HOMEOWNERS AND REMODELING PROJECTS
Why Homeowner remodeling projects cost so much
- Thinking that each little extra cost isn’t a big deal
- Not keeping track of extras as the job progresses
- Choosing nicer quality finish components than you planned on
- Hiring the wrong contractor
Don’t believe all you see on the do-it-yourself TV shows; remodeling jobs rarely go as smoothly and quickly as shown on 1 TV episode. Don’t believe the hype. Proper, long lasting remodeling isn’t that simple. If rehab were that easy, people wouldn’t go broke over it, get divorced over a rehab, or feel like they’ve gone through a war.
A rehab project can be a good learning experience. Often it unfortunately isn’t. Proper planning, consultation and good choices can make all the difference. Some homeowners even decide to do a few remodeling projects throughout their lifetime.
The following information is intended to be a primer to help you avoid some of the pitfalls of a major rehab.
We’ll work from the position that you aren’t a full-time contractor. Maybe you have a little experience; maybe you like to think of yourself as a weekend warrior; or may you think it can’t be that hard to do. Either way, you aren’t doing rehabs day in, day out.
Homeowners tend to go through a remodeling project in a vacuum of individual choices, rather than an ongoing path of successive interconnected decisions. If you make a bunch of rehab project choices separately, each decision seems Ok on its own. However, if one views the progression and consequences of each choice, the outcome doesn’t necessarily look as good. Because a home is a series of combined components that work together in order to function properly, rehab project decisions also need to be viewed that way. Upon completion, all components need to function together properly.
It is important to view each decision regarding a rehab not only on its own merits but also as to how it affects the job, budget and outcome as a whole. It is important to establish a realistic plan prior to starting the job. Once the project has started, taking a long term outlook may seem annoying at times but it can keep your project from spiraling out of control.
Construction material costs:
Lets get the negative out of the way to start. Homeowners like to try to make a project fit their budget. Sounds reasonable enough, right? Obviously, if you have 20K to spend, then that is pretty much your budget, give or take some.
Unfortunately, project costs are often calculated with exuberant optimism. Calculations, projections and attempts are made to fit a 30K rehab into a 20K budget. This is where the big problem starts. This is the big sand pit homeowners fall into.
Homeowner’s start out enthusiastic and thinking all will be well. Then costs start to increase for reasons they don’t understand. That’s when the project slows down and people get mad. All of a sudden the project is over budget and you are running out of money. The real issue here though, is that the project may not be over budget at all, it was just never budgeted properly from the beginning.
A DIY show used to buy materials from a supply house that I frequent. One of the guys at the supply house mentioned a few times how he would watch the show and laugh out loud at the costs mentioned on the show. The program had spent more just at his store than they were claiming had been budgeted for the whole project. I’ve also seen other DIY shows and thought that there is no way one could do that job off for the mentioned prices. Do yourself a favor and don’t base your budget entirely on numbers you hear on TV.
Another budgeting pitfall is relying too heavily on figures given to you by contractors that are vying to get the job during the initial bid process. Obviously you may not have a good idea what project X might cost and need to get prices from somewhere. Contractors are a good source, however there are cautions. It is a common technique for some contractors to low ball a proposal in order to get the job. They leave project related work out of the proposal to keep the cost down, knowing full well that work also has to be done in order to complete the project. Once the job starts, there are suddenly lots of extra costs. Sometimes those ‘extra’ costs were included in the another guy’s proposal. I have seen people pay as much or more for a job choosing the cheap, shoddy guy, rather than the more reasonable bidder. Once you get some bids, consider having a 3rd party review all bids to clarify the scope of work. When comparing bids, it is imperative to compare apples to apples, not apples to oranges.
If you pay less for Model X Sony TV at a different store, that’s great. The same TV is the same TV whether you buy it at merchant A or B. Rehab is NOT like buying a TV. There are significant differences in quality. I am in no way suggesting you take the highest bid. I’m only recommending that you keep an open mind to whether a particular proposal is realistic or too good to be true.
This brings us to another overlooked part of getting proposals. A lot of people don’t realize that they should be going through several rounds of proposals. Each set of proposals should be more refined and detailed than the previous. Going through two, three or four rounds of proposals should not be considered abnormal for a major rehab.
This process helps you obtain more information, define the scope of work, determine the contractors’ abilities and narrow down to the best contractor for you.
