There is a Quandry with Realtors and Contractors

There exists a major disconnect between realtors and contractors here in Newport News, Virginia.

It stems from when a realtor has a home that is for sale and is provided a home inspection that details repairs that need to be completed by the seller of the home in order for the buyer to accept the property.   What typically happens is that the realtor calls contractors for estimates on the cost of the repairs.

Now the problem begins.

In our part of the country, Hampton Roads, Virginia, an area that reaches from Williamsburg to Virginia Beach  and includes the cities of Yorktown, Virginia Beach, Newport News, Williamsburg, Chesapeake, Norfolk, Hampton, Suffolk, and Portsmouth, contractors typically provide free estimates.

However, contractors and remodelers have learned that giving realtors estimates for home that are for sale is a waste of time.

The reason that home improvement contractors feel that giving a realtor a free estimate is a waste of time is because the work that is estimated rarely, if ever gets done.  Usually what happens is that the estimate is used as a negotiating tool and the price of the home is reduced by the amount of the estimate.

To clarify my thinking on this subject, it seems to me that in most circumstances a “free estimate” is offered to a potential client when there exists the reasonable expectation that the client will hire someone to perform a project and that the contractor has a reasonable chance of competing for the client’s business. This would be a “win/win scenario”, in my mind: I give you a free estimate and you consider me for the work with your other bidders.

However, when the track record of realtors in Newport News is that no work will be performed and that the estimate will only be used as a tool for negotiating the closing price, the game is changed: “free estimate” ceases to be a “win/win” and now becomes a “win/lose” (that is, realtor wins & contractor loses).

If we subscribe to Dr. Stephen Covey’s philosophy on relationships (Read: 7 Habits of Highly Effective People), an effective relationship must be “win/win” or it’s “no deal” and we should walk away.

Therefore, in order for it to be a “win/win”, we must decide what the contractor’s time is worth to produce an estimate.

We can easily calculate this by dividing total gross profit earned (not total sales) per year by total estimates given, which in this case = $1725 average profit per estimate.

Now, I know that no realtor would pay THAT amount, but the question becomes “what price in between what the realtor wants to pay ($0) and what the contractor should be paid ($1725) is a number that both would consider a “win/win”?

A recent survey had realtors saying $75,  with contractors saying $175 – $498.

One forensic architect said it best: “Basically if you charge anything it will weed out a lot of people just looking for a free estimate to use for another purpose.”

 

In the meantime, make sure your home votes for Jim Hicks: Pro-Improvement & Anti-Bad Things!

 

Leave a Comment