The Early Warnings of Corner-Cutting Contractors

Friday, February 23, 2024

The Larossa Workshop Blog/The Early Warnings of Corner-Cutting Contractors

The Early Warnings of Corner-Cutting Contractors

Spotting the red flags before your project derails.

I'm here to give you the First sign that your contractor is cutting corners. Plus a few more. To truly understand this, I'm going to need to explain a couple of other things first:

  • ​What is cutting corners?
  • ​Why do contractors do it?

BUT I know you guys have no patience these days though so here are the first signs that your contractor is cutting corners:

  • ​The Black Hole
  • ​Pay Schedule Bending
  • ​Admin Skipping
  • ​Barrage of Change Orders

I will come back around and explain these in a couple minutes. Also stick around for a TWIST that I imagine you aren't expecting - The real reason contractors cut corners.

  • What is Cutting Corners?

First off, let's get aligned with what “cutting corners” actually means. Then I’ll hit you with the most common corner cuts for each main job that you’ll have done on a project.

The best way to explain this is by starting with what “cutting corners” is NOT. And that is making a SMART Scope of Work. When you’re in the game of buying investment properties it is imperative that you draw a line between what is “wanted” vs what is “needed.” To put it simply - Want is something that you would do on your personal house while Need is something that increases your PROFITS.

A real estate investor strategizing about what to leave off of a Scope of Work prior to a project is NOT cutting corners. To be clear, this does not mean to cut out basic safety, code, and other needs (cutting those things is something else entirely). It means to consciously CHOOSE to pay for only the tasks that return money into your pocket by increasing the sale or rent price in a measurable way. This means that for every $1.00 you spend you can draw a straight line to the $1.01 or more that makes it’s way back into your pocket.

Cutting Corners happens after you complete your Scope of Work then agree on it with your contractor. If you have made a clear Scope of Work, which is your setting of expectations, you will have outlined the following:

  • ​The job and tasks that need to be completed
  • ​The payment schedule
  • ​the material grade that is to be used

**PRO TIP: The items in your Scope of Work must be CLEAR. Ambiguity almost always leads to the same place - you getting SCREWED! Not out of malice it’s because these guys aren’t investors and don’t share your vision. Even if they are investors, all investors have a different vision and big picture plan.

After understanding a SMART Scope of Work the definition of cutting corners is simple.

Cutting corners happens when the items you've settled on in the Scope of Work gets shortchanged, either in ways you can see or, even worse, sneakily hidden inside the walls. Heck, sometimes things aren't even done at all!

Now, the moment to whip out your gavel only comes after the contractor hits you up for payment. It's key to remember that things can go sideways during the job—maybe their crew botched something and they haven't had the chance to swoop in to fix it. But when they call you, asking for that cash, what they're really saying is, 'Alright, I did my part, and this is what it looks like according to our deal (the SOW).' That's your cue to play the part of the judge. If you try to hold accountability before they have asked for payment you are simply an annoying little micro-manager. More on that later though. Stick around. First, as promised….

​Here are the Most Common Corner Cuttings sorted by Job:

  • Demo: unclean edges or stopping points. For example, they pull off drywall and just stop where it breaks instead of cutting clean ends. Now someone down the line will have to finish their work
  • Framing: undersized headers. Incorrect spacing between studs. Not enough fasteners or strapping
  • ​Insulation: not enough depth blown into the attic
  • Roofing: no drip edge. Insufficient flashing. Skipping the venting!
  • Electrical: backstabbing outlets or just general poor connections; Undersized wire gauge
  • Plumbing: insufficient venting; Improper sloping
  • HVAC: undersized unit or ductwork
  • Drywall: less screws than needed; Shoddy finish
  • Paint: shoddy finish; Missing closets or back side of doors; Pain on hinges! UGGGGGHHHH!!! I hate this one. A classic sign of laziness.
  • ​Floors: lazy cuts around doors and corners; Using transition strips when they could have run uniform from room to room
  • ​Trim: sloppy joints; Too much space between the trim and wall; Using the phrase "we'll just caulk it later" (A little of this is necessary. Too much is shoddy)
  • ​Cabinets: unleveled to either the floor or a level (Sometimes a carpenter has to install unleveled on an actual level to make it look right. Because everything else is unleveled.); Insufficient fasteners
  • Countertops: insufficient securing to cabinets; Unleveled (see above)
  • Windows: missing flashing or seal; Installed in a way that will make trimming out siding extra hard
  • ​Siding: insufficient flashing; Not enough fasteners, or wrong ones
  • Gutter: don't slope correctly; Poorly placed downspouts; Downspouts don't run away from house
  • ​Deck: setting posts and beams incorrectly. Concrete pad/footing, then post, then beam. All stacked on top of each other and fastened correctly.
  • Doors: don't latch or rub
  • Tile: not using enough adhesive or mortar behind them

