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How to Negotiate Lower Prices With Contractors to Save Money

Whether you’re thinking about a major renovation project or simply need the occasional home repair, sooner or later, you need to work with contractors. For many property owners, it’s an experience akin to visiting the dentist for a root canal.

Mishandled home repairs can leave homeowners with unnecessarily high bills, blown timetables, shoddy work, and even property damage. Compounding the problem, many homeowners go into debt to pay for property updates, pulling equity from their home or taking out a personal loan for renovations.

Working with contractors doesn’t have to become a nightmare, though. You can negotiate a reasonable price for quality work finished on schedule. The tricks are preparation and negotiation.

How to Negotiate Lower Prices With Contractors

These tips for negotiating with contractors will ensure you never get overcharged for shoddy work again.

1. Plan Home Improvements for the Slow Season

Sure, some repairs prove unexpected, popping up and requiring urgent attention. But for elective repairs and home updates, you can save money with careful timing.

When you call an HVAC contractor in July and ask them to service your air-conditioning condenser, don’t expect them to say, “I’ll be there in 15 minutes.” During their high season, many contractors find themselves booked weeks or even months in advance.

And if you want to skip the line and receive priority service, expect to pay a pretty penny for it.

Plan your home improvement projects in advance, and strategically schedule them for the slow season. When you call that same HVAC contractor in April, they’re much more likely to have free time and plenty of it. You can negotiate your new HVAC system from a position of strength and plenty of hungry, available contractors to choose from.

2. Collect Contacts Before You Need Them

No matter how perfect your home seems today, the day will come when you need a repair — urgently.

It could be a roof leak, a furnace that breaks down in February, a burst pipe. Emergencies happen. You can prepare for them financially with an emergency fund, but you also need to prepare with personnel.

Because when a pipe bursts and starts blasting water all over your home, you need a contractor within minutes or hours, not days.

Whenever you overhear a friend, colleague, neighbor, or family member discussing a home improvement project, ask them about their satisfaction with the contractor. Did they perform quality work at a reasonable price? Did they stay within budget and on schedule?

Regardless of the contractor’s specialty, ask for their name and contact information. Write it down somewhere safe so you can find it when an emergency arises.

Instead of panicking and doing a Google search for plumbers to fix that burst pipe, you can calmly reference your list of three or four plumbers that came highly recommended. Just as important as their trusted reference, you also have several to choose from, so you aren’t at any one contractor’s mercy.

And that can prove vital as you negotiate pricing.

3. Never Look Desperate

No matter how urgent the repair, you must never, ever appear desperate. Unscrupulous contractors’ noses perk up at the whiff of a huge paycheck.

Explain that you are collecting four or five quotes and that even though it’s important to you to fix the issue as early as possible, you don’t want to do a shoddy job just because it’s on a tight schedule. Ask for their best price and their timetable for completing the job if you decide to hire them.

Ask as many questions as you can think of about the scope of work. The better you can understand the project, the less ignorant and desperate you’ll appear to the next contractor as you explain the problem.

4. Collect 3 – 5 Quotes & Learn From Each

Conventional wisdom suggests you collect three quotes for any home improvement project. But four or five is even better.

First, it gives you exposure to more perspectives and greater odds of finding the perfect contractor for the job. But just as important, it gives you a chance to understand the scope of work better.

Often, when you call the first contractor, you don’t fully understand the requirements of the job. You know the symptom of the problem, such as the furnace failing, but not the root cause or the work involved in fixing it.

The first contractor arrives to look at the furnace, and all you can say is that it stopped working. But as you trudge down to the basement with them and they unscrew the panel, you can ask questions about the project.

Does it appear to be an electrical problem with the circuit board? A blockage in the filter or ducts? Maybe the pilot light simply blew out and needs to be relit. Or perhaps the furnace died of old age after 35 years of faithful service.

When you call the next HVAC contractor, you can explain the problem in more detail. As more contractors inspect the furnace, and you ask more questions, you learn the right questions to ask and understand the cause of the problem better.

