The Hidden Cost of Remodeling: What You Don’t Know Could Cost You a Fortune

No matter how simple your project might seem, every remodeling project involves decisions that you as the homeowner must make — either by choice or by default. Making informed decisions could save your budget, your sanity and possibly your home. As the knight in the “Indiana Jones” movie says; “You must choose wisely”. This article contains information that can help you do just that.

You can’t get where you’re goin’, if you don’t know where you’re at

It can be a challenge for even the most experienced professional to find everything that’s behind the walls, under the floor or above the ceiling. A thorough inspection of the site will often reveal certain conditions that must be dealt with one way or the other. Knowing what these conditions are and what your options are for dealing with them can make a huge difference, both in terms of time and money. Discovering a problem in the middle of the project can often result in substantial delays and additional costs.

By having an accurate set of “as-built” drawings, many potentially budget-busting problems can be dealt with during the design process. Sometimes a simple change to the design can avoid the problem altogether. In fact, these changes can often result in a better design for less money.

But what if you can’t (or don’t want to) design around the problem? Well at least you’ll know what the problem is and what it will cost to resolve it. Perhaps you can reallocate money from another part of the project by reducing the scope or choosing a less expensive finish. Perhaps you could simply add the cost to your budget. Either way, you can eliminate many surprises and be able to make intelligent, informed decisions if you are armed with the knowledge that only a thorough site reconnaissance and accurate as-built drawing can offer.

Fail to plan? Plan to fail!

Some projects need to be designed before you can figure out how to do it and what it will cost. Kitchens, room additions, basement finishes and other large scale projects almost invariably need to be designed first. Smaller projects such as a simple bath remodel, painting the exterior or replacing windows are simple enough that all it takes is a material takeoff and a budget for labor.

Regardless of whether a project needs to be designed, it certainly requires a project plan. Jumping into a project without considering all the ramifications will almost invariably cost more and take more time. A detailed plan that is well thought out is essential to the success of any project – particularly if it requires that you move furnishings, empty out cabinets or have to arrange for a safe place to store your vintage 1956 Thunderbird while the work is being done.

Make sure your contractor has a plan that includes your requirements so as not to be surprised when the cabinets are delivered and the Thunderbird is buried behind a wall of boxes in the garage.

Comparing apples to oranges to pears to bananas

Conventional wisdom says that soliciting multiple quotes for your remodeling project is the best way to select a contractor. On the surface, it would appear to make sense. But it can be quite confusing when it comes time to sit down and compare the quotes. This is because every contractor has their own way of determining your requirements, assembling the scope of work and calculating the cost. It’s easy enough to compare the bottom line. It’s much more difficult to figure out what’s included. (Talk about hidden costs!) But there is a better way.

First, let’s distinguish between large scale projects and “one-dimensional” projects. Large scale projects, such as kitchens, master baths, room additions and basement finishes typically require a design. One-dimensional projects, such as flooring, painting and roofing only require material selection. Either way, selecting the right contractor is the key to getting the job done right. If your main focus is on the bottom line, you are certain to attract contractors that use poor quality materials and questionable business practices to keep the price down. Better you should focus on the criteria that really matters – trust, experience, reputation and compatibility. Let’s drill down a bit.

Trust — There are plenty of ways to gauge a contractor’s trustworthiness, particularly in the age of the Internet. Go to your browser, type in the name of the company and see what comes up. Don’t be put off by a bad review here or there. No one gets along with everybody every time. But if there’s a lot of negative information, you’ll want to move on.

Then take a look at their affiliations. Do they belong to any professional organizations such as the National Kitchen and Bath Association or the National Association for the Remodeling Industry? Are they members of the Better Business Bureau?

Finally, make sure they have the proper insurance coverage. They should have liability insurance of at least 2 million dollars and workers compensation coverage on all of their direct employees. For sub-contractors, the general contractor should be named as “additional insured” on the sub’s insurance certificate. Without the proper insurance coverage, your contractor will be exposing you the most devastating of all the hidden costs, one that could very well cost you everything you own.

Experience – While experience is certainly important, be careful with this one. Being in business for 20 years says nothing about the contractor’s ability to deliver a quality project on time and within budget. The best way to look at this one is by asking for references. Here’s a good tip. Ask for nine references – three from projects they completed several years ago, three from projects that were completed in the last year and three that they’re working on right now. You don’t have to contact them all, but you’ll get a more complete picture if you talk to at least one in each category.

