Jeff Knorr doesn't like to keep clients guessing, nor does he want to put his company in a position of being sued by a disgruntled homeowner whose expectations haven't been met. So the president of Flagstaff, Ariz.-based JKC launched a system three years ago to inform clients of a remodeling project's progress using a third party.
In business for 13 years, he says the idea came after his company did some work for a construction/real estate attorney. “We were nervous about working with him,” says Knorr, who set up the risk management tool via an escrow account system that releases payments to his company as project phases are satisfactorily completed. “Fear of litigation combined with our goal of providing top-notch service prompted us to do this.”
The system is used for all out-of-town clients and for in-town customers who are using cash instead of a home improvement loan. Once the remodel details are nailed down, the project commences and a JKC project manager checks in with the client once a week with an oral update and photos via e-mail (typically of the demolition and rough framing, which Knorr calls “the most visually impressive” stages).
The company hires a home inspector, appraiser, or other qualified third party, and sets up an interest-bearing escrow account from which “draws” are allocated as the project progresses. “When we pull the permit, we ask for the first draw,” Knorr says. Then, upon completion of the masonry and flatwork, for example, a second draw would be requested and released upon approval by the third party.
“The inspector does a visual inspection and turns in his report to the escrow company,” says Knorr, who pays an average of $500 per project for the service, including the escrow work and about five inspections. The escrow company then sends a copy of that report to the homeowner.