If you think negotiating with your customers is tough now, wait a year.
The Internet’s hothouse environment is bringing to bloom a number of Web services that all intend to give your potential customers a sense of what their project will cost before you reveal your price. Some sites go even further by seeking to replace the traditional way of finding you—referrals—with a sealed system in which customers seek and contractors discover each other within that particular Web service’s world.
In February, Zillow introduced Zillow Digs. Houzz followed in July with Houzz Real Cost Finder. This month sees the arrival of an entirely new service called Porch plus an expansion of the estimate services at Planease (formerly RemodelorMove.com). All these come in addition to estimators from such services as Redbeacon, Home Advisor, and the granddaddy of the group, Remodeling’s own Cost vs. Value Report.
Each service collects and presents its data a bit differently (see “ Shopper’s Fare” for more), but all promise to bring consumers out of the dark regarding project cost. Virtually all the remodelers we spoke with for this article said they haven’t felt any pushback that can be tied specifically to these online services, but they did say they’ve noticed more customers citing the Internet in general when they talk money. Combined with the recent recession, this has made customers more wary about bids and tougher negotiators in general, they say.
“Generally, I have to spend considerably more time explaining and educating clients about construction costs than ever before,” says Don Mirabito, owner of The Humble Cottage, in Grafton, Mass. “These online sites don’t really help.”
On the other hand, some remodelers welcome what amounts to increased transparency about prices. That’s because many customers they encounter—particularly those who take their cues from cable TV networks such as HGTV—routinely go into shock when they see how much a project really costs. Web-based cost estimates toss cold water on prospects’ low-price dreams, they say, removing the surprise when a real pro submits a bid.
For Alan Hanbury, it’s all part of a more general trend on price negotiation that’s eating up more and more of his day. “In the old days, if I was going to do a deck … you might be in a house for 40 minutes and you could leave,” says Hanbury, co-owner of House of Hanbury Builders, in Newington, Conn. “Now your 40 minutes is [spent on] what product you’ll put on the deck—you don’t even get to rails. Then you give a price and there’s another 40 minutes of discussion plus 20 minutes of haggling. (I’m in my fourth round of discussions over a deck. One couple had my brother there four times for two hours each. I think they think they are our unpaid consultants.”
Robin Baine of Baine Construction (its slogan: “Remodeling the Jersey Shore Since 1984”) agrees that the pushback is harder, but he—as do several other pros contacted by Remodeling—believes it’s partly because his less-skilled competitors haven’t estimated properly. As for the websites, he thinks operations like Houzz and Zillow are here to stay.
“Some of the pricing may at least set a realistic starting point because we find many people are unrealistic on the cost of things,” he says. “Most remodeling prices are driven by the type of finishes chosen. If [Web-based estimating services] say the average bath is $13,000, you can easily eat that up with tile and fixtures.”
Mirabito is one of several remodelers who say Internet cost estimators are making it more vital than ever for him to explain to prospects how much a job should cost. “They have to learn that if all things were truly equal, then the bids would all be the same,” he declares. “However, they are never really going to be the same, for good reasons. Company A may bid lower while still using the exact same materials as Company B. But Company B is using skilled people and Company A is using unskilled people. Some companies build above code with elegant design and craftsmanship, while others struggle to meet code minimums. Clients have to be educated that there’s a difference and that that difference is valuable!”
Hanbury is considering reducing time spent on education by doing what some remodelers, such as John Lang, do already: provide a set list of options, or no options at all. Lang, of Lang’s Kitchen & Bath, in Newtown, Pa., gives prospects just three budget options to choose from as a preliminary step to putting down a retainer. “Every person we meet has sticker shock, no matter how much we prep them,” he says. “Letting them know up front and limiting expectations is the most critical step when someone brings up prices seen on the websites.”
Lang also has begun to spend more time qualifying customers to sort out who’s fixated on what’s cheap rather than what’s good. It’s a habit that Cathy Haldeman, wife of the owner of Haldeman Contracting, in Council Bluffs, Iowa, says her husband, Gary, will need to spend time developing now that their firm has begun getting prospects from Angie’s List.
“Some are reasonable and care about quality,” she says of these prospects. “A few are strictly interested in price and seem to have no knowledge that their experience can differ dramatically from one contractor to another. This they will learn in time. We just have to get better at qualification—a skill we didn’t really need when all new clients came from referrals.”
Marty Hughbanks of Spacific Coast General Contracting, in Medford, Ore., regards Houzz as a great tool for his customers beyond giving them a better idea of remodeling’s true cost. “To have the customers become more proactive in how their dreams are being put together keeps them in the loop,” he says. “Plus, the idea is a great tool for helping out the customer in decision-making, especially on color charts.” Baine says that as a personal user of Houzz, he loves that he can search anything and come up with great ideas. But, he adds, “professionally, ... it is truly a love/hate relationship for me.”
