National contractors pull into Dexter
by Sally Mitani
Like many residents of the Huron Farms subdivision, Scott Kraft was grateful for all the help that arrived after the March 15 tornado. Right behind the police, firefighters, and ambulances, volunteers showed up offering water and shelter. And soon after that, big shiny trucks pulled up, with 800 numbers painted on their sides.
The trucks came from companies that specialize in disaster, including Belfor ("the worldwide leader in disaster recovery and property restoration"), Statewide Disaster Restoration (offices in Detroit, Grand Rapids, and Florida), and Jarvis Property Restoration (offices in four states). Contracts were signed, and out came the fifty-foot blue tarps.
Kraft is president of the Huron Farms Condo Association (though the subdivision is made up of single-family homes, common areas are owned collectively). From what he's heard, most of the out-of-town companies did a pretty good job in the hysterical days following March 15.
The help offered by these disaster emergency contractors--or "storm chasers," as Jeff Brown, president of Dexter Builders, calls them with a laugh--is controversial. No one disputes that some Dexter residents needed help that night, but storm chasers are expensive, and in the heat of the moment, homeowners don't always realize that those fees come off the top of their insurance settlements.
Moreover, to the consternation of local builders, some of the storm chasers are sticking around for the rebuilding process.
"Contractors who clean up disasters are broken into two different groups," explains Jim Haeussler, president of Peters Building in Saline. "You have disaster recovery types--boarding up windows, putting on tarps--basically protecting the assets. They get paid unbelievable fees. But it's specialized work. They need a lot of equipment. I don't even pretend to know the costs associated with it.
"Then you have the rebuilding."
"When the storm first happened, Belfor had this whole area here," says Tony Push, another partner in Dexter Builders, pointing to the corner of Wilson and Ryan in Huron Farms. "They had a trailer. They had tents."
Steve Lucchesi, an Ann Arbor-based contractor, says:
"I was told people were coming up [from] as far as the South. They mobilize and they're here within minutes. People are overwhelmed because their houses have been destroyed. They're told, 'Don't worry, we'll charge your insurance company.'" In one case he knows of, a resident was charged $8,000 to wrap his house. "It should have cost $3,000," Lucchesi says.
For better or worse, the expensive and necessary triage process was soon done. Insurance adjusters arrived to calculate payouts for storm damage (an estimated $59 million statewide). Homeowners found out how much money they had to work with, and the rebuilding began.
By mid-May, with rebuilding well under way in Huron Farms, many of the storm chasers were still on the scene. Brown and Push of Dexter Builders drive past trucks belonging to Jarvis, Statewide, Belfor. But these are not the same trucks that drove in on March 15. "Different crews come in. They have their emergency teams, and they have their carpentry teams," Brown explains. "They're all licensed builders, so they can put the homes back together as well." He pauses, parsing his words carefully. "They may do very well for the customer. I hope they do. [I hope] they're not cutting corners."
Amy Bach isn't optimistic: "Storm-chasing builders are an increasingly problematic phenomenon in our current economy. It's being fueled by the fact that some contractors are basically desperate for jobs and some have taken their desperation on the road." Bach is executive director of United Policyholders (uphelp.org), a national consumer advocacy group. "These large contractors often cut deals with insurers that include discounts and unrealistic pricing," she says--and "then they cut corners with the repairs to make up for it."
Bach, who spoke from her office in California, has no specific knowledge of what happened in Dexter; she's speaking of general trends in the industry. But she's concerned because, unlike residents of states like Florida and California, who experience many natural disasters, Michiganders are babes in the woods. Add that to our state's notoriously inadequate consumer protection laws, and you have, so to speak, a perfect storm.
One homeowner on Quackenbush, who contracted with Jarvis both for emergency services and for rebuilding, says the contract signed by his wife offered no warranty for the work. He has since managed to renegotiate for some warranty protection, and says he's happy with the work so far. Next door, the homeowner signed a contract with Mar-Que (offices in Detroit, Lansing, and Toronto). "They tarped the house so quickly, and we were happy with it. So we let them do the rebuilding." But he says he doesn't yet know how much the tarping and other emergency services cost.
