core, you just can't get the results you need. I have a client here, I did five projects for this lady, and each time she said I was too high and she had someone else do it. Four times she had me come back, paid me approximately 50 percent of the original contract to fix it. The fifth time, she said "this is too high," but each time it's cost me more than you were going to charge me originally. Just come do it.
Jud: Geep, when you do those contracts, would you end up with two contracts: one for your court work and another one for the work itself?Actually, I do. I have a fairly simple one-page contract for doing the consulting effort, and it explains what our charges are, our retainers and what we charge for, and what it's going to cost if we go to deposition and what it's goint to cost if we go to court. And then, if we come back and do the remodeling, we go in to a full-blown, five-page remodeling contract.
Jud: Greg, do you have two separate contracts?
Greg: I'd say the court thing — we've only done it a couple of times — so no, I haven't actually come up with a contract for that. I just invoice them hourly for my time as a consultant, still under the Out of the Woods banner. I realized that for us, at least in the Boston market, we are accustomed to it. Almost every one of our jobs is walking into a botched job, the age of our housing stock, and there's already been five other contractors in to just about every house over the 70-plus-year life of the house. We're consistently walking into old botches, we have a clause in all of our contracts which that states if we make a recommendation along the lines of fixing a structural defect or some safety issue, and bring it to the client's attention and they elect not to do that work, we have the right to walk off the job and terminate the contract. We're not going to be forced because of the homeowner's discretion of their lack of finances to perpetuate an unsafe or structurally defective situation.
Geep: We have a clause that states that if we find conditions that are not current with what we thought it was. Once we open up a wall and find that there's something totally out of whack — the plumbing, electrical, or framing aren't right — where we had no previous knowledge of, we have the right to charge for what it takes to bring it up to code. They have to understand that, and we make them understand that. We have the same problem: we have 70-, 80- and 90-year old homes. They've already been worked on numerous times before we ever got hold of them.
Jud: I don't think we had that concept when we put this topic together. Realistically, on the remodeling side we are walking into houses all the time, on every project, that has something wrong because they've been remodeled x number of times in the process. Almost every job we do is part of that!
Greg: In a normal contract as a normal cover up for a lot of the things we run into in the middle of a botched job.
Geep: I had my own project where I bought a house; it was going to be a simple re-do, to fix up and flip it. It would take $40,000. We got into it and ran into some problems that we just had to correct, because I'm a contractor and consultant. They would sue my butt off if I don't fix this. I closed it up and spent $90,000. It happens even to those of us who know what the possibilities are when you go in. The appearance of the home looked great. Now, everything's correct in this home.
Jud: Greg, can you think of one that was a really good job and made life considerably easier, even though it was botched somewhere along the line?
Greg: It really boils down to the personality of the client, which it does for every project. If they were sincerely duped and it wasn't their own stubbornness or lack of foresight that got them into the situation to begin with, and they're willing to defer to your judgment, obviously, it can be the greatest testimonial you'll ever generate. You were the "white knight," and they should have listened to you to begin with. I've had three offers, formally, from people who didn't hire us the first time around. They still offered, in the end, to be on our reference list. Even at the end of the job the client will still thank us for bailing them out, even if "it's still not what I wanted." They still have the means to borrow money or whatever to still achieve their original dream. In one situation, in the end, it was everything they wanted, and they were happy. They ended up getting the house of their dreams.
Jud: Geep, any good ones you want to tell us about? Any particular ones that went very well and the type you like to see when you walk in the door?
Geep: I like the challenge in what I do as far as going out to look at these problems and trying to figure out how to go about fixing them. I think Greg hit it on the head. It's the client that makes the difference. It doesn't matter how bad it starts. If you've got a client who is willing to work with you and they have the finances to fix it, it makes any job go well, because I can fix anyone's screw up; I haven't found a screw up I couldn't fix. The economics of fixing it is the biggest problem. Short of that, the client is what makes all the difference. Almost every time we do these things our clients think that we walk on water. I tell them no, we just know where the rocks are and we know where to step and which direction to take. I had a job that had bad EIFS work done on a brand new home. They went in and replaced all this EIFS work to the tune of $90,000. It's a big home at a local lake here. Five and a half years after this — after it was inspected by a person who was supposed to know about flashings and such — we go out and they've still got a problem. They've got wood that's rotted again, showing moisture intrusion into the house, and they don't know what it is. I looked in there. It was a little high off the ground for me to get up there with what's on the truck, and I would bring back some help and a bigger ladder. I was pretty sure that what we were going to find was that it is a dead-end flashing, and it was never turned out to direct the water back out on the roof rather than down on the wall. Sure enough that's what we found! About $40,000 later, we fixed the problem. I still see this gentleman pretty often, because he's now my urologist. He continually says something about this particular home — and that was four years ago. We've done several since then. We had one where the windows and doors had leaked. The people that put the windows and doors in claimed they put them in properly and they shouldn't have leaked, and it was the standard way to put them in. Standard way or not, they were leaking! I went back and put in a sill pan under these doors and windows. They haven't leaked since I put them in. We've had some extraordinary rains since we put those in over what we normally have. The people are very, very appreciative, and I continue to work with them. I really do like that portion of what we do. It is very rewarding.