That added competence and confidence puts you in a better position to negotiate.

Make sure you call the first or second contractor back before making a decision and share any additional information you’ve learned. Give them a chance to amend their quote.

5. Collect Licenses, Insurance Bonds, & References With Each Quote

Each state’s department of labor and licensing contracting licenses. Additionally, insurance companies issue bonds that allow you to file a claim with the contractor’s insurance if they violate your contract or do demonstrably shoddy work.

Both offer you some measure of contractor accountability. You can file complaints with the state licensing board and potentially see a contractor’s license revoked, and you can file a bond claim for a refund of any losses.

However, if you wait until after a dispute arises with your contractor to ask for their license or bond insurance details, don’t hold your breath waiting to get it.

You have exactly one chance to gather these documents: when you collect quotes. Contractors surrender this accountability leverage to win your business, and for no other reason.

Also ask for client references while collecting quotes — and actually call them. But you can also go a step further and ask what jobs the contractor is currently working on. With the owner’s permission, drop by the work site and see the contractor’s team in action.

This due diligence in screening contractors helps you choose the best candidate. But it also positions you as being thorough and capable before you even enter negotiations over price and timeframe. It sends a clear message you are no easy mark for fleecing with inflated quotes.

6. Check Other Clients’ Feedback

Yes, it’s worth calling the contractor’s references to ask pointed questions about their work and ability to complete jobs on time and on budget. But keep in mind the contractor cherry-picked these clients as their most satisfied.

So don’t end your due diligence there. Start by running a quick online search for the contractor’s name and the word “reviews.” Search both by their personal name and their business name, as business names can change overnight.

Go a step further by searching for them on Yelp, Angie’s List, and Home Advisor. These make up some of the widest contractor review websites in the country, and if you can’t find the contractor listed in any of them, consider it a glaring red flag.

Read the reviews carefully, and remember that even good contractors occasionally clash with difficult clients, so in most cases, there’s no reason to let a single negative review sway your decision. A glut of negative reviews makes for a different story, though.

7. Don’t Reveal Your Budget

As you ask for quotes, many contractors also ask about your budget. They want to feel you out, and they often charge accordingly. If you offer a $5,000 budget for a $3,000 job, how much do you think they’ll quote you?

Deflect the question instead. Turn it back on the contractor with an answer like, “Zero dollars. I was hoping to avoid this repair entirely. But since that doesn’t appear likely, what’s the lowest bid you can offer me for the job?”

Also ask them what they charge as an hourly rate and how many hours they estimate the job taking. Some contractors start squirming at this point, reluctant to be pinned down with such transparency. And be sure to ask for separate quotes for labor and materials.

Ultimately, you want to force the contractor to come up with the figures and to make it clear that you expect their lowest possible price because you’re collecting similarly competitive bids from several other contractors.

8. Structure Payments With Extreme Prejudice

Not many contractors ask for deposits or milestone payments for a $500 job. A $50,000 job is another matter entirely.

When you hire a contractor for a larger job, they often ask for a series of payments rather than one single payment upon job completion. To help them buy the materials they need, they sometimes ask for a deposit before even starting work. They may also ask for partial payments at various milestones along the way, known in the industry as “draws.”

For owners, structuring deposits and draws is the most dangerous moment in the entire contracting process. Contractors inevitably push for as much money upfront as possible for a material deposit and aim to stack the draw schedule with money early in the job so they can collect money before doing the work.

Your interests lie in direct opposition to theirs. You want to surrender as little money as possible early in the job, with most money due only after completion.

As part of the negotiation process, ask what funds the contractor requests before completion of the project. And then be prepared to fight tooth and nail to backload the draw schedule even as the contractor tries to frontload it.

There’s a trick to help you avoid them getting ahead of you on payments. Remove their argument for a deposit by paying for the materials yourself.

9. Pay for Materials Yourself

After you’ve agreed on labor costs but before you’ve agreed on a draw schedule, throw a curveball: “I’ll pay for materials myself so we don’t have to worry about a materials deposit.”

