Ethical and/or Legal

I have a question about the ethical and/or legality of this situation.

If a contractor writes an estimate for a homeowner for a roof replacement for say $10,000 and the insured agrees and signs the contract. However after finding out that the contractor’s prices are way higher than the current market conditions, the homeowner decides not to use the contractor. The contractor then says that’s fine if you don’t use me, I need my $2,000 fee now. The homeowner is shocked to see that at the bottom of the contractor’s contract there is a statement that says “If the homeowner cancels this contract after 5 days a 20% fee will be assessed of the total contract amount.

I just want to get some input as to what you contractors, adjusters, and attorneys think about this kind of business practice.

Especially for an insurance compensated project, often a contractor (well before the legally binding agreement has been signed) has put in a lot of effort with sketching the roof, discussing figures & component coverage with the insurer, etc. Essentially, a lot of ‘back end’ work.

The difficult part is when all of this is done & the customer decides to go with someone else who might not have done all the proper advance legwork but offers $ 50.00 off the deductible or 10’ more of free ridge vent.

Once the contract is signed, it’s customary to order parts (which will often cost a restocking fee if turned around) & they might even be roof loaded by the 5th day.

Considering that most state & federal “cooling off” rules require only a 3 day provision for cancellation, I’d say that 5 days is a bonus offer to the customer.

Now, I’m not saying that I would glue down every customer for the cancellation fee. Everything in life is negotiable & there are different circumstances for every situation.

I especially wouldn’t want to risk my good name for the sake of one contract, even if it is $ 2,000.00 for the perception of not having done anything of ‘real’ value (even though, as noted above, there has already been a lot of time & effort involved).

PS: I don’t want to fall back onto “let the buyer beware”, but are we talking about $ 500.00 difference or something like 20% over other similar / comparable offers?

It IS incumbent upon the customer to do their research & get as educated as they reasonably can be… but @ some point you’ve got to go ahead & pull the trigger on the project. Buyer’s Remorse is a deadly thing to deal with.

PPS: As to the legality of it, seems like the customer is stuck & even more so if the contract was double signed (husband & wife) or witnessed on the paper by someone else.

I can get you a free once-over on the legal language / fine print if you can either paste in here or Email me what the provisions & details of the agreement are listed like.

I once bought a truck for about $13,500.
I just happened to pick up an old newspaper a couple of days later and saw “my truck” advertised for $500 less.

Now that was the same dealer and I was pissed— That I did not negotiate better. But I also decided then & there that I’d never shop there again. I felt they should’ve offered mt the advertised price.
Now if another dealer was selling the same truck cheaper, it’d be different.

I’ve learned over time not to 2nd guess my buying decisions. It is a bottomless pit, an endless road. Buy and move on.

Not everyone charges the same and in this instance they did not buy from the cheapest contractor. But buy they did. There is ALWAYS someone cheaper

I think that - if the homeowner was shocked - then the roofer is unprofessional if he does not let the homeowner go (if that is a strong wish of the homeowner). Instead, the roofer might have said it was not a problem, then resold his customer. That was the win/win that was lost forever.

That type of provision should have been emphasized in the negotiation. The homeowner should NEVER be shocked about any provision of the contract. If we know what we are doing, we should write contracts that are clear, simple, and we should deliver what we promise (and then some).

The gray area that will be present in our business comes in in the complexity of the product we deliver. There are tons of minute details that can be misunderstood. Not every detail can or should be listed, but that wreaks of unprofessionalism, in my opinion.

I’m not sure you posted the entire story. Many contractors use a contingency agreement when working with Customers on an insurance claim. Generally, the contingency agreement states the contractor will do the work for the insurance proceeds and limits the Customers expenditures to their deductible. The contractor then proceeds to inspect and measure the roof, create an estimate (often using Xactimate software which is used by a high percentage of insurance companies), meets with the Adjuster for the insurance inspection and negotiates with the Adjuster over the validity of the claim and payment amount.

Occasionally, the Homeowner gets their statement of loss and check subsequently seeing an opportunity to personally profit from the transaction by bidding out the job. They then want to cut out the original contractor that invested substantial time & $ to assist the Homeowner in getting the claim approved and receiving a fair and reasonable payout from the insurance company.

The payout is generally within the range of what is reasonable for this type of job in that area, otherwise, the insurance company wouldn’t pay that amount. Xactimate estimates are just that as they utilize a rate chart that is downloaded each month. The only things open for debate are the line items and the quantities.

If the Homeowner wishes to attempt to profit from the insurance claim, whether that is legal, ethical or otherwise, that is up to them in my opinion. That generally means they plan to do the work themselves, get friends or relatives to do it or use a crew of illegals working for sub standard rates. Again, that’s up to the Homeowner. However, if that is their plan, how ethical is it for them to sign a contract and utilize the efforts, expenditures and expertise of the original contractor without compensating them? It is also possible that the Homeowner is commiting insurance fraud by creating a situation where they profit from the claim.

My learning experience came from working with a homeowner and his insurance company for two months to get them to pay for all the things they missed. Little did I know he was working with someone else at the same time. After about 30 hours of behind the scene work being done, without any work being done on the actual house, I got the insurance company to a good amount.

After that happened, homeowner told me he chose someone else to do the job and has been working with him the whole time. I almost punched him right in the mouth. They came in a lot cheaper. Since then, things have changed and before I even agree to meet an insurance agent at a customers house, I have them sign a contigency agreement. Now I dont care if you choose someone else, I still get compensated for my time.

It sounds like the homeowner signed a deal for 10k and then the insurance refuses to pay that amount.