Jud: On the good side, when you have the success, it's actually to support your company than what you tried to do in the beginning anyhow.
Geep: No question about it.
Jud: Let's go in the other direction. Realistically, can't we say that the biggest problem is if you get into a situation and they haven't got the money to do it the project is in trouble.
Geep: You can't fix it if they don't have the money to fix it. I have a saying, and my wife bought me a plaque to put in my office: "It is what it is!" And I can't change that. I can change it but it will take a certain protocol and certain methodology and a certain amount of money to fix it. If they're not willing to do this, there are certain aspects of all these botched jobs you have to complete to stop further damage. Beyond that, everything else may just be cosmetic. If they put a door unit in your home and put it in a little out of plumb and the trim doesn't quite fit; if the door still closes and shuts it off between two rooms and locks, it is functional. It won't cause further damage to the home, it just looks like heck. In that case it's just cosmetic. If that door was leaking, until you stop that door from leaking you haven't done anything. The primary thing is to stop the moisture infiltration. Once you've done that, if it still looks bad, that's just what it is unless they have the further finances to let you go ahead and continue to finish that.
Jud: Greg, any comments about dollars toward this stuff?
Greg: It's a non-starter. I'm just giving them some free advice and wrap it up in a couple of hours, gone out and taken a look, and said, "Here's a list of guys you should call. Here's the plumber, and you should make sure you call him. Here's the name of a mason, and here's what he should understand." I think where we've gotten caught in the past is trying to fix something that should have been completely torn out and replaced. We still get the warranty call afterwards: "We knew we should have ripped this out, we knew we shouldn't have Mickey-Moused with it". We end up crediting the money. We charge them for the Mickey-Mouse job and credit that against going back and doing the whole thing. We should have advised you better in the beginning. When you go to fix a patched job it's going to cost more money than what it would have cost to have done it right. Now you have to tear out all the botched work. Now you've got to deal with the damages and collateral things that the botched job has caused. Then, you've got to put the job back to where it should have been. There's no way that it will be done for anywhere close to what it should have cost before, unless you're able to salvage everything. That generally is just not possible. It's easier to tear it out and put the new door back in than it is to try and save the old door. You'll spend a lot less time. Time is a whole lot more expensive than the material.
Jud: You spend a lot of time and money trying to save them money.
Greg: Right!
Jud: Greg, do you have different markups when you get into those situations?
Greg: Maybe not a different actual markup, for more contingency built up.
Jud: Geep, is that about where you're at on that, too?
Geep: For sure! Of course, what we do — like on the last one we did which was extremely large in terms of money and effort — we had contingencies built in to take care of anything that might come up once we tear it out. Maybe there's something else going on here that we don't see. Our per-hour charge is that we have to charge for that. I'm not going to do a job for free. We'll compensate us on a time and material basis at the same rate that we would have charged had we had that completely included. I'll talk to a client over the phone, but if I'm going to their job and work, I'm going to charge them. Once we get through all that, if they want to fix the job, we'll start all over again on the second contract.
Jud: Greg, let me go back to that, because it's a good point. When he goes out there, they know they'll get charged. You made a comment a few minutes ago that, occasionally, you end up spending an hour or two giving advice. Do you ever get paid for that?
Greg: Yes. If they're not, as I say, part of the "inner circle" of Out of the Woods, usually if I'm doing something like that I'm doing it as a favor to one of my existing clients. Either a relative of theirs or somehow they're connected to the "inner circle." If someone calls me out of the blue, yes, I can come out and on a basis of an hour or something and take a look. If I can tell them now it might not make sense to hire our company, and we might not be the right company for it, I can point them in the right direction and only charge a little consultative fee to get them back on track. Once you're one of our clients, you're royalty. We are going to do things that we wouldn't do for the general populace.
Jud: Greg, you answered this question earlier, but let's emphasize it again. Do you do this work on time and material or do you do it by contract? You indicated that you're not a fan of time and material.
Greg: Sometimes in these situations that might be only answer. But we're still going to do some very realistic budgeting. One we did recently had a cap: here's what we're going to attack, and we think it's going to run upward of $35,000. It wasn't a fixed cap. It was an agreement that, as things start to inch up that way, we're going to be discussing whether they want us to stop now — we're getting close to the $35,000. This is how far we've gotten; do we need to prioritize because we came up with this issue and this issue that we hadn't foreseen. There is a constant discussion about budget and where we stand. Do you want us to stop now? In a normal remodeling project, the budget sticks; we've done research and poked holes in walls if need be ahead of time and tried to eliminate the unknowns. It's the constant dialogue — making sure things don't build up for a week or two and then have a rude awakening.
