Just recently I lost a bid for a large room addition. I must admit I was very disappointed when I learned another contractor was chosen. But, what I found most disturbing was that the winning bidder was almost 50% less then me and the other contractor bidding the job.
When speaking with the homeowner I asked if he had any concern that the lowest bidder might not be credible. He informed me that this particular contractor was about to start a very large project and if he (the homeowner) agreed to get started right away the contractor would be able to save him a lot of money by ordering all of his materials when he orders the material for the large project. I was shocked to hear that this scam still works. So once and for all I will explain how the scam works. It works because we’ve been conditioned to believe that the more widgets we purchase, the cheaper they will get. And of course that’s true to a point; we don’t expect to purchase so much that it’s below the supplier cost. The scammer relies on the fact that most people believe they can keep buying down the price, and let’s face it; they want to believe they have beaten the system and found a great deal. Once the homeowner is hooked it’s simple, just get them to sign a contract (no doubt a very simple contract) and collect the deposit. No work need be completed; this deal is 100% profit. What the contractor knows and the homeowner doesn’t is the deposit is less than the cost to hire an attorney. This is why a criminal contractor will continue this scam for years. In most cases the homeowner later discovers that large project either did not exist or had no affiliation with his contractor. Still not convinced this is always a scam? Consider you’re the owner of the very large project that this material is getting tacked onto. And also consider seeing material leaving your job on a regular basis. I would imagine that you would not allow this to continue for very long. How would you (as the owner) know what material belonged to who as it left your job site? What you also might not be aware of is that in most cases, whether it is a large home or commercial building, the owner or owners hire a project manager to oversee all contractors and of course inventory all material. Finally if deep down you’re a gambler and still want to give this a shot, here are a few suggestions.
1. All material must be delivered to your house directly from the suppliers on a marked truck.
2. Require a sworn statement and / or waiver of lien from all material suppliers.
3. No deposit! Pay upon completion of work. i.e. you pay a portion upon completion of carpentry (rough framing); a portion after electrical, etc.
The no deposit item will probably be a deal killer and it’s true that most reputable contractors will require a down payment. But this contractors bid is so low, that he needs to prove to you that he is legitimate. If you’re willing to take a risk and operate outside the norm than so should he! Good luck.