As long as you don’t read any home remodeling magazines, watch HGTV or go anywhere except big box stores to look at finish materials, you should be able to keep your budget in line.
The day you buy a few magazines, spend a morning watching HGTV or go to a specialty remodeling showroom, your budget may become a distant memory.
It is not uncommon for homeowners to see big box store materials as less than ideal once they’ve been to a ‘showroom’. Don’t worry it’s not just you. Style, design, better materials and finishing techniques are definitely appealing.
Is there a difference in the quality of finish materials between what is sold at the big box stores and showrooms or specialty stores? Well, Yes and No. There have been many news articles and product reviews that suggest both.
Based on years of experience, I can say that there is a difference. The differences may not be apparent at first. All new products tend to be shiny and pretty. The real difference tends to be more obvious over time. Finishes and components on better quality materials tend to remain looking and functioning better a few years down the road over cheaper materials.
There isn’t much quality difference in basic materials such as drywall, insulation, wire, plumbing pipe etc. Yes there are differences in quality from brand to brand. Overall though, basic construction materials are roughly the same. Big box lumber often isn’t as straight or nice as lumberyard lumber but it is functional. Big box plywood is sufficient but plywood supplier plywood tends to be more consistent.
HIRING A CONTRACTOR
There is tons of information on the internet and TV shows about how to hire the right contractor. A lot of it is good info, some of it is nonsense, and some of it will keep you from hiring anyone. Do a search and read away. I won’t go into too much detail but will just point out some major things to be aware of.
Talk to friends, call references, look at reviews, check your local paper, drive by buildings listed as having been worked on.
One or two bad reviews don’t make a bad contractor. Not all personalities match up well. For an isolated bad review, it may have been a personality clash or even the clients fault.
Don’t hire the guy whose price is substantially lower than everyone else.
*There will always be differences in proposal pricing. Significant differences though can be a red flag. A caveat to this though is to make sure the bids are being compared on an ‘apples to apples’ basis, not ‘apples to oranges’.
Don’t hire the guy that starts out saying everything is ‘no problem’
*There is always some problem on a rehab job.
Don’t hire the guy who ‘urges’ you not to get a permit, license or insurance.
* You can make that choice for various reasons but it should be your choice, not his. There are good contractors without any of these who do very good work. They generally won’t be the ones pushing you not to worry about those pesky details.
- For an average small to medium rehab job, payments of 1/3 at a time are normal in the Chicago area
- Payments of half and half are also normal for small jobs that will only last a few days to a week. I wouldn’t recommend this though for more involved remodeling work. If you have an established relationship with the contractor or there are significant costs for specialty materials then that’s something to assess.
- For larger jobs, consider an initial deposit and then divide payments into weekly or bi-weekly installments based on performance.
- Consider keeping a separate notepad to track payments. Each time a check is written, record it in the notepad and BOTH of you initial the payment.
- EXTRAS: Pay extras with a separate check EVERYTIME! DO NOT add the cost of extras onto a currently due contract payment and write one check. Always write a separate check for extras. If you run into issues with your contractor, you’ll be glad you read this.
You will save yourself a lot of headache if you immediately accept that there will be unforeseen conditions that bring about extra costs. When figuring your budget factor in funds just for such instances. Depending on project type and size, figuring 10%-15% for extras should be sufficient. To expect that there won’t be any extra costs is to set yourself up for a lot of headaches and sleepless nights.
Once walls or ceilings are opened up, especially around plumbing stacks, near roof edges or next to stairs, poor conditions may become visible.
‘We don’t need construction inspections, we have a general contractor’.
This is one of the worst misconceptions and mistakes that you can make. Yes, the general contractor works for you and in theory is working on your behalf to get the job done as best possible. However, the GC is also out to make money. Some decisions that get made on a rehab job come down to money. What’s best for the client may not be best for the GC’s profit margin.
It is not uncommon for a GC to make decisions that a client wouldn’t be thrilled with if they knew about them. Ask questions; Ask if there are other options; Stay connected to the jobsite.
Consider hiring an independent inspector to conduct construction phase inspections during the project. Hiring the inspector early on during the planning and bid phase can help provide a more compliant build. Construction inspections can be performed throughout the project or at key points. Costs vary depending on frequency and amount of documentation requested.