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Question:
We are in the planning phase for a kitchen addition to our home, and we have noticed that most design / build Remodeling Contractors vary a great deal in how they charge for design or up front costs.
Is there a common method, or a right or wrong way to go about it?
Answer:
It is up to each individual Contractor how they charge for design related fees. Here are a couple of examples of methods that I am aware
of:
1.) Some firms have design / sales people that work on strict commission who assume all the risk of wasted time and effort. These firms usually don't charge for up front costs because they don't have any to speak of. If
the firm gets the job, the commission is simply added on to the contract price. If they don't get the job, it's the designers tough luck. In this method, turnover of designer/salespeople could cause problems with jobs down the
line. Also, the commission is added to the contract price, whereas with in-house design, the design is part of the overhead and is included in the price. This may or may not be a factor.
2.) Some Companies will not put
pencil to paper until they receive a fee, using the fee as part of the qualifying process. This method is usually used by in-house design firms who do not want to waste any time on tire kickers. This method can put the owner in
a awkward position of deciding on a Contractor before they see anything. With the amount of money being spent on remodeling today, that could get a bit ticklish.
3.) Others Contractors go the middle road and do not charge
for a preliminary concept and ballpark figure, then charge a fee to continue from there. This seems to be a logical compromise, but the Contractor runs the risk of wasting a lot of time on shoppers. I should say that all fees
are usually applied to the contract price, and designs usually remain the property of the Contractor until a contract is signed.
Which method is better? Should you pay simply to find out feasibility and ballpark costs?
Good question. But you must remember that these are not body shops where estimates can be kicked out in 5 minutes. At our firm, an average of 5-10 hours is spent simply to prepare a preliminary design and ballpark price. What
is 10 hours of your time worth? If you are an attorney, it could be worth $2,500. Why should professional design/build firms work for free? They shouldn't, but the market dictates what you can and can't charge.
What if
you pay a fee and don't go ahead with the job? Many a dispute has arisen over this scenario. To avoid this, terms must be spelled out and put in writing so all parties thoroughly understand. In most cases, all or part of the
fee will be absorbed by the Contractor if the job falls through. This is only fair, and shouldn't be a big deal if everyone understands that right from the start. What the homeowner must decide is if the fee is a reasonable
amount to forfeit before they enter into the agreement.
It is unfortunate that in our industry it takes quite a bit of work to show potential clients our ideas and estimates. In a world full of "Free Estimates"
we are kind of stuck in the middle. My best advice would be to screen your Contractor so thoroughly that you are not afraid to pay some money up front, because you are absolutely positive that they are the Contractor that you
want to work with.
Answered by: Patrick Benkowski, CR
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