"The truth of the matter is," says Bach, "you're almost always better off hiring someone local. If these guys rip you off, they can move on. Also, your state's not in the best financial shape, and your state insurance department was never the most aggressive cop to begin with. Any time insurance companies know there's not a lot of heat on the beat, they get away with things."
Hiring a local builder, as Bach recommends, isn't always easy. Lucchesi is doing one rebuilding job in Huron Farms. Peters Building is doing a couple for owners who specifically called them in.
Haeussler of Peters explains why he doesn't like to work for insurance companies: "The insurance adjuster will come in and say, 'You're going to [need to] buy 5.2 feet of trim.' But you can't buy 5.2 feet of trim. It doesn't come like that. You buy eight feet, and you're going to have to throw the rest away." Fortunately, Haeussler "had a couple of pretty strong owners," who were willing to argue with their insurance companies.
Lucchesi, rebuilding a house on the corner of Meadow View and York, also had a personal connection with the homeowner, and in his case was able to come quickly to an agreement with the claims adjuster. But, he says, "I don't chase work. And I certainly don't chase someone's disaster."
Among local contractors, only Dexter Builders was able to go head-to-head with the national construction companies in playing the insurance game. Brown and Push already had a lot of clients in Huron Farms, so they didn't have to make any cold calls. But an even bigger factor in Dexter Builders' getting work there was, of all things, computer software.
The day of the tornado, "our roofing manager's father-in-law tipped us off about Xactimate," the insurance industry software used by adjusters, Brown says. "We bought it the next day." At $300 a month, it's not an easy expense to justify unless there's a natural disaster headed your way. But it "allows us to speak their language."
Another part of the insurance game is fronting serious money. "We must have done twenty roofs before we saw a dime," says Push.
Now, Push estimates, Dexter Builders is working with ten insurance companies, and he sees their being on insurance companies' preferred-vendor lists in the future.
With forty or so reconstruction jobs at Huron Farms, Brown says, "we are up six full-time workers over last year, and have subcontracted maybe ten or twelve others to help with the roof and siding projects." Now the company's biggest problem is one that most builders would love to have: "It's tough coming up with manpower," Brown says. "We're talking to a lot of our guys and saying, 'Do you know anybody?'"
It's not just labor that Dexter Builders keeps close to home: "We're buying all our materials locally," says Brown. And even the storm chasers, he notes, are leaving some of that insurance money in the village: "They all buy gas at the gas station. They all eat lunch at Subway."
[Originally published in June, 2012.]
On July 2, 2012, Patricia Harman wrote:
I'd like to clarify a few points in the article. BELFOR, Statewide and Jarvis are all headquartered in Michigan with multiple offices throughout the state, making them "local" contractors.
Restoration contractors are trained and equipped to handle major catastrophes. They bear most of the costs up front before they are paid a dime, which can take several months to several years to collect from an insurance company. In the meantime, the insured is back in their home or business because of the work done to restore their structure and contents.
Companies do pull in resources from other areas when a large catastrophe hits because local resources can often be taxed beyond their limit. Wildfires, hurricanes and tornadoes can wipe out the resources in a local area.
Restoration contractors do go into damaged areas with all of the supplies they need since prices tend to rise in highly damaged areas because of limited supplies and high demand for them.
Xactimate is an estimating software program used to help price out the costs of supplies, manpower and other overhead costs. It must be adjusted to reflect the prices in a specific area because they vary widely depending on geography and other factors.
Consumers should check references of any company and see if there are part of a national trade association such as RIA.
Yes, there are "storm chasers" who come in and take advantage of the situation, but the vast majority of restoration contractors are trained and equipped to help residents put their lives back together following a traumatic event.Their goal is to make it better for their clients to the best of their ability.
Patricia L. Harman
Director of Communications & Standards
Restoration Industry Association