Low Price Thinking Can Be Really Expensive

I am a technical nerd in another part of my life. I review analytical data for clients on occasion. Last week I saw a search query for “Mexican to build brick mailbox”  Now you never really know what the intention of a search query is- but it was probably not wanting information on styling- on Mexican colonial architecture.  This, I hope, is an appropriate segue for a conversation about price.

Most quality contractors and service companies do not like to talk about price much. When they hear this question, they sense a price sensitivity for paying less rather than more.

And of course this makes sense. Who wants to pay more for anything? So quality contractors start shying away- most really good contractors are busy and just do not take the time to explain the difference between a lower price and cutting corners can and paying more but getting the job done right.

Admit it. You are in a hurry. You want the low price. These are tough times. Pricing is really important. But you don’t really want to sacrifice value for that low price. Great service people are good at service not selling.

This is a really serious problem because low price becomes a huge factor in bad decisions that end up costing much more- over and over again.

I am going to run through several scenarios for stuff to be aware of about pricing. These are not rocket science but some of them might surprise you. And you might think of a couple not mentioned here.

Feel free to speak up.  This underlying theme here is not that contractors should be paid more- we are trying to help homeowners like yourself maximize the value of your money over the long term. Money is pretty precious in this economy. Way too precious to squander on a bad deal with a low price.

And don’t be mislead by the concept of long term. A low price for a project can start your meter running on future expenses immediately. It will come up as moisture problems and mold- or accumulate into an expensive repair later.

It is even becoming less likely that you can sell your home and escape a problem unscathed.  Home inspection and home construction is getting more scrutiny as we move to green construction and sustainability.  You get to pay for problems in many ways. It is best to avoid them as often as you can.

Most really good contractors- those who have been in business many years and plan on being in business many more- have pretty sharp pencils for calculating costs. Their estimates are spot on. So watch out for people offering big discounts up front. They are using discounts as a sales tool. They know we love bargains.

How many people remember 80% off of window blinds. That one always made me laugh. This is a disingenuous offer. Why should you trust someone offering a big discount up front?

What you want is a great contractor at doing good work not a contractor who is really good at selling stuff.

Have you ever had a contractor suggest that they can beat any offer? Or try to see other bids and then suggest they can save you 15%. They like to give the impression that there is a wide variation in pricing at the discretion of the contractor. That there is all this fat in the budget that they will kindly strip out.

Actually, when you get down to designing an actual solution for your problem with a defined scope of work and specifications that are fundamental and sound-  for work that will be undertaken by practiced professionals with years of experience- there is not that much variation in price.

When contractors offer a big reduction in price they are depending on the fact that they can bend the rules- that they can cut corners- that they can use less competent workers at lower wages and get away with it.

You the homeowner are then tasked with making the best choice . Who among us does not  have a bias for the low price if we do not have good understanding why  to spend more? This bias for the lowest price opens an opportunity for problems.

It is unfortunate that many really conscientious contractors are not great marketers and effective sales people. They do not have the skills to get our attention… and it is getting harder all the time.

Who has lots of time in their schedule  and abundance patience when service people try to explain why we should pay more for a particular project?  This is a tough place.

And great contractors are busy. There people are busy. They have repeat customers who have been burned before- have learned better- and they do not have time to deal with the difficult buyer- people hung up on low pricing.

Now I am not meaning to place blame here- but just trying to outline the forces that allow cheap pricing to have undue influence in the marketplace. You will have to draw your own lessons from the conversation.

Low cost repairs cover up problems- camouflage them and make them harder to find and fix later.

Low price solutions are often designed in… A/C units and duct work go into unconditioned attics. Builders are notorious for building cheap with maximum attention to looks and immediate impression and not so much concern for the long term.

You will do yourself a great service to take a long term perspective- not take conventional wisdom at face value. Convention wisdom is often wrong. Did conventional wisdom help prevent or help create the bubble in real estate that we are still grappling with? Of course, the conventional wisdom was wrong and the prescient thinkers were selling short.  Thinking adroitly will make you money. Even when you have to understand you might have to spend more.

Projects have different levels of risk. Having someone build a cheap mailbox is less risky that having someone giving you the cheapest roof.  But lets follow through with this analogy on risk.

Brick mailboxes are very popular these days. Some builders are quite a bit more expensive than others. One way they make them cheaper is with a shallow and cheap foundation. Unfortunately brick mailboxes with inadequate foundations start leaning over in a few years or less.

Brick mailboxes with a solid foundation don’t lean over in a few years. Yet, as you drive about you see lots of leaning brick mailboxes. It is funny and sad. A lot of boxes lean over because someone got a great price but a lousy foundation and are now trying to ignore the consequences because the solution is more expense. The cheap price has become expensive to fix.

So the question becomes- how much mailbox lean are you ready to put up with- before you get it fixed?

The solution- and this solution runs across any purchase you make… understand the underlying issues with value… and determine the level of risk you are taking if and when you want to dicker on price. And, when it counts, find really good people and worry a little less about the lowest price.

Comments are welcome. Feel free to add to the discussion.

 

Stu Langley

meet the author at StuLangley.com

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