Jud: Communication, it goes back to that doesn't it? Geep, T&M or contract?
Geep: We always do a contract. For the most part, we don't know exactly what we have until we get into it. I have a pretty good idea of what we're getting into. We give them some budgetary numbers to work with, so they know where they're going. For the most part, we do the thing on a T&M. I do T&M a little different than most people. When I get done, I'm going to make a markup that I can live with. If I can't, I'm just not going to be able to do the work. I can sit at home in air conditioning a whole lot easier that I can sit out here breaking even on a job where it's hot and humid. I'm just not going to do that. These people know that when I go out I go for a minimum retainer of $750, that gets them my first three hours. After that, I charge $150 an hour. Once we do reports, we charge a clerical charge, a copy charge, photo charges, etc. At $750, they know I mean business. I'm not coming out there just to give them free advice. I found that free advice doesn't get you any work for the most part any more. People will use that if they know it. I do go out and try to help people that I know need help. Ninety-nine percent of what I do, I'm charging, and they know that.
Jud: We can't certainly work for nothing. When you get into these botched jobs, obviously there's a lot more effort into trying to figure out what someone was thinking when they tried to put it together to begin with!
Geep: They just don't know what to think. I recently went to a job that was flooded and everything got pulled out. There was an electric panel that's 3 feet off the floor and it's stored behind the refrigerator! I'm 55 and have been in this business my entire life; you think you've just about seen a little bit of everything. We're not talking about a box that wires are connected in; we're talking about breakers, the whole nine yards!
Jud: Anything in particular you both would like to say? Greg?
Greg: I was thinking if you ask the blunt question — pro or con — I'm still caught. Ninety-nine percent of us in the industry are just really nice guys. We're going to try to find a way to help people out. If you know your numbers, you know you can't do it for free. We are going to get sucked into some things, but make sure you've communicated with the client, you've built in your contingencies, clauses and what not.
Jud: In these cases, probably more than ever, to absolutely know what your overhead is because of the risk factor, you've got to know the margins and what you've got to have for the mark-up.
Greg: Unless you have total confidence in your numbers and running your business, I'd say don't even consider it.
Jud: Good point. This is a risk area we don't need to get into. Geep, any closing comments?
Geep: As a consultant, the way I handle it — by the time I've gone out, looked at it, given them all the methodology, what's wrong and how to fix everything — two things are very evident: whether or not you feel comfortable that you can go fix it, and whether you're comfortable with your client. At that point, I've been paid for my effort. If I feel comfortable with my client and my ability to fix it and the timeline I've set for fixing it, I can then opt to take the job or not. I've opted out of a whole lot of this stuff. I can see a lot of problems down the road with this botched job. Once you get into this, they've got some other problems here that don't apply to the botched job. You're fixing to get into those too. Many times, you get to a job, you open it up and start working on it. There's a problem which is totally unrelated to what you're there for that suddenly is sitting there right in your face. Now, regardless of the outcome of what happened there, that client feels that you're part of that and you've got a liability. My best example is a roof. Re-roof a house to put a new roof on it. We got up there, and the roof has been leaking in a particular area. It was probably some unusual flashing thing, that unless you knew it was leaking you wouldn't have looked for. The client knew it was leaking but didn't tell you. By the time you leave, it's leaking. Now you own that roof. And you should fix it if that makes sense. Too many times these guys are looking to please. They're looking for a job, and even today they're looking for jobs a lot harder. They tend to make a bad business decision to take on something they really don't know enough about and aren't sure about the numbers. The thing I've had to learn to do in my career is trust that gut feeling and back off. It is almost 100 percent correct all the time. The time you go against that feeling will be the time that you get screwed over yourself. You may have done the very best you could do. There's a client or something about the job that said — walk away! If you get that feeling, don't walk — run!
Jud: The other side of that is we've got to be careful. A lot of times we end up guilty by association. We worked on the back of the house, but the front door doesn't work.
Geep: That's exactly what I'm talking about. You didn't touch the front door, you just walked through it. It doesn't work, and it's yours. There's a possibility of taking on the job and still creating a win-win. We generate a good number of referrals from people we've declined the opportunity to work with. I've illustrated to them why it's to their benefit not to hire us for this project. I've pointed them in another direction. The guy in the other direction got all the headaches. I'm getting the referrals. The people appreciate the time I take with them on the phone and point them in the right direction. They call back a couple of days later for more advice. We generate more referrals that way by not taking the work. And, we get referred for the good stuff.
Jud: If you know what you can and can't do, and don't run them off or burn any bridges!
Geep: Yes. You have to do it tactfully. You don't have to pay for my five people in the office to solve your problem. It doesn't make sense. We can handle it technically. You hear the name of someone with less overhead and get a fit for you. But when you're ready to remodel your kitchen or know someone who wants to do a master suite addition who'se name will you give them?
Greg: Yours, absolutely!
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One person's screw-up can make you a 'white knight'