The Real Cost of Using HomeStars

ZHomeStars presents itself to homeowners as a convenient way to find contractors and post jobs for “free.”

That word — free — is where the problem starts.

The homeowner may not receive a direct bill, but the contractor can still be charged for the lead. That means money is being generated from that homeowner inquiry even though the homeowner is being told the service is free.

The homeowner may not see the charge directly, but that does not mean the cost disappears.

Contractors have to recover business expenses just like any other company. A 30–35% markup is common in the contracting industry because the contractor has to cover far more than the direct cost of the job. Insurance, vehicles, fuel, tools, office expenses, estimating time, bookkeeping, advertising, warranty exposure and non-billable time all have to be paid for somewhere.

So if a contractor is charged an $83 lead fee, that fee does not necessarily remain $83 when it is built into the job price.

At a 30% markup, $83 becomes $107.90.

At a 35% markup, $83 becomes $112.05.

On a $250 service call, that means the lead cost alone can effectively increase the price of the job by about 43% to 45% before tax.

That is a substantial increase on a small service call.

Not long ago, HomeStars charged considerably less for leads involving smaller service work. Now I have seen approximately $83 charged for a small service-call lead while the same approximate fee is also charged for a much larger lead involving a $5,000 to $10,000 project such as a 200-amp electrical service upgrade.

Those are two completely different opportunities.

An $83 fee on a $10,000 project represents less than 1% of the job value.

An $83 fee on a $250 service call represents about 33% of the entire job value before the contractor has even performed any work.

And if several contractors are charged for access to the same small job, the numbers become even more difficult to justify.

Six contractors charged $83 each would generate $498 in lead fees around a job worth approximately $250.

Only one contractor can actually get the work.

The others may have paid simply for the opportunity to compete for it.

That is why describing the homeowner side as “free” does not tell the whole story.

The homeowner may never receive an invoice from HomeStars, but that additional cost can still end up being built into the contractor’s price. In practical terms, the customer can ultimately pay considerably more for the exact same work than they might have paid by contacting the contractor directly.

There is another problem with the model.

A contractor can potentially be paying for a lead before properly seeing the property, diagnosing the problem, confirming the actual scope of work or even determining whether the job is suitable for them.

The homeowner’s description may be incomplete or technically inaccurate, which is completely understandable. Homeowners are not expected to know electrical terminology or accurately diagnose electrical problems.

The contractor is the person who has to determine what the job actually involves.

That brings up the larger issue.

Why should a third-party lead-generation company be entitled to insert itself into a relationship that already naturally exists between a homeowner who needs work done and a qualified contractor who provides that service?

The platform itself is not supplying the contractor’s trade education, trade experience, licence, technical knowledge, tools, equipment, vehicle, insurance, permits, materials, labour or responsibility for the finished work.

It does not diagnose the problem.

It does not perform the installation.

It does not assume the contractor’s liability.

It does not make the finished work safer simply by being involved.

Yet it places itself directly between the homeowner and the contractor and creates an additional charge around that connection.

That added layer can increase the price of the job without adding anything to the actual installation.

There is also a more serious concern than the cost of the lead.

A lead-generation platform can give homeowners the impression that the contractors presented through that platform have somehow been properly evaluated for the work being requested. That is not a substitute for actual trade education, licensing, experience, technical knowledge, insurance, permits or a proven history of performing that type of work correctly.

The contracting industry already has more than enough corner-cutting, inexperienced operators and people taking on work beyond their actual knowledge or ability. A platform that makes it easier for those operators to appear alongside properly trained and experienced contractors can create a very real problem for homeowners.

Electrical work is not something that should be reduced to whoever is willing to buy the lead.

Poor workmanship can result in overheating, damaged equipment, fire hazards, shock hazards, failed inspections, expensive repairs and potentially dangerous installations hidden inside a home for years.

That is why the relationship between a homeowner and a qualified contractor matters.

A homeowner should be choosing a contractor based on actual qualifications, experience, licensing, insurance, reputation and the contractor’s ability to safely perform the work — not simply because a third-party platform placed that contractor in front of them.

Most established contractors already spend significant amounts of money making themselves available to customers through websites, Google listings, advertising, social media, referrals, vehicles and local reputation.

The contractor already exists.

The customer already needs the contractor.

The work already needs to be performed.

Adding another company between those two parties does not make the contractor more qualified, does not make the installation safer and does not replace the homeowner’s responsibility to verify who they are hiring.

What it can do is add another fee.

And when that fee is built into the contractor’s pricing, the homeowner can end up paying more for the same work simply because a third-party company positioned itself between them and the contractor who is actually responsible for the job.

Whenever possible, homeowners should consider contacting qualified local contractors directly, checking their credentials and dealing with the company that will actually be responsible for the work from the beginning.