The 7 Major Traps Property Managers Fall into When Choosing a Contractor

When you have to deal with many properties, you face numerous maintenance, emergency, and renovation calls. Being a property manager will mean that finding some trusted contractors within the least amount of time can either result in happy tenants and the use of space effectively or empty pockets caused by the necessity to find someone to fill the vacancy. However, there remain a lot of expensive errors in the choices of contractors made by many property managers, errors that lead to budget losses, project delays, and ruined reputations of professionals.

We have hired several teams of contractors with New Jersey and New York property managers, and we have found out the top seven mistakes made when hiring contractors, and what is more important is how to avoid them.

1. Hiring Based on Price Alone

We understand—we do; there is a budget limit. The cost of doing business is still on the increase, and property owners want you to keep the cost down. However, picking the lowest offer without thinking about what surrounds it is a disaster waiting to happen, which in most cases tends to be more expensive in the long term.

The Underground Price of Cheap Labor

 The Problem: Lowball bids do tend to presuppose corners cut. The cheap plumber could be using low-quality materials, not be properly licensed, or be in a hurry to proceed with the next task. The end result? You will pay twice—once to the lowly paid job and secondly to get it done right. Better, you will be exposed to tenant complaints, code violations, and safety hazards that would otherwise be situational.

Imagine the following situation in the real world: A property manager has contracted the lowest possible bidder to do HVAC repairs at the cost of $1,200, and this is a saving of 800. Six months after that, the system collapsed due to the use of poor-quality parts. The emergency replacement was 4,500 dollars, and the property manager was forced to cover the three days without heating in winter for the tenants.

Finding True Value

The Solution: Ask for a minimum of three competitive bids and consider them as a whole. Look at the experience, time and schedule, materials to be used, warranty, and their history with similar properties of the contractor. An intermediate quote by a well-known contractor is usually the one that offers the best value.

 Develop a low-weight system (price: 40, experience: 25, timeline: 15, warranty terms: 10, references: 10). This also assists in objective decision-making in terms of cost/quality.

2. Omission of the Vetting Process

 It is understandable that when a pipe explodes at 2 AM, one wants to hire the first plumber who arrives. It is very easy to forget due diligence when you have five maintenance requests and one contractor tomorrow. However, when you hurry to do the vetting process, you risk being hit by massive liability and shoddy workmanship.

Getting to Know Your Exposure to Risk

 The Issue: Uninsured/unlicensed contractors expose your properties and yourself to risks. In case an individual is injured at work or destroys his property, you may be the one to pay. Also, the unlicensed contractors might not be inspected, might breach local codes, and may nullify equipment warranties—a domino effect of costly issues.

The property owners and managers in New Jersey and New York have had cases of being sued because of injuries sustained by uninsured contractors or their employees. Such lawsuits are readily determined to be in the six-figure range, which is way more than the amount of savings obtained in employing a non-vetted contractor.

Developing Your Checked Contractor Network

 The Solution: Always verify:

• Existing licensing and certifications in their respective trades.

• General liability coverage (at least 1 million cover suggested).

• Employee's compensation insurance.

• At least three recent similar projects of which we are referenced.

• Bureau of Better Business or certified online reviews.

• Experience in years of business and qualifications in staff.

  
  

Always have a list of pre-vetted emergency contractors for each trade in case you are always rushed when you need the contractors. Revise this list after every quarter, and recheck insurance and licenses after every year. This training will make emergencies not panicky scrambles.

3. Omitting to Write Things Down, Not to Mention It

 An agreement made by handshake and verbal quotes may seem more intimate and fast but is legally ambiguous and practically unsound. They appear okay in the moment of the heat, and then they turn out to be not okay.

Why Verbal Agreements Fail

 The Issue: In the absence of written contracts, there are no avenues to pursue in instances where scope alterations, schedule, and subpar quality arise. Memory is not so reliable, and even the good-hearted individuals recall conversations in different ways. He-said-she-said conflicts consume time, money, and professional relationships. You also do not have documentation of property owners, insurance claims, or legal proceedings as necessary.

Designing Ironclad Agreements The Solution: Demand detailed written contracts that spell out:

• Precise scope of work and certain deliverables.

• Brands, grades, and quantities of materials used.

• The date of starting and completion with milestones.

• Payments are based on milestones of completion (nothing upfront).

• Both labour and material warranties.

• Price methodology change order procedures.

• Clean-up and disposal of waste.

• Allowances and authority of permits.

  
  

No exceptions—even in little jobs. This is the expectation of professional contractors. A written estimate signed by both parties can be adequate in the case of jobs that cost less than 500. Anything bigger is worth investing in a proper contract.

4. Zero Tolerance for Red Flags in Communication

 A contractor who is hard to reach during the bidding process will be almost impossible to reach in case of problems. You have everything to know about the nature of those early interactions.

Reading the Warning Signs

 The Issue: Due to inequality in communication, there are misinterpretations, delays, and anger. When your contractor fails to pick up, gives irresponsible estimates, or even appears to be insensitive to your needs, then little problems will be minor inconveniences that will turn into big pains once the work starts. You will lose hours in trying to get updates and asking what is happening.

Setting Up of Communication Standards

 The Solution: It takes into consideration responsiveness during your initial engagement. Do they answer their calls within 24 hours? Do they submit elaborate written estimates? Will they be ready to take the tour of the property and pose clarifying questions? Are they willing to communicate possible problems?

These behaviors in the early years are the predictors of reliability in the future. Establish high standards of communication in the initial stages: I want to receive a short update every Monday morning and be informed immediately of any problems or delays. You should not give your business to contractors who are not able to communicate at a reasonable level.