Negotiation and Education
For Alan Hanbury, it’s all part of a more general trend on price negotiation that’s eating up more and more of his day. “In the old days, if I was going to do a deck … you might be in a house for 40 minutes and you could leave,” says Hanbury, co-owner of House of Hanbury Builders, in Newington, Conn. “Now your 40 minutes is [spent on] what product you’ll put on the deck—you don’t even get to rails. Then you give a price and there’s another 40 minutes of discussion plus 20 minutes of haggling. (I’m in my fourth round of discussions over a deck. One couple had my brother there four times for two hours each. I think they think they are our unpaid consultants.”
Shopper’s Fare
Who’s who in remodeling cost estimates, and how do they differ?
Lately it has seemed as if remodeling cost services are proliferating faster on the Internet than cat videos. Several new services arrived this spring and more are coming out this month. And while their intent may be consistent, how they arrive at their numbers varies dramatically. Here are seven sites worth watching.
Zillow Digs
What it does: “... Users can browse tens of thousands of photos and see Zillow’s proprietary Digs Estimates for the estimated cost, based on where they live, of the actual [projects] they are viewing,” the company says.
How it works: Estimates are based on a “proprietary formula” that analyzes elements such as size, materials, finish level, and labor, etc., based on the home’s region (or regional labor rates), to estimate the cost of installing a similar room.”
Behind the numbers: Initially, estimates were based on numbers provided by “a couple dozen contractors,” a Zillow spokesperson told REMODELING in an email on Feb. 21. That number has since grown, but lately it seems that the majority of estimates come from architects and designers, not remodelers.
Houzz real cost finder
What it does: Shows average costs for a project in the area located close to where Houzz software thinks the viewer lives. Kitchen projects are the default, but a viewer can see costs for 20 projects, including baths, closets, decks, pools, and custom homes. First page also gives three price ranges for the project selected, as well as other information.
How it works: Service pulls data from a survey of more than 100,000 homeowners to give estimates of potential costs of remodeling projects in more than 50 metro areas and every state.
Behind the numbers: Some stats may be more reliable than others. For instance, on kitchen projects you can get data for Huntington, W.Va., but not Buffalo, N.Y. Some projects give numbers for as few as 20 metro areas. And when you seek data for the Dakotas, Wyoming, and Montana, you don’t even get statewide numbers; an asterisk next to the name warns the viewer that the data is for a census region, not just that state.
Cost vs. Value
What it does: Compares the average cost for 35 popular remodeling projects in 100 cities with the value those projects retain at resale.
How it works: Construction cost estimates are generated by RemodelMax, publisher of estimating tools, which prepares a detailed construction estimate for each project, then adjusts this baseline cost for each city to account for regional pricing variations. Construction cost figures include labor, material, and subtrade expenses, plus industry-standard overhead and profit. Resale value data for each project were aggregated from estimates provided by members of the National Association of Realtors in cooperation with REALTOR magazine.
Behind the numbers: Costs are based on estimates for generic projects and don’t account for personalized design and product choices typically made by homeowners in connection with actual remodeling projects.
Redbeacon
What it does: Provides estimates on low, average, and high bids for projects in a region or even a ZIP code.
How it works: Numbers come from the more than 1 million quotes that pros who signed up with Redbeacon submit when a consumer puts in a request involving a potential project. Job quotes in the database are for jobs bid over the past four years. Numbers are strongest in major metro areas, such as San Francisco, New York, Chicago, Los Angeles, and Atlanta. For areas where data is sparse, data from elsewhere is localized to reflect regional differences, such as in labor rates.
Behind the numbers: The Home Depot bought Redbeacon in February 2012. Many of the remodeler customers in its database were recruited to join the site because they shop at the big box.
HomeAdvisor
What it does: Shows local and national average costs for more than 300 kinds of projects.
How it works: Numbers stem from roughly 800,000 reports submitted over the past seven years by homeowners after the project is completed. “Homeowners visit HomeAdvisor.com to find a top-rated pro to complete their home improvement project or repair. Once their projects are completed, the members log in to their accounts and complete a short cost survey. After compiling and organizing the data we report it back to you.”
Behind the numbers: Reports go back as far as seven years.
plan ease
What it does: Provides estimates for a variety of different-size projects based on data the customer enters. Also estimates the impact of the project on a home’s value.
How it works: Customers use calculators that contain typical estimated costs to determine how much their particular project could cost. Unlike other sites, here you can factor the impact of do-it-yourself work done as part of the project.
Behind the numbers: Costs are localized by ZIP code according to variables such as labor rates.
Porch
What it does: Gives price (“where provided”) for roughly 60 million projects conducted nationwide over the past 15 years.
How it works: Unclear. A Porch spokesperson says that the company has “insights into really unique information” and has collected data from “professionals, partners, public sources, and private sources.” The firm is working on tools to let consumers and pros enter their own pricing information.
Behind the numbers: Service formally launched on Sept. 17. (Note: REMODELING’s parent company, Hanley Wood, has a commercial partnership with Porch that includes promotional and marketing benefits for both firms.)
—Craig Webb is editor-in-chief of REMODELING. Follow him on Twitter at @craiglwebb or @RemodelingMag.