Not only does it negate their need for a deposit, but it also prevents them from inflating material costs on you. At the same time, it lets you finance the material costs on your cash-back credit card or travel rewards card to reduce your cash outlay and garner you some rewards in the process.

It doesn’t remove all risk of inflated costs, of course. An unscrupulous contractor could buy more materials than they actually need and set them aside for other jobs.

But if you physically meet the contractor to purchase the supplies rather than providing the cashier your credit card by phone, fewer contractors risk blatantly inflating the material costs before your very eyes.

10. Ask About Sign Marketing

Contractors love to market their services to passersby with yard signs: “Another Great Job Done by Bob Bros. Contracting!”

Before signing a contract, ask if they intend to use your property for marketing with a yard sign. If they say yes, draw a line in the sand: They can either pay you for marketing on your property in the form of a reduced quote, or they can leave the sign in the van. Hard stop.

They’ll protest and insist it’s “normal industry practice.” Stand resolute and reply that advertising on your property isn’t free.

Whether they offer you a discount or leave your lawn unbesmirched with marketing messages, you win either way.

11. Pick Through the Contract With a Fine-Toothed Comb

Read every boring word of legalese in the contract, even when it threatens to send you into a sudden bout of narcolepsy.

Pay particular attention to the warranty, the materials used, the draw schedule, and the timetable. If they aren’t crystal clear, insist on adding your own language.

Don’t be afraid to get creative, either. You can structure the deal with performance incentives, such as a $500 bonus for completing the project early, and a $500 penalty for completing the project after an agreed-upon deadline.

Make sure the contract itself includes the contractor’s license number and bond policy number to remove any confusion in subsequent claims or disputes.

If the contractor doesn’t like it, they don’t have to work for you. You have three or four other quotes from contractors hungry for your business.

12. Manage the Contractors Through Completion

Negotiation doesn’t end with signing the contract because you don’t yet have what you want. Only when the contractor has completed their work at a quality that meets your standards does your contract end.

That means you need to stay on top of it until they finish the project. Check the contractor’s work daily, and don’t be afraid to ask questions. The better you understand their work, the better you can manage it.

If you see any detail that strikes you as odd, suspicious, or inferior, ask the contractor about it. Keep a clear vision of what you expect the result to look like, and hold the contractor to that vision.

Most of all, continually confirm that the contractor remains on schedule. If they hesitate when they answer, consider that your cue to bring the pressure:

“Finishing this job on schedule is extremely important to me. I sensed a hesitation just now when I asked you about the job’s status, so let me rephrase: What do you need to do to complete the job on schedule?”

That leaves little wiggle room for cons, lies, or excuses. Put the onus on them to come up with a solution for completing the job on schedule. If that means working weekends, so be it.

Ultimately, it’s your responsibility to ensure they finish the job on time and within your budget at the quality level you expect. The contractor has their own priorities and interests, so if you want the result you negotiated for, you need to manage them day in and day out until they finish the job to your satisfaction.


Final Word

I’ve found working with contractors to be one of the most challenging aspects of investing in real estate. And whether you’re a homeowner with a ship-shape house or a real estate investor flipping houses, you need contractors you can call when the need arises.

You probably live in a world where people generally show up on time to meetings, do what they say they’re going to do, and collect a mutually agreed-upon fee and no more. Contractors don’t necessarily live in that world.

For many of them, it’s no skin off their back if they show up late for jobs, don’t complete work on time, do shoddy work, or demand more money halfway through a project — unless you make it their problem.

But to do that, you need to negotiate the project aggressively, and then manage it like a hawk.

Like so much else in life, successfully working with contractors revolves around prevention. Demonstrate from the very beginning you’re paying close attention and you plan to hold them to a high standard. Most importantly, anticipate what can go wrong — and then make sure it doesn’t.

G. Brian Davis
G. Brian Davis is a real estate investor, personal finance writer, and travel addict mildly obsessed with FIRE. He spends nine months of the year in Abu Dhabi, and splits the rest of the year between his hometown of Baltimore and traveling the world.

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