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Tips and Advice on Remodelling Your Home.
That day has finally come. You’ve decided to remodel your home. Perhaps you’ve decided to split up the kids, give junior his own room and let big sister have some privacy. Maybe you’ve decided to make over the kitchen or bathroom. No matter what you’ve chosen to do, guaranteed it’s a big job.
At some point, after you’ve decided exactly what you want to do you’re going to have to find someone to do it. Whatever your project, unless you happen to be a brilliant handyperson, you’re going to have to hire someone to make your dreams become a reality.
How to Pay for Your Remodelling Job
As you ponder renovating your bathroom, giving your kitchen a facelift, or adding a room, one of the first things you’ll need to consider is how you’ll pay for it. While a good chunk of the costs of many remodelling projects are often recouped when you sell your home, you’ll still need to gather the funds to pay for your project up front.
There are several options available out there for you, including:
Good old cash. If you have money in savings, this is an option. However, you’ll want to think about the interest that the money could be earning in other investments.
Compare that to the interest rate you’d be paying on a home improvement or other type of consumer loan. Also, keep in mind that interest paid on home improvement loans are usually tax deductible. Look and compare the numbers carefully.
Home equity line of credit. This is a line of credit in which your house is the collateral. The credit line is usually set at 75 to 80 percent of the appraised value minus the mortgage balance. Lenders will also consider your credit history and ability to pay.
Second mortgage. If you prefer not to have an open line of credit through a home equity line of credit, you could consider a home equity loan, a fixed-rate, fixed-term loan based on the equity in your home. Monthly payments are set over a fixed period of time.
Cash-out refinancing. If interest rates are quite a bit less than when you bought your house, you may want to refinance your mortgage, that is take out a new loan to pay off your mortgage and use the remaining money for your project.
Once you’ve determined your financing method, staying within your budget is key. Three ways to keep your spending under control are:
Plan on spending 80 percent of what you can afford. Let the other 20 percent act as a reserve to cover any unexpected expenses that come up.
Carefully consider everything in your contract. Anything not included will cost more. Every time a change order is written up, your pocketbook will take the hit.
Stay focused on the project at hand. As you remodel your kitchen, don’t try to undertake the bathroom, too.
Things to Keep in Mind When You Add-On
Now that you’ve decided to remodel your home, you’re going to have a slew of options. Of all of your options adding on rooms or floors is one of the more complex. Here are some things to remember when you decide to add on:
First off, you want to look into the physical, legal and financial aspects involved. For example, say you want a two-story addition that might accommodate a master suite on the second floor and a family room on the first. Do you have enough property to do it and still comply with local planning and zoning regulations? Even if you do, what about the neighbours? They certainly will want a say in something that might block the sun from their gardens or affect property values, taxes and resales.
If you’ve never thought as far as resale, consider it before you do anything more. One mistake you don’t want to make is to over-enlarge. In a neighbourhood full of three-bedroom houses that are attracting small families, how quickly will your five-bedroom house sell? It is something you need to consider.
Two-story additions should look as if they are integrated with the original structures. Matching stone is always the toughest. Brick is easier to blend, since used brick is available in great quantity in this area. However, it is much more expensive than new because old mortar has to be cleaned from the surfaces of the brick.
If an addition does not work for you, why not look into the attic and the basement? The attics of some houses are merely crawl spaces, so often roofs need to be bumped up to create headroom.
If you have to change the exterior of the house by making it taller, then planning and zoning approvals are needed, the neighbours’ approvals are is as well.
What about basements? When people buy older houses, one of the first places they look to expand into is the basement. One of the first questions they ask is whether the basement is wet or dry. Although a finished basement is just one item on a buyer’s wish list, it sometimes can make or break a resale.
Checking Your Insurance
Before you go and hire a general contractor you’ll want to make sure to call up your insurance agent to determine whether additional homeowners insurance coverage is needed. You’ll also want to be sure that any contractor or sub-contractor you hire has the proper insurance so you’re not liable for any accidents or damages that may occur while they work on your project.
Contact your insurance agent before work begins on your project. He or she will help you determine appropriate coverage for your addition or improvement. If the new work is damaged or destroyed before additional coverage takes effect, you could be responsible for repair costs.
Home insurance policies typically require that you insure your home to at least 80 percent of its replacement cost.
About 25 percent of remodelling projects result in a home value increase of at least 25 percent, so make sure your insurance is increased enough to provide adequate coverage.
Even smaller projects like decks and home offices — which might include custom cabinets to include a desk, a computer work station, storage, as well as rewiring to accommodate faxes, computers, cable modems and DSL lines — should be considered for increased insurance coverage.
When it comes time to hire a contractor make sure to find out the following:
Find out if the contractor has workers compensation, which covers any medical-related expenses and lost wages if any injuries are sustained.
Request a copy of the contractor’s certificate of insurance. Let your agent look over the certificate to determine if any exposure exists.
If your project involves tearing down walls or chimneys, review your policy for theft and weather damage liability.
Establish responsibility for uninstalled appliances, cabinets and other items in advance. Your contractor will likely have a builder’s risk policy or installation floater to cover such items.
If you plan on leaving your home during the remodelling, check with your agent about terms of your policy. Vacancy clauses vary from company to company. In some cases, you may not be covered under your homeowners policy if you are gone for more than 30 days.
