Money Tips for Home Remodeling
By Amy Hoak, MarketWatch
A 20-year-old house in suburban Atlanta is getting a makeover to create a more open floor plan for its kitchen, dining room and living room. The homeowners had wanted to make the improvements for a while, but because they purchased the home when prices were at peak levels, their plans were shelved.
“The rebounding economy gave us the confidence to invest in our property — even though it is still worth less than what we paid, at peak,” said Jeffrey Ulrich, who lives there with his wife and three children. “At the same time, we have no intention of going anywhere else. This is our home, and we made a decision to invest in our everyday living, and think it will pay dividends now and in the future.”
Researchers at Harvard University’s Joint Center for Housing Studies think there will a fresh crop of homeowners like Ulrich, finally going forward with postponed remodeling plans in 2014. In fact, they are expecting 10% to 15% growth in remodeling spending through the third quarter of this year, compared with the same period a year ago — which would add up to a “very good year for the industry,” said Abbe Will, the research analyst who puts together Harvard’s Leading Indicator of Remodeling Activity. The projection is based on a wide variety of housing data.
“Homeowners are starting to feel much more confident about the fact that their homes are not just retaining value, but are starting to see home-price increases in many markets,” Will said. To fund these discretionary projects, there’s an improving environment for home-equity lending; until just recently, home-equity loans and lines of credit were nearly impossible to get.
Remodelers are getting more requests for kitchen and bath remodels, home exterior improvements, changes to help homeowners age in place — even additions, said Tom O’Grady, chairman of the National Association of the Remodeling Industry’s strategic planning and research committee, as well as president of O’Grady Builders, based in Drexel Hill, Pa.
The increased demand had many remodelers entering 2014 with jobs in the pipeline, something that hasn’t happened for years, he said. Remodeling activity started slowing back in 2006, O’Grady added.
Renovation of distressed properties is also helping fuel the remodeling industry, as owners invest money into foreclosures and short sales that have been neglected over the years, Will said.
Before you remodel
If you’re planning a remodel of your own, consider the following before hiring a contractor. It will make for a smoother process, and ensure you’re getting the most for your money.
Collect ideas: Go online to get ideas, and share pictures that you like with your contractor, Ulrich said. That will help you communicate your desires, and will make it easier for the contractor to quote jobs. “It puts everyone on the same page from the beginning,” he said.
Set a budget: For yourself, set a maximum budget and make sure you have a contingency for any splurges you may want to make or problems that you could run into, said Liza Hausman, vice president of community for Houzz.com, a home remodeling and design website. Then, create a goal budget to share with your contractor. As much as you can, research materials to understand what they’ll cost. That will help you understand whether your budget is realistic.
Take a breath: Don’t rush into major remodeling jobs if you’ve just moved in. “Live in the home for a few years so you know what you want to fix,” Hausman said. Only then will you understand how your house works — and what really needs improving.
Research contractors: Contractors should be licensed and insured. Read online reviews, but make sure that the site you’re using allows both positive and negative reviews (some only post the positive), Hausman said. Don’t forget to ask for referrals from former clients, and reach out to them to find out how they liked working with the contractor, she said.
Break down bids: Bids should include detailed information on what everything should cost, including materials and labor, Hausman said. But there can be wide variations when it comes to material costs, she said. Find a contractor who can “value engineer” your project and “help you find ways to pull stuff out or do things in a creative way,” so you’re spending your money in a smart way and getting elements that are the most important to you, she said.
Trust your contractor: Choose a contractor you trust, but also make sure that the person who gets the job is a good communicator. That will go a long way to making sure you’re happy with the final result. “We’ve heard plenty of horror stories from friends,” Ulrich said. His contractor was good about following up after the initial inquiry — and Ulrich took that as a good sign.
Start with a small job: Although he had a good feeling about the team doing the work, Ulrich gave his contractor a smaller project, a bathroom remodel, first, before hiring him to do his large-scale great room project. “How you’re treated on a small project is going to be how you’re treated on the big project,” he said. “They treated us like the most important customer they had, and it showed.”
Prepare for inconveniences: Workers will be in your home all day, and if you’re redoing a kitchen, take-out dinners will become the norm. And then there’s the dust. But remember that remodeling requires a spirit of adventure, Ulrich said. “Take a deep breath and say ‘This is all going to turn out great, and it’s a small price to pay for decades of enjoyment.’”
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