Decisions, Decisions, Decisions again

 

The last couple weeks have been quite an adventure for my wife and I.  In the space of just over a week we have had issues with our roof, water heater, dishwasher and irrigation (sprinkler) system.  These events are accompanied by the usual and unfamiliar decisions.  Unfamiliar in the sense that most of us lack any substantial experience in making these types of decisions.  One of the elements of rational economics is that as we gain experience we make better decisions.  Behavioral economist Richard Thaler counters this, pointing out that most of us do not buy or sell enough homes to gain substantial real estate experience.  I would add, that many of the things I learned in buying our first home would be irrelevant in today's market.  In simpler terms buying a home in Mississauga Ontario in 1986 is vastly different than buying one in McKinney Texas in 2019.  So in that light, here is my view of one of our household decisions over the past couple weeks.

As I sit here writing there are a dozen roofers working over and around me.  This series of events began with a roof leak.  Here in Texas we go through long periods of drought interrupted by intense rainy periods.  So it is quite easy to go through several months without ever discovering a leaky roof.  So one day after about 4 hours of rain water began to leak through light fixture in our laundry room.  A couple days later the same actions.  Rain for about 4 hours than a leak.  The leak was very minimal  The amount leaked was never more than a couple quarts. After the first leak we called a roofer in the area that we had used in the past for a couple quick repairs.  There conclusion was that the roof was significantly damaged to need replacement.  Pretty much what they told us when they did the previous small repairs.  So the decision to replace the roof was pretty much made by the Texas weather (hail).  So after all the insurance hoops were jumped through (a subject that deserves its own post)  it was time to select a contractor.  This is where the unfamiliarity comes into play.

Selecting a contractor can be described relatively simply.  You contact a group of contractors, you get quotes from them and you select the best one.   Sounds simple, right?  However, unless your are well versed in the field that the work is being done it can be difficult to assess and compare quotes.  For our roof we received 2 quotes and I took quite a bit of time comparing the quotes.  You obviously look first for the total cost.  One quote was significantly less than the other.  Rather than jump for the lowest bid I decided to compare apples to apples.  In other words I wanted to know why the two bids were different.  The fact that the two bids were so different made me apprehensive about selecting either bid.  Was the lower bid too cheap (possibly cutting corners) or was the higher bid too expensive (basically a rip off)?

I then decided to compare the line items of each bid.  One bid was very simple to go through.  It was a list of the items and an over all cost.  Verbally they told me how payment was to be transacted.  The other bid was more detailed.  It listed all of the possible services the roofer offered and the ones we needed were "checked".  For example there was a line item for temporarily removing and replacing a satellite dish.  This was unchecked since we did not own a dish.  It also detailed how and when payments were due.  It also had line items indicating the amount insurance was paying (I had given both contractors the insurance info).  The different layout of the bids made it difficult to directly compare them.  Also neither quote had itemized costs.  Both had a list of the items (shingles, nails, valley material, etc.) and a total cost.  So I could not look and see if a single line item produce the lions share of the total difference.  So going deeper I compared the descriptions of some of the items.

Most line items were quite similar.  One the cheaper quote I noticed that the shingles did not specify "class 4" shingles.  This type of shingle was recommended to us by our insurance agent.  He also told us that if we used these shingles we would receive a discount on our insurance premium.  Since the cheaper bid did not specify "class 4" shingles I contacted them to ask if the shingles in their quote were class 4.  They told me that they were not.  After a little discussion they offered to send a new quote using the class 4 shingles.  This quote was almost the same amount as the other one.

Going through this process I began to think about previous posts and how this event supported my previous posts.  First off, the smell test.  The fact that the quotes were quite different meant something was not right and that I needed more clarity to make a decision.  So when I started to delve deeper into this information I was a little uneasy at first.  However as I went through the information I began to feel comfortable.  The simple quote with no financial information (other than the total cost) did not phase me.  I knew the total cost, how much insurance was going to pay.  From these 2 values I knew how much I was going to be responsible for (simple arithmetic).  As I posted before we all bring something to the table.  The information from my agent regarding the class of shingles was a great help.  I have not specifically posted about having good counsel but it does appear in many of my posts as an underlying theme.

One other thing about this decision is the fact that I had funds to cover the deductible and secondary costs.  I think a further post is warranted on the topic of anticipating and preparing for decisions.

As a final note we now have a new roof.  We eventually selected a the contractor that had more experience in working on the older homes in this area.  I felt that both contractors would do a proper job.  Both I felt were forthcoming and would have been good to work with.  I would happily recommend either of them.

As I said I have a new roof.  I also have more confidence going forward in making decisions about my future trials and opportunities.  In part due to the smell test, what I bring to the table and as always the sound counsel of others.

So far no new leaks!!!!!