Meanwhile, another thing to keep in mind as you increase your homeowners coverage is that any additional furniture, home office equipment, electronics, grills for the deck, or other personal effects, should be added to your home inventory and if necessary, additional contents coverage or a separate rider should be considered.
Hiring a General Contractor
A good general contractor is worth his or her weight in gold (if you are interested in saving time, money and aggravation). The contractor’s job is to assure that the proper building permits are obtained, that all work adheres to code (and will pass inspection should the home be put on the market), and oversee the hiring and scheduling of subcontractors so that the job will go smoothly. The contractor will also obtain the materials, keep track of the receipts, and is responsible for paying the subcontractors when the job is complete and cleaned up. And the job isn’t complete until the homeowner is satisfied.
The question of course is how to find a good one. The truth is there are no substitutes for word-of-mouth and checking references. Ask friends and family, who have had work done in their homes, who they would recommend. If you get the name of a contractor from another source, such as an architect, kitchen design studio or a decorator, make sure you see the kind of work that they have done previously.
When you interview contractors, ask for their references. However references do no good if you don’t call them and ask to see the work. Most contractors would prefer if you ask about more than just the bottom line. You should heed the wisdom of professional contractors, who say that most people who seek professional help ask the wrong questions in their search for a contractor. Make sure to ask the right questions. While, when can you start, when will it be finished, and how much will it cost are all important questions, make sure to ask the following as well:
How long have you been in business?
Who will be the project supervisor?
Will employees or subcontractors be working on the project?
Does the company carry workers compensation and liability insurance?
How will you approach this project?
How many similar projects have you completed?
How much repeat and referral business do you have?
Are you certified in remodelling or do you hold any special training or education?
May I have a list of references related to those projects?
Once you receive a list of references ask the references questions such as:
Were you able to communicate easily with the remodeler?
Did the remodeler and crew show up on time?
Was the job done on schedule?
Was the contract fulfilled?
Did the remodeler stay in contact throughout the project?
Were you pleased with the outcome (you may even ask to see the final product)?
Would you use the remodeler again?
For an extra dose of “peace of mind”, call the building code inspector in your city, the Better Business Bureau, and the municipal builder’s licensing board to find out if there have been any complaints.
Find out from the building code official what licenses are required to be a contractor (so that you will know them when they are presented to you) and then ask to see their proof of license, insurance and bonding. As mentioned above, make absolutely certain that the contractor carries liability insurance and also find out who in your area is responsible for workman’s compensation. It could be you, the contractor or the subcontractors, but one thing is for sure—it’s best not to take chances.
In some areas, bonding is a requirement of doing business. A reputable general contractor will have no problem presenting the credentials of the subcontractors he or she plans to use.
Pay attention to how well you communicate with each other. Be sure that the contractor understands what your priorities are. Does the contractor answer questions directly, return phone calls in a timely fashion and appear to be interested in your project? What is this person’s attitude? Do you feel at ease with this person? Is his or her behavior appropriate? Follow your instincts. If you are uncomfortable in any way, there is probably a good reason, the least of which could be a failure to truly communicate which can lead to hard feelings down the line. Even if the contractor has an excellent reputation, if you feel ill at ease, why would you want to work closely with someone on a project as emotionally and financially charged as your living environment? You don’t have to, and shouldn’t.
To help in communicating your needs and wishes, be prepared to show the contractor the finished look you are after. Illustrate your points with photos, magazine spreads, architect’s drawings, paint chips, finish samples and samples of the design details you want to include. Make sketches to illustrate what you want and where. Verify measurements with the contractor to insure that everything you want to do will be in scale and correctly proportioned for the room’s function and your personal comfort.
Ask contractors to give you an itemized bid. The bid should be to the point and should spell out step-by-step what needs to be done, what materials will be used, what steps will be taken to complete the work, and what the labor costs will be. Pricing varies from contractor to contractor, but generally count on a 15% add-on as the contractor’s fee.
In some jobs, there may be a variance in estimated costs such as materials or labor but the final costs should not vary more than 10-15% of the bid, and this provision can also be included in the contract. Be sure to have all bids written in such a way that you can compare the costs in an apples-to-apples fashion.
Make sure the contract has a start date and a completion date, or you may find yourself with days going by and no progress being made on your project because your contractor has accepted an intervening job somewhere else. If the contractor returns a general or open-ended price for the work or finish date, find another contractor. If you should decide to add more work as construction gets under way, be prepared to adjust the costs and finish date, and then alter your contract in writing.
Lastly, to monitor costs, you can ask to reimburse materials on the job plus 15%. Ask to see receipts for all materials purchased for the job. A payment schedule, which should be outlined in the contract, should reflect only work done to date and materials purchased. If for some reason, your contractor is unable to finish, you will have enough money to complete the work with someone else.
If your project is large enough to prompt you to hire a contractor, then you should take extra time and caution in finding one who will do a great job. After all, the outcome is something you have to live with and see on a daily basis (or something potential buyers will be considering), not to mention the amount of money you’re putting into the project. And, the project’s outcome could affect your home’s resale value.
This paper is intended for informational purposes only. Nothing contained herein constitutes legal, financial or other professional advice. Transmission of these materials is not intended to create, and receipt does not constitute, any relationship of any kind between the provider and the recipient. Some of these points may not apply in your area. Different term and conditions may vary from state to state and province to province. All articles, text and photographic material presented here is for the use and pleasure of the recipient only. Download PDF