3 common problems for home renovation when buying real estate
Up until the real estate boom of the 1980s, home renovation was an outlet for American creativity. But when buying real estate became a short-term financial investment rather than a lifestyle purchase the rules of renovation changed.
Suddenly, the most important thing was recouping costs and not doing anything that might deter a potential buyer. It was the age of the plain vanilla kitchen and bathroom project. I think that age is over. Yet, that attitude is still out there, underlying nearly every renovation problem that's brought to me.
You'll have fewer home renovation fears and problems if you realize that the spiritual and emotional factors in improvements and additions now outweigh the financial factors. That doesn't mean you should go overboard and put a $80,000 kitchen in a $100,000 home.
But you shouldn't hesitate to, for instance, sink some money in a pool. If it will be the focus of your family's summers for years to come you'll recoup the cost in pleasant memories rather than dollars. To me, that's a fair exchange. If you can afford it, and it will add to your enjoyment of your home without being totally outlandish (like building a tennis court alongside your trailer), go for it.
Can't costs get out of hand?
The solution to this problem is to become an expert on your own project and on the details of your arrangement with your general contractor. Renovation costs do tend to get out of hand. That's for three reasons.
First, the plans may not be comprehensive, leading to unexpected costs along the way. You can avoid that pitfall by insisting your architect or designer provide complete plans. Ask all the contractors who bid on the job to point out any gaps they see in the plan. Whichever contractor is hired, bring all suspected gaps in the plans to the planner's attention.
Second, contractors often underestimate their costs. Sometimes it's because they're desperate to win the job and come in with a low bid. Other times it's because they run into a hidden surprise¡ªsay a rotted beam replacement¡ªwhich throws off their estimates of material and labor.
You can overcome this potential hurdle by insisting on binding bids from your contractors. While these will automatically come in higher than nonbinding bids, since the contractor needs to build in a safety net, you will at least know for sure what your project will cost.
Third, and most problematic, homeowners often make changes to their plans while the project is under way. Every change you make costs you more. Contractors, in an effort to both deter and profit from these "change orders," charge much more for these items than they would normally.
For instance, adding an electrical outlet that's in your plans might cost $50, while adding one that's not planned for could cost you $100. To avoid these costly change orders, spend a great deal of time with your plans. It's far cheaper to make changes to paper than it is to Sheetrock. The more study you put into your plans the less likely you'll end up over budget.
While you'll need to have a level of trust with your architect and general contractor, it's facts not feelings that count in these relationships. Don't rely on your relationship or on verbal assurances. Put your trust in well-crafted, ironclad agreements instead. Not only should these agreements specify costs, but they should also give a date for completion, including language requiring the work to be continuous.
A specific payment schedule, tied to the work done, which lets you hold back a percentage until you're satisfied with the final result, is essential.
Will I get my money back when I sell?
Ironically, even though you're focusing on the dollars rather than sentiment, this is often an emotional rather than a rational problem. If you're renovating strictly to increase the value of your home, then you're being rational worrying about your return. However, if you're renovating to improve the quality of your life, getting back every penny you put into an improvement isn't the prime issue. Instead, focus on getting the most pleasure for your money. Your return on investment should be measured in joy, not dollars.
If your goal is to renovate in order to improve the salability of your home you need to become an expert on what buyers in your area expect. Speak with two or three real estate brokers and get their opinions on the kind of improvements that attract buyers. Ask if there are any renovations that turn off buyers.
Then, plan your projects with an eye toward creating a plain vanilla environment. Keep in mind that improvements that bring your home up to the level of others in your area will provide the best return on investment. For example, modernizing an old kitchen or bathroom will be more profitable than changing an already acceptable floor plan.
The building department rejected my plans.
This isn't a rejection of you, so don't take it personally. In fact, it's not really a rejection of your plans either. It's a rejection of your architect or contractor who drew up the plans. In this instance you need to rely on the expertise of others. Whichever of your professionals drew up the plans must now go back to the building department with modified or amended plans that meet their approval.
After screwing up in this manner it's now up to your architect or contractor to recreate the environment of trust that once existed between you.
tags: real estate, home
Comments
No comments so far for this article