Remodelers Embrace Price Transparency
Thanks to the internet, remodelers and other building pros know much more about what the materials, tools and services they use should cost, but few seem willing to pass that information along to their customers.
Newsflash — homeowners can get that information online, too, and are using it to evaluate contractor estimates. Whether or not they are applying that information correctly is beside the point; contractors are under much greater pressure than ever to justify their prices. Indeed, a lack of transparency into contractor costs, markups and fees remains at the root of consumer dissatisfaction with the home remodeling trade, according to many industry leaders.
Consumer expectations of price transparency have certainly contributed to the rise of the design/build model since the 1990s, but most contractors remain extremely reluctant to share such information with their customers — most, but not all.
Replacing markup with management fees
A growing number of award-winning design/build firms are embracing price transparency in a bid to win market share. Some have invested in franchises that combine buying power and the internet to provide homeowners unprecedented control over their home improvement projects.
Alair Homes has become one of the fastest-growing residential construction franchises in the United States since 2015 by promising “True 100% price transparency from receipts to invoices to markup percentages.”
The Canadian company does this by letting homeowners use its online system to review subcontractor bids, make selections, schedule payments and monitor timelines and inspection reports along the way. Under the Alair Client Control™ Construction Management system, customers are charged the same prices for materials and labor that Alair pays with no additional markup. The company says its approach empowers homeowners to take full control over their projects and save money through the company’s national buying power.
The concept appears to be gaining traction in the United States, where 24 Alair franchises operated at the end of 2018, up from 18 a year earlier, according to Entreprener.com.
Among its newest franchisees is Jeff Jenkins, who opened Alair Homes in New Braunfels, Texas in early 2018 after nearly 13 years of owning his own custom homebuilding business.
“This grants me the ability to leverage my company’s reputation to secure incredible discounts on everything it takes to build or renovate a home,” explained Jenkins. “As part of my commitment to price transparency, I pass along these discounts to my clients without additional markup. This helps me to not only remain competitive but deliver more value for the money and oftentimes instant equity in the homes my clients love.”
Unbundling design/build costs
In Minneapolis, the design/build firm Otogawa-Anschel has unbundled its pricing to provide homeowners more visibility regarding costs.
The company uses separate design and build contracts so its clients can clearly see what they are paying for each service, right down to individual subcontractors’ estimates. Rather than mark up these estimates, Otogawa-Anschel lists fees for the management services it expects to provide as general contractor.
“Around 60 percent of the way through the design process, we bring in all of our trade partners to assess and identify any potential surprises and to fully estimate the project so we know if we are on target with our budget,” the company explains on its website. “What this means is that when we finish the design, we know to the penny what the project will cost. Our construction contracts are not cost estimates; they are fixed sum contracts.”
Pro.com completely changed its business model three years after launching as an online marketplace to match homeowners with trustworthy local contractors. The company did so after discovering it could not deliver price transparency it deems essential to customer satisfaction. Founded by former Amazon employees in 2013, the Seattle-based company has gone on to become a licensed general contractor and recruit subcontractors in every state in which it operates.
“Transparency, responsiveness and continuous communication are the values we bring to every project in order to delight our customers,” Pro.com vowed in August 2017, when it announced it had raised another $10 million in venture capital.