Home Remodeling: Don’t Get Nailed
By Edward Johnson
The home remodeling market is hot. In part, this is due to the rising value of real estate and the resulting increase in equity homeowners are enjoying. Tapping a portion of equity through either a cash-out refinance, home equity line of credit or home equity loan has kept the mortgage industry busy. As a result, homeowners flush with cash are fueling the demand for home improvement and remodeling projects.
No matter if you are interested in having a basement finished, your kitchen updated or a room added, the results can vary widely. A key determining factor on whether or not your experience is a pleasant one rests in large part on the amount of due diligence you decide to perform prior to entering into a contract. While most contractors are honest and hard working, others prove sloppy, incompetent or downright fraudulent. According to the Better Business Bureau (BBB) home remodeling ranked as the #1 most-inquired-about industry and the #3 most-complained-about category last year. Some of the cases are quite shocking. Imagine having “used” materials utilized, or having the contractor perform your work on the wrong house! How would you like a lien put on your house because the subcontractors were not paid, even though you paid the general contractor in full? Worse yet, what if you made a down payment and the contractor is never heard from again. The potential for headaches abound. However, the potential for positive experiences also abound and this is where your obligation to protect your investment comes in. Covering the basics is an easy three-step process.
Step one is to plan your project. Be realistic about what you want versus what you can afford. Having a floor plan or sketch --with the correct dimensions-- will help to assure the bid you receive is accurate.
Step two is selecting a contractor. Get two or three bids and make certain that the bids are apples to apples. The bids should be based on the same building specifications, materials, labor and time needed for completion. Discuss the bid in detail to make certain you understand the scope of the project. Check references and, if possible, visit the most recent job site. Verify licensing and check their record with the BBB. You should also verify insurance and coverage for claims against workers’ compensation, property damage and personal liability in the event of accidents. Also, be mindful that the bid you accept should not be based on price alone. Good customer service, reliability and workmanship are equally as important.
Step three is the contract. Make certain you understand the terms and conditions. Any verbal promises should be in writing and the contract should at a minimum specify the work to be done, materials to be used, start and completion dates, payment schedules, guarantees, debris removal and your right to cancel. Never sign a partial or blank contract. If the project involves subcontractors you should have a release-of-lien clause added. If a warranty is provided, it too should be in writing and must state whether it is a full or limited warranty. The contract should also state that the work will be performed in accordance with applicable building codes and that required permits or inspections are the responsibility of the contractor.
In addition to the basic steps, you can help to eliminate what are likely to be less-than-reputable contractors by being aware of a list of practices considered by the Federal Trade Commission, the National Association of the Remodeling Industry and the BBB to be problematic. Buyer beware of high pressure tactics, door-to-door solicitations claiming leftover material from a neighboring project, up-front payment requests for the entire job, cash-only transactions, special pricing as a “showcase” home, reluctance to provide insurance information or failure to provide notice of your right to cancel.
Edward Johnson is President & CEO of the Better Business Bureau - Washington DC
