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Monday, February 16, 2015

How (and Why) to Caveat Emptor



Many buyer beware stories start off the same way: someone stops by a house and offers to work fast and cheap. This work might include tree/limb removal, gutter cleaning, or roof patching. Often these tasks fall under the category of things a homeowner might consider doing him or herself, but if someone is willing to do it cheaper and with less hassle to the homeowner, then what’s the harm – right? The homeowner may be handed a business card or have a truck with a company logo on it. It looks legit – right?

What buyer beware stories don’t discuss, what may be impossible to determine accurately, is how many times these situations work out for the best. Boy Scouts CAN clean gutters. An enterprising young person CAN paint houses. Anyone with a chainsaw and a little experience CAN trim a tree. Why must a homeowner contact state and local agencies to check out every entrepreneur that comes offering help? Why must a homeowner pay taxes on services rendered at their home, under the table? If there were more problems than success stories, homeowners would be a lot more cautious. Therefore, it must be rare for things to go wrong.

Occasionally, however, things go wrong. And when they go wrong, they go terribly wrong. Like when a Little Rock homeowner posted for help on social media finding the people who did this:

A picture is worth a thousand words -- and in this case, easily thousands of dollars in damages.
image posted on https://www.facebook.com/forbidden.hillcrest ; Riley Adams -- homeowner and photographer
.



The tree crashed into the homeowner's three-year-old’s room. The owners were out of the house and no one was injured. Neighbors alerted the owners when the fly-by-night entrepreneurs fled the scene of the broken home and fallen tree. The owners tried to call the number on the business card they were given – but there was no answer. So the homeowners turned to social media.

Some commenters on Facebook turned on this family in their time of victimhood, crying "caveat emptor!" Many of them knew reasonable licensed tree-service professionals. Professional arborists, for example, would have cut the tree in pieces from the top down. It would have taken longer and cost more to do it this way. But it would have prevented the expense these “victims” will face in restoring their home. Reputable businesses cost more to run than businesses which fly by night. They often pay higher wages and corporate taxes, as well as having to pay for licenses, insurance, and bonding. These costs are worked into the cost of doing business and passed on to customers.

Many customers choose to risk rock bottom rates over paying the rates of businesses who operate safely and legally. Businesses have fairly fixed overhead costs. However, many customers fail to consider economy of scale. Dividing the fixed costs of legitimate businesses by two jobs yields a higher per job rate than dividing those costs by 20 jobs or 200 jobs. The more work a company contracts, the cheaper each contract. Conversely, the fewer contracts, the more expensive each contract. If small legitimate businesses can't get enough contracts, they are less likely to hire more help and expand. Worse, small businesses risk going under. As a result, every time a fly by night entrepreneur takes a contract from a legitimate business, everyone pays more -- and that's BEFORE someone's home is destroyed.

Homeowners may still choose to do work themselves; however, most city ordinances prevent homeowners from hiring unlicensed outside help. So if homeowners are caught hiring an unlicensed entrepreneurs, penalties could be imposed by various governing bodies. Most homeowners aren't penalized because by the time the governing body is informed about the shoddy workmanship, the homeowner’s personal damages are already significant. However, every time citizens support unlicensed business practices, they hurt legitimate small businesses and drive the costs up for everyone. 

Please visit the following government agencies or their websites for education and assistance before hiring cheap labor that costs more than was bargained for.

State Contractor’s Licensing Board
Homeowners’ Association Webpage or Bylaws
City Ordinance Bylaws for the homeowner’s city and state

Phyl Campbell posts parenting and how-to articles to her blog on Mondays. She is author of several books, including Mother Confessor, Carley Patrol, and Martha's Chickens & the Pirates. Check out her blog and website for more information.