A corner cut has many different faces but they always come down to a contractor doing less than what you agreed upon with them whether you can see it or not.

  • Why do Contractors cut corners?

Now it's time to understand why corners get cut.

There are certainly some dubious contractors out there that are doing this because of their greed and short-sightedness and you are just going to have to get better at spotting those types. Check out my article on the “10 Types of Dirty Contractors” for more on that.

That is not why cutting corners usually happens though. Most of these guys are good guys that are trying to make an honest living. It’s just that they have some issues. Like they really aren’t business operators, they are low on cash, they didn’t take the time to understand your vision, they can’t manage their people well, there is a labor shortage, material prices are always changing, and so on.

They have given you a bid or an estimate and they really want to succeed in hitting it. However, construction is hard! Especially the types of houses that we as flippers buy. Surprises? Guaranteed!

Then the contractor is faced with a decision. And sometimes, good people make not-so-good choices under pressure. Do they face the music with you, the customer, AGAIN! Do they eat the cost and not tell you so you will hire them on the next project? Do they find a different way around whatever obstacle they just hit? I mean “what if we just get some $1.00/ft laminated planks instead of that $3/ft LVP we were talking about?” It will all look the same to the untrained eye. “How about using that extra wire that’s in the truck from the last job?” It may not be exactly right but “what’s behind the drywall never hurt anybody, right?”

**Pro tip: They may just not have experience therefore lack the skills to pull off the Scope of Work despite good intentions. How do you differentiate a pro from a moonlighter? The fool-proof way is to ask them to actually walk you through a project verbally. Ask questions like “what would the first steps be” and “what would be some obstacles you’ll run into?” “Have you seen those obstacles on a past job?” “Walk me through the steps you took to remedy this?” Here's the golden rule: Folks can concoct glowing referrals, pay for reviews, or forge all sorts of paperwork. But faking on-the-fly, step-by-step project breakdown? Not a chance. When someone's seasoned, the roadmap rolls off their tongue. That’s experience talking, and it doesn't stutter.

Soon I will give you the MAIN reason contractors cut corners. First we will go through those Initial Warning Signs that I introduced earlier. I will explain what each of them mean, why the contractor does it and how you should respond.

The Black Hole

The contractor just stops showing up or answering your phone calls. Usually they don’t ghost you completely. They will be back and get a little bit done here and there. It’s terribly frustrating.

One of two reasons:

  • ​They have run out of money or they know that they are about to on some of the upcoming work on your project.
  • ​They have overcommitted on their workload and don’t have the skills to hire and manage appropriately.

Give them an ultimatum. Hopefully you have followed my guidance from other content and not paid in advance. Give them a date to complete (put your frustration aside and make it reasonable) and tell them if they aren’t complete you will hire someone else and deduct that amount from their pay. If they come back, confirm your scope and be extra vigilant when checking the completed work. Make sure no work gets covered before it’s inspected.

Pay Schedule Bending​

You have set up a pay schedule and when they ask for money they just aren’t quite wrapped up or they straight up ask for the money before it’s done because they need it for whatever reason.

Simple. They have run out of money.

When this sign shows its face, you are going to pay for it one way or another. Just say no!!! Their story is always a good one, because they have so much practice in doing this. It will get worse for you, take whatever loss right now and go find a professional.

Admin Skipping

They have failed to get permits or are hiring unlicensed people to do work that should be licensed and permitted. I’m not a Boy Scout so I understand there are times that you may ask for these things. But if you are doing work that requires this administrative step and it’s not getting done you are going to have some problems!

Multiple possibilities:

  • ​They’re not licensed.
  • ​They know that if they get the work inspected they will be asked to do things that will be more expensive than they bid.
  • ​They are hiding shoddy work and know you don't know what to look for.
  • ​They are so unorganized that they can't handle the administrative stuff which will eventually bleed into the work they do.

