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Important Things To Note About A Construction Contract

Looking to get some work done on your home? One of the essential pieces of material in the process will be the contract you sign. Construction contracts come in a few different forms. Each with its own pros and cons. This article will showcase two types of construction contracts: an estimate and a time and materials-based contract. While you should carefully consider each type of construction agreement, the most crucial part of the contracting process is finding a trustworthy contractor. One with a good reputation that you can be sure will correctly perform any work on your home.

When working with any contractor, it is always vital that you ensure they are licensed, bonded, and insured to perform the work.

What Is A Construction Contract?

At the most basic level, the construction contract is an agreement between a homeowner and a contractor. The contract is for the said contractor to perform work on a home. A contract should clearly lay out the price for the services to be performed. Additionally, it should state the other expenses for which the homeowner will be responsible. Different contractors use different pricing models; some will have an hourly figure for a crew to work, others may charge by the area of the work that needs to be done (this approach is common in roofing and siding renovations.)

Estimate Or Bid Contract

If the contractor provides an estimate, it should list the services to be performed for that price. Another critical detail to look for in an estimate is the terms for any change orders that may occur. A change order is what must take place when the contractor goes over the estimated price they initially set. While it is uncommon, some untrustworthy contractors will quickly come to assess your project and give you a cost estimate that is lower than their competitors. They can do this because they know change orders will arise, hiding a much higher cost in change orders. Usually, change orders come with extra fees and halting the progress on the repair or renovation. A lot of the time, change orders are a necessary part of the estimation.

If you cannot see the full extent of the damage to your home, neither can your contractor. Although most estimators have years of experience to help accurately predict what a project will entail, many projects have unknown problems that will pop up and change the original estimation.

Project Timeline

Along with pricing information, your contractor should try to provide a timeline for the project. Once again, some tasks may be challenging to assign a definitive timeline for completion. If you encounter this issue, ensure you stay in communication with your contractor or the job’s foreman. A potential warning sign of an untrustworthy contractor is the estimator being overly confident in the time it will take to complete a repair or renovation without having any recourse for what will happen if the work crew takes longer than expected.

Ensure You Can Terminate The Contract

When agreeing to a contract, ensure it is something you can get out of if you choose to. Many companies want to guarantee they will have work on their schedule. In short, they will lock you into completing the project with them once you have signed the contract. You should always be able to cancel a project when you choose to. Be sure to inquire about cancellation policies and procedures before agreeing to anything.

Time And Materials Contract

The other type of contract you will encounter in construction is a Time and Materials contract. With this agreement, instead of an estimator making a site visit, leaving, and then providing a written estimate later. You, the homeowner and the contractor agree to a base labor rate you will have to pay for the services and also the cost of any materials. These contracts are most common in repair projects and more minor renovations. The base rate is usually an hourly rate and may differ in the type of work the crew is doing. If a contractor applies different rates for specific skillsets of work the crew performs, ensure these are clearly laid out in the contract. When it comes to the costs of materials, most companies will receive them from wholesale distributors and mark the cost up.

Be sure the contract has the markup clearly stated, whether flat rate or a percentage. Additionally, make sure the invoice you receive after the project is complete lists all the materials you were charged for.

Why Sign A T&M Contract?

When signing a time and materials-based contract, one of the most common concerns is not knowing the total price of the repair. You should always inquire why the contractor chooses to go with this type of contract rather than an estimation-based agreement. Often, the estimator cannot accurately know the full extent of damages, such as water leaks, attic, or crawlspace repairs. If you agree to work with a contractor on a time and materials basis, always make sure they are a reputable company and communicate any changes to the timeline of the projects that may arise.

What Is The Difference Between A Bid And A T&M Contract?

Although the Time and Materials contract appears very different from a price estimation, they are very similar. When providing an estimate, most contractors are trying to figure how long it will take a crew to complete and what materials they will need to complete. The estimator usually has an hour figure to use on their side of the calculation and figure out what it will cost the company and mark up the estimation for profit.

Research Their Online Reputation

To make sure you can trust the contractor you are thinking of hiring, take a look at their reputation. Of course, we live in the digital age, and it should not be difficult to learn about a company. Doing a quick internet search of your potential contractor should result in a professional webpage and multiple avenues of approach. Those may include a website, Google Business Page, Google Maps Search, Facebook or Instagram, or another third-party website. Most established contractors will have a reviews page through Google or other sources. Reading through those will help give an idea of how the company conducts themselves and how satisfied their past customers are, but please remember not everyone can be pleased. Don’t let one poor review in ten outstanding reviews turn you away.

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