The Inside Outside Guys: Learn How to Determine Cost to Value

By Ken Calverley and Chuck Breidenstein

DETROIT, June 23, 2022
~ You just had that roof installed nine years ago and a bunch of shingles blew off in yesterday’s wind.

You do the smart thing and email your installing contractor. They are the ones that furnished the shingles as well, so this should be something they take care of.

The contractor thrills you with a fairly rapid response two days later, but they indicate your issue is with the shingle manufacturer. You are able to find contact information through the distributor who originally sold the shingles and a manufacturer’s representative shows up a week later and performs a physical inspection of the roof.

His declaration floors you. That great deal you got from your installer wasn’t such a great deal after all. It seems the shingles are prematurely failing due to a faulty installation with underlayment that contributed to their early demise. The manufacturer cites a written warranty that denies any responsibility when their shingle is thus abused.

The lesson here? You “saved” almost 20 percent nine years ago by hiring the lowest bidder and not comparing apples to apples. Your original cost was low.

But you are now going to have to have that relatively new roof torn off and replaced. Worse, the cost of labor and materials over the last nine years has more than doubled the installed cost and, due to inflation, your dollars are worth less today, so it takes more of them to make a major home purchase.

You received an awfully bad value for your invested dollars.

The industry tracks this cost-to-value, or CV ratio very carefully. On one side we survey the marketplace in the guise of realtors and try to discover what an investment in the home is worth when you go to re-sell the property. A new front door, for instance, may “return” up to 70% of its cost through added value in the sale price.

Another angle of the CV is represented by the issue with your roof. Had you gone with one of the higher bidders nine years ago, one certified by the shingle manufacturer who can also furnish a legitimate forty-to-fifty-year labor and materials replacement warranty, you would have received a far greater value.

The Guys like to characterize this as price-to value-to cost. What is the initial price compared to the value received and the actual cost over time? In the case of your roof, the initial price was low, but the value received was lower and the cost over time is going to be high.

Alan Seeley, owner of Kopke Remodeling & Design in Sterling Heights, reminds us how long its takes to save money for major home purchases as compared to how quickly that money is spent.

When a homeowner makes a buying decision based solely on price, they are likely to regret the decision as time uncovers the hidden issues of cost. Seeley, whose company specializes in kitchens and baths, cites the myriad of cabinets in the market that look great on the front face, but are made with inferior materials, poor quality joinery and hardware that doesn’t hold up to the rigors of daily use.

A buyer who has never been in the marketplace only sees the much lower price and assumes a better value.

Something as seemingly simple as ground-supported concrete is a huge CV issue with our listeners. On the day it is installed, most concrete placements look the same. The hidden value is in the preparation of supporting materials and forming, whether any steel was properly placed during the pour, and the mix and placement itself. The professional contractor bid nearly twenty-five percent more than the uneducated low bidder. But that would be money well spent as the properly placed slab will still look good in twenty years as compared to the inexpensive one that will spall, split, crack and vertically displace within five years or so.

Does this mean that spending more will automatically get you better product, process and quality?

The answer is “yes” only if you are dealing with good companies. Seeley cannot install a quality cabinet in your home without paying more for it. But he has been in the market for decades. He knows what to specify and where to shop for that specification.

The secret sauce is valid experience, and the buying relationships good companies have with their suppliers. This allows a professional company to furnish far greater value for the dollars invested.

Whether it is lumber, shingles or kitchen hardware, a company that annually purchases large volumes from a manufacturer or distributor can obtain better value than a once-in-a-lifetime homeowner or small volume general contractor.

Don’t be like the cat with the laser and get fooled by slick marketing.

When you are preparing to make that next, large, home investment take the time to talk with legitimate professionals. They love to educate people on the value of superior product.

Their advice and input can be worth tens of thousands of dollars to you, and they are easy to find at InsideOutsideGuys.com.

For housing advice and more, listen to the Inside Outside Guys every Saturday and Sunday on 760 WJR, from 10 a.m. to noon or contact us at InsideOutsideGuys.com.

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