Should you pay your contractor’s markup? (Yep.)

Contractors typically charge homeowners a 10-20% markup on their subcontractor’s (“subs” for short) work. If you think you might want to pay your contractor’s subs directly (like the plumber or electrician for example) to avoid your contractor’s markup, I want you to understand what you are getting and giving up by going that route.  

When your contractor pays his or her subs and marks up their services, then he/she is essentially taking responsibility for said services. If something goes wrong, you can count on the fact that it will be covered under your standard one year contract with your contractor. If you pay the subs yourself to avoid that markup, and something goes wrong, then it is up to you to remedy the situation.

Let’s say you remodel your upper floor and decide to pay the painter $3000 directly to avoid your contractor’s 15% markup so you are saving $450. Nice! That’s a short weekend getaway waiting to happen! 6 months later you realize that the painter neglected to put the mold and mildew additive in the paint in your bathroom, and it needs to be repainted. You have to call them up, be home while they are working, deal with the mess, etc. Not a huge deal but annoying…. And that may or may not happen, so it could be worth paying them directly after all. That’s for you to decide.

Now let’s look at a different, more risky type of work. Let’s say you paid a plumber directly to install the plumbing in that same bathroom. Once complete, the insulation went in, the electrical was routed around it, the sheetrock was installed, and the tile was artfully applied to your walls and floor. If a little gasket wasn’t installed properly and water begins to leak, then up comes the tile, off goes the sheetrock, out goes all of the wet insulation and wood… AND if water made its way to the floor below, well then, you can fill in the blanks there.

Now who is going to fix all of the damage? You? The plumber? Who is paying for it all? It wouldn’t be covered under your contractor’s warranty, because you took responsibility for that sub. You have to chase everyone down, be there while all of the various trades come back, protect the house as the damaged materials are hauled out and fresh materials are hauled in, etc. Sound fun? If your plumber charged you roughly $3000 to do the plumbing in that Bathroom (to make our math easy), is that $450 savings worth the massive headache in which you now find yourself? It wouldn’t be for me.

With those more risk-laden tasks including things moving or containing water (plumbing, tile in a shower, waterproofing, roofing, etc.), I would highly recommend that you look at that markup as a cheap insurance policy. The same can be said for electrical (can cause a fire if not done properly), structural work, etc. For those less risky tasks (such as painting) feel free to get out that calculator and decide what your time is worth to you.