How to Tell if a Contractor is Overcharging for Materials

How to Tell if a Contractor is Overcharging for Materials

A few simple tactics can prevent contractors from overcharging you

By Glyn Sheridan

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When your contractor is on the job, he or she is buying materials and using them to construct your project. Unfortunately, not every contractor is trustworthy and if you think you're getting overcharged for materials, you may be able to find out. The best remedy is prevention; hire a local contractor only after checking his or her references, but if the project is underway, a little sleuthing might help.

  • What You Need to Know
  • Contact the National Association of Homebuilders for reputable contractors in your location.
How to avoid being overcharged

Step 1:

Ask for a detailed labor and material breakdown before paying your contractor. This is the first step in determining how much a contractor is spending on materials. On this sheet, the contractor should list the number of items he or she purchased for your job and the price they are charging you. For instance, one charge might read, "22 dimensional pine studs, $8.25 per item, total $181.50."

Step 2:

Figure in the contractor's material handling markup. This is the percentage of materials that the contractor charges for determining, ordering and arranging for delivery of the materials. Many contractors charge between 10 to 20 percent markup, but your contractor may charge a different rate. If the markup is not visible on the invoice, ask the contractor what they charge.

Step 3:

Contact the lumberyard where your contractor purchases materials and find out the price of the items your contractor is buying for your project. Add the cost of the items, plus your contractor's markup cost to see if he or she is padding your bill.

Step 4:

Request a copy of the original material receipts if you sense something fishy is going on. An unscrupulous contractor may charge you for high-quality materials, and then funnel less expensive ones into your job. With a copy of the material receipt, you can compare the items listed with the ones used in the construction of your project.

Step 5:

Count items if you're pretty sure your contractor is cheating. This is a last ditch effort because you must be able to monitor the job closely in order to determine how much material is going into the project. However, the most likely places where a contractor can overcharge you include items that may be quickly hidden from view, including insulation, wiring, plumbing and studs that are hidden once the contractor installs drywall.

Step 6:

Take discreet photos during the various stages of the project if you're concerned that your contractor is overcharging you. That way, you have documentation that a judge can view if you later decide you really were overcharged and you want to pursue a legal avenue.

Step 7:

Remember that a contractor can only overcharge on a job where he or she submits an estimate or if the contractor has agreed to charge for time and materials -- but not on a bid. When contractors submit a firm bid, they are bound to do the job for that amount of money, whether they allotted more than the going rate for materials or less.

  • Tips & Warnings
  • Remember, you have no say about materials if you asked for and received a firm bid. In addition, you can't even salvage excess materials without permission from the contractor.
  • If you're hiring a contractor to complete a job on a "time and material" basis, it's wise to sign a contract that details the contractor's markup charges and his additional overhead fees before the job starts.
  • If you accept a contractor's bid, you will pay the face amount of the bid no matter what.

About the Author

Glyn Sheridan is a regular contributor to DexKnows.

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