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HOME RENOVATION DOs AND DONTs
With interest rates so low, and summer here, many homeowners are beginning home renovation or remodelling projects. With that in mind, THAT MONEY SHOW invited Karol DeWulf Nickell of BETTER HOMES & GARDENS magazine to give us some tips on how to plan for a renovation without going crazy. The following article combines her excellent advice with some equally good tips from the Web site of the Better Business Bureau (http://www.bbb.org).
PLANNING YOUR PROJECT
Before starting any kind of home improvement work, it's very important to figure out exactly what you want. If you have a clear vision of your renovation, and you're able to be very specific about it, hire a draftsperson to put it on paper for you. But if you're not sure what you need, or how it's going to look when it's finished, seek the assistance of an architect first. This step can help you avoid a lot of disappointment in the end.
FINDING A CONTRACTOR
Get at least three bids from respected and well known contractors. When soliciting bids from contractors, be sure you give all bidders the same specifications for materials, labor, and time needed to complete the project. Discuss the bids in detail with each contractor, making sure you understand the reasons for any differences in the prices. Don't automatically choose the lowest price. One contractor's bid might be higher because the materials to be used are of a better quality or because the work will be especially thorough and, therefore, require more time and labor.
To help you make your choice, consider these options:
- Ask the contractor for local references and find out if previous customers were satisfied with the contractor's work. If possible, visit and inspect their completed projects.
- Find out if the contractor is a member of a professional association which has standards or a code of ethics for remodelers.
- Contact your local Better Business Bureau to learn how long a contractor has been in business and if the firm has been responsive to any complaints.
- Don't be afraid to ask the contractor if the company is insured against claims covering worker's compensation, property damage, and personal liability in case of accidents. Then call to verify the contractor's insurance coverage after obtaining the name of the carrier and agency.
- Check with your state, county, or city housing authority to see if the contractor must meet certain licensing and/or bonding requirements in your area. If so, make sure your contractor is properly licensed and bonded.
- Remember, the contractor's crew may be working in your home for four or five months. Will you be comfortable having them there?
THE CONTRACT
Before giving a contractor any payment toward your renovation project, and certainly before any work begins, you'll need some information, and a good contract. You may choose to have an attorney write your contract. In case you decide to do it yourself, here are some of the most vital details that should be included in your agreement:
- A thorough description of the work to be done, specifying all materials to be used in terms of quality, quantity, weight, color, size, or brand name;
- The contractor's full name, address, telephone number, professional license and insurance policy numbers;
- The agreed upon starting and completion dates;
- The total cost, with a breakdown of labor and material charges;
- A payment schedule;
- Any warranties or guarantees;
- The method for debris and material removal; and
- Any information pertaining to how you want the contractor to perform, and the type of work you expect.
PAYING FOR THE WORK
All contractors have different payment policies. When negotiating, you need to be upfront about how much you can afford to spend. Some firms want a flat fee, some bill by a percentage of the square footage, and some base it on the cost of construction. Make sure you understand what your obligations will be before signing the contract. The Better Business Bureau advises consumers, "Never pay a contractor for the entire job in advance, and avoid paying in cash whenever possible."
As for financing the project, think about it as a long term investment, and talk to your banker about a home improvement loan. Also, consider breaking your renovation into three phases if it will make it easier for you, both financially and in terms of surviving living with work crews for months on end.
GETTING THE MOST FROM A RENOVATION
Remember that any money you put into renovation work might not be fully recouped when you sell your home. Before beginning, be sure the work is necessary, or know that you're doing it because it will improve your quality of life. Don't expect a guarantee that a renovation will be profitable. On the other hand, explains Karol DeWulf Nickell of BETTER HOMES & GARDENS, "To get the most out of your money, do the work in this order: first, renovate to solve problems in your home; second, renovate to enhance your living space; third, renovate for pleasure."
In the current housing market, some renovations may be better than others. Most homebuyers are looking for large kitchens, large master bathrooms, pantries, built-in closets, and storage in the garage. Renovations that include these enhancements are more likely to be attractive and valuable to future home seekers when you decide to sell.
For more information on how you can achieve your financial goals, visit our archive.
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