5. Failure to Plan for Unexpected Situations

Well-thought-out projects are not immune to surprises, concealed water damage, outdated wiring that needs to be replaced, or structural problems that were not noticed at the beginning. The inability to foresee this fact puts a strain on the budgets and relations.

The Uncertainty of the Certainty

 The Issue: When things go wrong and you do not have a backup budget, you run a project to a standstill as you struggle to find extra funds or make impulsive and regrettable choices. You may get substandard solutions, not do the required work, or ruin relationships with property owners by seeking emergency funds. Tenants are victims of prolonged schedules and inconveniences.

Smart Contingency Planning

 The Solution: Add a 10-20 percent contingency to all project budgets—20 percent to older buildings or major renovations, 10 percent to new buildings or minor work. Talk with your contractor about any surprises ahead of time and come up with a definite change order procedure.

This training will alleviate stress in the event of (not if) the unforeseen. When the contingency is not used, then all are happy. If it's needed, you're prepared. This approach should always be cascaded to property owners so that they are aware of the reasons why your estimates have buffers.

6. Micromanaging or Under-Managing

 It is a difficult task to strike the appropriate oversight balance. Excess interference will annoy the contractors and waste your time. Too little, it is a festering, unseen problem.

The Golden Rule of Project Management

 The Issue: Micromanagement of well-established professionals, whether it is by regularly checking in on them, challenging their every move, or simply hanging around the workplace, is a waste of time and ruins working relationships. Contractors go on the defensive, work becomes stagnant, and you burn yourself out on work that does not add any value.

Key Account Strategic Oversight

 The Answer: Have a firmer point of check-in/check-out—maybe a quick visit of the location at 25, 50, and 75 percent completion of more extensive projects. In the case of smaller jobs, a single midpoint inspection and a final inspection can be used. These milestones are used to confirm quality, resolve concerns, and make payments.

Between checkpoints, trust the expertise of your contractor. They are the professionals—leave them to work. Record your checks in photographs and writing. This gives them accountability and also takes into consideration their professional autonomy.

 In the case of a multi-property manager, you should have one trusted contractor who serves as your eyes and ears for projects that you cannot physically survey on a regular basis.

7. Failure to Institute Long-Term Relationships

 The approach of handling each project as a unique transaction requires a continuous process of reinventing the wheel. The transactional state of mind takes your time, money, and tranquility.

The Transaction Trap

 The Issue: You spend time in the process of vetting new contractors on a project-by-project basis. Every new contractor has a learning curve of knowing your expectations, quirks of your property, and communication preferences. New subcontractors are not as motivated to give priority to your job, bend the rules on costs and time, or do extra work when difficulties happen.

Nurturing Contractor Partnerships

 The Solution: Build relations with reliable contractors; when you find them, cultivate them. Provide them with consistent work where you can, pay on time (even early where you can), speak well and respectfully, and refer other property managers.

Contractors aware of the fact that you are a good client will tend to:

• Adequately prepare for emergency work, at times even during weekends.

• Provide lower prices or charge longer.

• Be more comfortable standing behind their work and dealing with warranty problems promptly.

• Offer useful property care information and preventive advice.

• Warn about possible issues when they are still problems in time.

  
  

You may consider organizing an appreciation program at the end of each year for your good contractors, or you can send them a token of gratitude at the end of successful projects. The little things will create loyalty, and this will come in handy when you most require it.

Failure to Do Seasonal Planning

 Here is an added booby trap that the property managers are finding very expensive: not planning their maintenance and repairs according to the seasonal needs and weather patterns.

The Seasonal Crunch

 The Issue: To wait till summer to book the maintenance of HVAC means to compete with all other property managers in getting a contractor. During high seasons (plumbers during winter, roofers after storms), emergency calls receive high prices and long queues.

The Solution: Plan yearly maintenance when contractors are busy with low seasons—HVAC at the beginning of spring and fall, roofing towards the end of the fall or beginning of winter, and landscaping preparation at the end of winter. When the contractors are not busy, you will be better priced, served faster, and given more attention.

 Design an annual house maintenance schedule for every house in advance, foreseeing requirements before they turn into emergencies.

The Smarter Way Forward

 Contractor relationship management does not necessarily have to be daunting. Having systems in place such as pre-vetted professionals, standardized contracts, a well-defined system of communication, realistic budgets, and strategic planning is the key.

It has been found that contractor connection platforms take much of this headache, as they do the heavy lifting in the initial stages for many property managers. Such services pre-qualify contractors, create a competitive bidding process, and make project administration easily streamlined so that you can concentrate on what you do best, and that is, management of properties and ensuring that tenants stay happy.

Consider the amount of time you are spending nowadays searching and finding the contractors, checking references, comparing bids, and running projects. Then consider that wasted time can be recovered and results can be made even better. The strength of being able to get the systems and relationships right.

Taking Action Today

 The next time that you have a maintenance problem or a renovation job, stop and think before you make that hire. Ask yourself: Do I not commit these seven deadly sins? Run through this checklist:

• Did I get three or more competitive bids?

• Have I checked licensing and insurance as well as references?

• Is all written in clear terms?

• Has this contractor exhibited sound communication?

• Have I been designing a sufficient contingency budget?

• Am I organizing proper supervision and not being a micromanager?

• Is this the long-term relationship that is worth investing in?

  
  

You will be glad of your bottom line—and your peace of mind. More to the point, your tenants will have fewer inconveniences, your property will not lose its worth, and property owners will have a positive perception of you as the qualified professional that you are.

Begin to establish better contractor relationships now, and see how it will improve your performance as a property manager.