Photo: Reservation by Matty Simpson Burma-2288964_1920
The point at which the buyer’s lowest price and the seller’s highest point are the same is called the reservation point. Is that the only thing that matters in a negotiation? I offer an example from a recent experience with a roofing contractor that I think we can all learn from.
When working on any type of home improvement project where contractors are involved it is always recommended to obtain three bids? Why? To see what the cost may be, to discuss various insights or alternatives of the vendors, and to gain insights into the process. I always learn something new from each vendor.
A practical example
A major hailstorm came through my neighborhood last year. Everyone was descended upon by roof contractors like vultures to a fresh kill. It was too much. If you ever experienced this, you know what I am talking about. I was receiving over a half-dozen door knocks a day (I have a home office) to the point I stopped answering the door.
I elected to accept three bids. I had some criteria. They had to be local. I did not want any out off town or national chains, and I wanted to make sure they could service me if there were any concerns later. They had to be timely. I had to know who was doing the work. I checked each of them out with the BBB and other information I found out about them on social media and networking with others. With that I went up on the roof with all three contractors.
In came the first contractor: He walked the roof, marked with chalk what he determined to be damage from hail and he estimated how much it would cost to replace the shingles and any metal work that needed to be replaced. He also told me he would upgrade the quality of my shingles to those of one of my neighbors and not charge me or my insurance company for the upgrade. When I asked who would do the work he told me that he was local. I asked again who would do the work. He said with all of the work in the area they would be subcontracting the work to an out of state contractor. He would get to my house as soon as he could. He would be happy to work with my insurance company’s claims adjustor. He quickly went over their standard contract with me and sent me a detailed bid for the job the next day.
In came the second contractor: He walked the roof, noted that some of the chalk marks were not damage from the recent storm but a previous storm, but still there was enough damage for the insurance company claims adjuster to require a new roof. He also noted flashing and aluminum gutter damage. I wondered about my neighbor’s type of shingles. He told me that was an upgrade and it would cost $300 more for those shingles. I told him about the first contactor. He told me that technically it was illegal for a contractor to offer an upgrade for shingles and not charge for that. I did not know that. He indicated he would make my home a priority to start right away since he already checked me out on social media. He told that he saw I was a block captain for community crime prevention with the police department and he wanted to make my house one of the first examples for a new roof from his firm. He told me that if his sign was out front for his company and completed timely other neighbors may react positively to his firm’s sign in my yard and completing the work timely. He would be happy to work with my insurance company’s claims adjustor. I was impressed that he had checked me out ahead of time on social media and decided to make my home a priority. He went over his contract with me, explaining every step along the way with insurance company and he also pointed out other things beyond the roof that I had not noticed. He left me with his estimate and we discussed the need to replace downspouts and gutters. I also asked him for an estimate for gutter guards. I was impressed with his honesty, integrity and approach.
In came the third contractor: He walked the roof, noted the chalk marks from the first contractor and accepted them. He agreed with those chalk marks as being recent, even though not all were from the recent storm according to the second contractor. He showed me how he differentiated them. He too said he could offer me higher quality shingles at no extra charge similar to the first contractor, when I asked him about my neighbor’s shingles. He indicated they were inundating this neighborhood and would subcontract the work, but still guarantee the work going forward. He would be happy to work with my insurance company’s claims adjustor. He could not comment on when the work would be done in the contract, but verbally he said they would make my house a priority. For what it was worth four months later none of the work by this contractor had started yet on my street with others that went with this contractor. He said he would deliver the estimate by the end of the day and he did.
The prices for the three contractors were within $500 of each other with the second contractor the most expensive of the three. I went with the second contractor. Why? He pointed out the ethical issue regarding the upgrade (I checked that out with my insurance agent). He would use local labor. He pointed out current and former hail damage. He expanded his analysis for the flashing, metal work and gutters as well as other damage on the property I had not thought about. He seemed ethical and honest. I checked him out on line where I read favorable reports.
When the claims adjustor came from my insurance company the claims adjustor had to be shown damage to my metal work and gutters from the second contractor. Initially the claims adjustor was not going to include that. Thank goodness contractor number 2 was up on the roof with the claims adjustor when he reviewed my roof. I was there too to witness the interaction. Otherwise I don’t think the claims adjustor would have included the metal work and gutters.
When evaluating a local contractor listen to what they see as concerns, what they will do, when they will do what and who will do the work. Get it in writing on the estimate in dollars and the completion date before you sign the contract. Make sure to read and understand the contract including completion dates. Read this carefully and take your time. Don’t be pressured into making a decision. Yes negotiations are about price, but as in this case and many cases there are many things to consider. Make sure all of your interests are addressed.
Michael Gregory, NSA, ASA, CVA, MBA, Qualified Mediator with the Minnesota Supreme Court is an international speaker that helps others resolve conflict, negotiate winning solutions and inspire leaders. Mike services clients business to IRS, business to business and within businesses. On point resources are available online at www.mikegreg.com and check out the blog. Mike may be contacted directly at firstname.lastname@example.org or at (651) 633-5311.
About the author
Mike Gregory is a professional speaker, an author, and a mediator. You may contact Mike directly at email@example.com and at (651) 633-5311. Mike has written 12 books (and co-authored two others) including his latest book, The Collaboration Effect: Overcoming Your Conflicts, and The Servant Manager, Business Valuations and the IRS, and Peaceful Resolutions that you may find helpful. [Michael Gregory, ASA, CVA, MBA, Qualified Mediator with the Minnesota Supreme Court]