Before you hire a contractor you can check if they have the correct licensing online. You can also check if permits are pulled online or by calling the city or county building department. If you have already hired them and they have started, don’t pay until they provide the proper documents. MAKE SURE you have set this expectation from the beginning! Don’t just bring it up at payment time. That would make my “Top Dirty Customer Tricks” content, if I ever made one.

Barrage of Change Orders

They keep finding things that “are gonna be extra.” There is a balance here, because you will find things in these houses, but watch for excessive change orders.

They are trying to cover for the bid that they have already blown. Or they are unorganized and missed a bunch of items on the initial bid because they weren’t paying attention.

Don’t just automatically agree to them. Go to the jobsite, ask questions, and have them explain why they have to do that and how they arrived at the price. If you feel any BS, get a second opinion. Not in an aggressive way - something like “you know I have a contractor or crew that I work with that is really good at exactly this type of job. I think it’s mainly what they do and somehow they do it really cheaply. I’m going to have him come check it out just to see what he thinks.”

Seeing one of these signs doesn’t necessarily mean that your contractor is cutting corners, but it should definitely raise a red flag in your mind. As I’ve said before, cutting corners usually doesn’t mean that a contractor is mal-intended; it’s simple mismanagement in one way or another and this is a tough business to manage.

However, in most cases the main reason contractors cut corners is…..YOU!!

Yeah, that’s right. You are the problem. You’re a terrible customer and you need to learn to be better if you want to be successful as a house flipper. Plus it’s the only thing you can actually control here (ha, maybe).

“It couldn't be me, it’s gotta be these blue-collar boys driving trucks and swinging hammers who are messing all this up.” “Haven’t you read all the articles about contractor horror stories?”

Well, I can tell you since I have played both sides here that some customers make it really easy and they make contractors really want to do well for them.

They have expectations, but they don’t micromanage. They are open and approachable so they end up receiving the real information about what’s going on. They don’t freak out about the problems that inevitably happen on flip projects and then calmly discuss a plan that works for everyone when those problems do arise. They also have skills in assessing people to make sure they are working with the right types of vendors. They have taken the time to learn how to be a better investor and the different things to look out for. Which I have been working hard to help with if you want to check out some more of my content.

Now on the other end of the spectrum, there are customers who a contractor would have to try really hard to not want to take advantage of. You have to continually tell yourself “it’s just the way they are. They mean well, they just have no control over themselves.” They call or show up to the jobsite 40 times a day, micromanage everything, always ask the same questions, hold out pay when work is actually done, change their mind all the time then get mad because things are more costly or time consuming. They basically have zero self awareness. In their mind they think they are doing all the things we talk about here, but really they are just being an ass. Nobody wants to work with you and you better hope you picked someone who has a high ethical code because they will have to work hard to not want to take advantage of you.

It’s always a good time to take a look in the mirror. Make sure you are someone that the best contractors would want to work with. If you’re not, work on it. Everyone can improve.

I’ve been doing this for over a decade and I have seen all kinds of corner cutting. I’m sure there are plenty I never caught too. With that I have learned that it basically always comes down to setting clear expectations, hiring the right people, and holding accountability in a respectful way. It is truly treating people like you want to be treated. When they don’t follow suit, act quickly to remove them from your life. Good luck out there folks!

customer1 png

Hi, I'm Ross Paller

CEO Of Larossa

After flipping over 300 houses, holding a portfolio of 150 properties, and creating a successful construction company for over a decade, I felt compelled to pay it forward by sharing the wealth of knowledge and experience I’ve accumulated on my journey.

1 png

Learn to Systematize your Real Estate Investments

One tip at a time...

We spent over a decade focusing on one thing: creating systems to remove the complexity and headaches that come along with renovating a home.
​This allowed us not only to scale to flipping over 300 homes, but to have predictable, reliable returns, and most importantly peace of mind knowing that we would never have major unexpected construction costs.

Each week I take the time to make sure I send you something valuable and useable

Exclusive For You

Weekly Larossa Newsletter

We sit down each week and figure out how we can send you the most valueable and useable tips possible to help you increase your skills and ultimately your profit in Real Estate Investing.