I can’t seem to get the insurance companies around here to pay my rates.

I’ve even tried summitting estimates using exactimate. Problem is that in order for me to make any money they have to pay 10&10. Which most of them won’t.

I’m about fed up with the whole damn deal. I think I would have been better off with the storm.

[quote=“THE OUTLAW ROOFER”]It sounds like the homeowner signed a deal for 10k and then the insurance refuses to pay that amount.

I can’t seem to get the insurance companies around here to pay my rates.

I’ve even tried summitting estimates using exactimate. Problem is that in order for me to make any money they have to pay 10&10. Which most of them won’t.

I’m about fed up with the whole damn deal. I think I would have been better off with the storm.[/quote]

Do you mean “Without the storm”?

I think you would at least owe him half of his fee.

[quote=“THE OUTLAW ROOFER”]It sounds like the homeowner signed a deal for 10k and then the insurance refuses to pay that amount.

I can’t seem to get the insurance companies around here to pay my rates.

I’ve even tried summitting estimates using exactimate. Problem is that in order for me to make any money they have to pay 10&10. Which most of them won’t.

I’m about fed up with the whole damn deal. I think I would have been better off with the storm.[/quote]

Notwithstanding the basis for the claim & other roofing components, what’s up with the 10% & 10%?

Are you doing any other work beyond the scope of the roof? Is there any other work required such as an A/C combout, window screens, fencing, gutters, broken windows, chipped vinyl or Hardie siding?

I find that if you list yourself to the insurer as a roofer & they only have 2 other components, well to the insurance co (or agent) that means there’s only 2 components 'cause you’re already getting paid on the roof as it is.

Instead of “XYZ Roofing”, list your estimates as “XYZ Repairs” or “XYZ Contracting”. Be careful if your state or area would have a problem with you using the word “contracting” & please note that I didn’t use contractORS.

Also be aware that some co’s say they won’t pay a 10 & 10 because it’s already built into the pricing for each individual components. Whether it actually IS, can be debatable as I’ve seen lower pricing for the total project as compared to a broken out Xactimate with the 10&10’s as a separate component.

You have to include your O&P within your estimate. The insurance companies that I am familiar with don’t pay O&P for a roof only. Even with other trades involved there has to be coordination. Of course that may change with the storm.

Here is an example of what I am talking about.

And for this example lets say that the price of the estimate is much higher than the current market conditions. Lets also assume for this hypothetical example that the homeowner is widowed and elderly.

What are your thoughts now?

Well, your last part of it only SLIGHTLY changes things (please note that my commentary prior to this was in relation to the 10 & 10).

You say “elderly” & if the customer is ‘of a certain age’ & not really competent to make decisions like this on their own or without some sort of assistance, then are we talking about taking advantage of someone (much less potentially in violation of the law for elderly abuse)?

I can understand the idea of charging a premium rate for a premium service, but @ some point you have to ask yourself if you’re
A) screwing yourself out of future business or
B) messing with a good reputation in the event word of this gets around (provided you aren’t genuinely providing a quality service for a quality price).

Now, let me tell you that if I could get Xactimate kind of dollars on every project then I’d never have a complaint in the world. I don’t know about your market, but in mine the Xactimate money is about 50% or more higher than what I can ‘reasonably expect’ for a quote where it’s more about the dollars I’m quoting in competition with other roofing co’s.

So, the final question I have for you is this:

Do you feel RIGHT? I think that if you had a clear conscience about this whole thing that you wouldn’t be here asking us what to do.

Are you kidding me? I am not the one doing this…This is an example of something that is going on here around me. Im not a contractor. This is a situation I am dealing with and I do not think that it is right! I just wanted to get some other opinions to see if I am making to big of a deal about it.

In this example I am giving to everyone, the prices quoted were higher than xactimate with 20% O&P on top of that. Basically 10k for 30 sq of 25 year comp. No steep, no two storys, no valleys, no IWC. The only add on was 30lb felt… I would venture to belive that if a contractor could make 20% off of every estimate that they wrote, there would no need for actually doing the work because they could make more money writing high estimates than they could actually putting a roof on.

Which brings me back to my original question. Is this ethical or legal?

OK, so you weren’t clear on whether you were directly involved as a contractor (the selling contractor) or not. (Or if you were, I didn’t pick up on it)

Ethical? Maybe. I still stand by the idea that if this person is elderly & doesn’t have anyone to advocate for them or assist in purchases like this that it’s possibly illegal.

The flipside of this is that if the contract isn’t over priced & the work to be performed is valid, “Caveat Emptor”; “let the buyer beware”.

The 20% cancellation fee is valid, IMO, because I have plenty of stories for customers I’ve done all the serious & difficult work for when it comes to the insurance process, only to have them use someone else for the work, whether cheaper or one other ‘free item’ that I didn’t offer or wasn’t asked about.

If the price that’s contracted is IN SCOPE OF WORK TO BE PERFORMED a 1:1 to insurance but the price is about 20% higher, then yes, it’s probably not fully ethical IMO.

Sorry I was not clear in the beginning. Thanks for the input.

Thats perfectly legal & ethical here in new england. you do have the right to back out, however you are not entitled to your deposit back.You homeowners dont know how much time & money is invested in just doing a free estimate & once you agree & sign, alot more time & money gets invested in planning, material purchases, permits, container rentals, & etc. Once you sign the wheels start turning, i collect my first 20% right when you do sign, fine back out after that if you want.

ethical and legal!

Authentic Dad, you are the man!
If i could write like you…
I wish you here sellin roofs for me.
the weathers nice…