The Scope Of Work – Don’t Get An Estimate Without One!
When buying distressed properties, one of the most important things you will need before getting repair estimates is a “scope of work”. A scope of work is a detailed list of repairs to be done and the fashion in how they are done. The main benefits to having a good scope are that you give the same scope to each bidder. Therefore, the bids can be compared as “apples to apples”. Everyone bids on the exact same thing so then you can concentrate on the best contractor at the lowest price.
In my S.W.A.T. training, I use my property inspection forms to compile a detailed scope of work. There are several things needed to build the best scope and I will give you some good guidelines to go by for yours. You must first list all the materials needed for each aspect of the job. If you are doing painting, list what brand of paint to be used, oil or latex, one or two coats, sprayed or brushed and rolled and so on. The more details the better. However, you should be able to describe your scope of work in just a few paragraphs.
As in all contracts, the scope should describe who is supposed to perform each article of work. That way there is no confusion as to what is expected of each person hired on the job. For example, if you are roofing the house and also having some carpentry repairs done and you find that some plywood needs replacing before the new shingles are put down, you must assign who is to replace the plywood…the roofer or the carpenter.
Aside from the choosing of who is to be given each job, you must also be very detailed about what they are to do and not to do. You might have someone putting in a new ceiling fan and changing a few light fixtures and such, and this is fine. But you need to draw the line and list that this person is not to do any electrical that requires wiring into the main service panel. The difference being that in most states anyone can do fans, light and switches, but to wire into the panel box requires a licensed person and possibly a permit. Set the limits on what they are allowed and not allowed to do.
We have talked about the who and the what portions of a scope of work. Now let’s talk about “when”. This is the part of a scope that tells when the job will start. It tells when the job will be finished. You can set the daily working hours to suit you and also can detail if Saturday and or Sunday are considered working days. Some people Do not want to have workers on their jobs on Sundays as that is a personal day to many. In most cases, I will let the worker give me the timeline that they think the job will take. Let’s say I was told the job would take two weeks to complete. I will agree to this but in my contract I may have a clause that says “ contractor is to complete this job satisfactorily in two weeks. After a one-week grace period beyond these two weeks a $50.00 a day penalty will be deducted from the balance due until job is completed. Just to make sure that the job does not linger too long or in case you have a contractor who abandons the job, this will eliminate your liability for liens or owing money to the contractor.
Another aspect of the scope of work should lay out the payment schedule. There are many common ways to have this set up. One of the most common payment plans is one third of the contracted amount down, with the remaining balance due on completion. This allows most contractors the ability to buy the materials needed for the job without coming out of their own pockets. Some people are wary of giving some money up front as in some stories we have all heard about someone running off with the money and never starting the job. But think of it this way. If you have done your homework before hiring someone, you’ll know if they are to be trusted. The reason I will give the one third up front is because if I have given them the money to buy the materials, then I have less worry that anyone can put a lien on the property for the materials used. If they paid for them up front…no lien. You may also choose to pay on draws or the amount of work completed. You can pay on Fridays, or you can pay at the 25% complete, 50% complete and final payment.Remember to get your lien releases signed every time you issue a check.
List Of Materials
When listing the materials to be used and the method of application you must be very specific to avoid misunderstanding. If you are having siding installed you want to list exactly what type you agreed to. Is it Hardi-plank or regular Masonite? Is it textured, beveled or T-111? Make sure the details are there. If doing a new roof then you want to know the same type of things…”the shingles to be used are Sovereign brand, 25 year shingles at $35.00 per square from Home Depot”. Something like that for each item to be done to the house. Now you also want the application of items to be described. For the siding, are they using hammers or nail guns? You want to know this because nail guns can be set to different settings that regulate how the nail ends up in the siding. If set too strong, the nail heads go too far into the siding and this will allow water to get into the siding at every nail and will start to cause your siding to rot out almost immediately. Or for the roof…is it a roof over (putting shingles on top of the existing ones) or is it a tear off (scraping all old shingles and felt down to the plywood and starting new).
Finalizing The Job
The last part of a good scope of work is the final acceptance of the work and materials done on a property. You want to make sure that all code for your area has been met. You also want to make sure that anything that required a permit did have one pulled for each aspect. If one was overlooked, it’s best to get it now and just pay a penalty than to let it go on for months or even years. This could escalate into lawsuits or worse later. It is important that all your needs were met as to the standards and quality of the material and workmanship of your job. Always hold back about 10% of the contracted price for your final punch list. This will insure that you will get your last items done, so they can receive the balance of pay from you. I know that I could have added so much more to listing what could be in a scope of work, but I feel that this will more than help you to get the best rehab for the lowest price.
For more info on my rehabbing techniques please visit PeteYoungs.com