Reputation – Good or bad, a contractor’s reputation is a direct reflection of the way they choose to do business. It’s important to emphasize the word “choose” since this speaks volumes for the character and integrity of the organization. Reputable contractors engage in fair business and pricing practices. Their integrity shows up when they have the opportunity to take advantage of a situation and choose not to. For example, let’s say that an asbestos coated duct is found in a wall that is to be taken out. Obviously, this has to be dealt with on a change order. The opportunity to take advantage is certainly there, but a reputable contractor would choose not to.

Compatibility – After you’ve determined that a contractor has the trust, experience and reputation to do the job, your next step should be to interview the key players in an effort to size up your compatibility with them. Depending on the size and scope of the project, you may wish to meet with the owner of the company, the designer and the project manager. These may be all the same person or different members of a team. Remember, you’ve already determined that the contractor has the ability to do the job, so the interviews should focus on how you feel about each member of the team and how they communicate with you and each other. Let’s look at each role as it pertains to your project.

Meeting the owner of the company – regardless of whether he or she will be directly involved in your project – will tell you all you need to know about the culture of the organization. If you feel good about the owner, chances are you’ll feel good about the company. If the owner rubs you the wrong way, the best advice is to move on.

For obvious reasons, the relationship between you and your designer is critical to the successful outcome of the project. A good designer will listen, interpret and produce a design that reflects what you want, not what they think you should have. They should be ready, willing and able to offer expert guidance and advice, but they should also recognize that you will be the one who will be living in the space. Sizing up the designer is simply a matter of listening to their ideas – not just in terms of whether you like their ideas, but also in terms of how they are presented. If you’re not comfortable with their style, you’ll need to keep looking.

Finally, there’s the project manager. The skill set required to effectively manage a remodeling project can only be obtained through lots of experience. The technical skills required to complete the work are similar to other residential construction projects, but in the remodeling business, everyone is working in a fish bowl. There’s no way to insulate you from the inconvenience associated with a remodeling project, but a skilled project manager knows how to orchestrate everything such that the impact on your home life is minimized. Aside from having a strong working knowledge of every trade, diplomacy, tact and an even temper are the things to look for in the one who will ultimately be responsible for delivering the end result.

In the final analysis, selecting the right team to take on your project is the most important decision you’ll make. In the process of evaluating contractors, remember this simple formula: Quality + Service = Price. High quality and excellent service only cost more on the front end. As long as your contractor delivers both, the price will be a bargain in the long run.

We’ll need a #4 sky hook for that

Of all the things that effect your remodeling budget, the greatest impact can be found in the design itself. Basically, a valid design needs to be functional, aesthetically pleasing and be practical to build.

The National Kitchen and Bath Association (NKBA) publishes and maintains two sets of guidelines – one for kitchens and one for baths – that when adhered to, will result in a perfectly functioning kitchen or bath. If the design doesn’t work, you’re going to hate it no matter what it looks like. The worst part is, a dysfunctional kitchen is usually discovered after the fact, as a result of the day to day use of the space.

Once the requirements for functionality are met, the aesthetic requirements can be applied. For example, the cabinet layout and appliance locations are a product of functionality. The cabinet door style and the color of the appliances are design decisions that only affect the look. To be sure, the aesthetics can drive the budget up. Lots of molding costs lots of money. Applying matching panels to the refrigerator and dishwasher can be surprisingly expensive since the door is the most expensive part of the cabinet.

If the design meets the first two requirements, the next thing is to determine the degree of difficulty in bringing it to life. A good designer anticipates the practicality of moving a bearing wall for instance. But is there a more practical, less expensive alternative? Not all designers are prepared to gauge the impact that their design decisions have on the budget.

In the worst case, a flaw in the design is discovered in the middle of the project. For example, it’s discovered that a wall that was to be moved can’t be moved at all. Of course, a total recon of the site as suggested in the first part of this report should insure that the design can be built. But it won’t necessarily insure that the design could have been done without moving the wall.

The message here is to make sure that the validity of the design is field verified before any materials are ordered. You do this by making sure the designer and the project manager have done a thorough review of the design early on so as to anticipate any problems in building it out.

Cheap doesn’t always mean less expensive

No matter how much money they have, everybody loves a bargain. It can be hard to resist a great deal, even if you’re not in the market at the time. But when you think about it, there are really only three reasons that price and value get out of sync; the seller doesn’t know what it’s worth, the seller doesn’t care what it’s worth, or the seller is desperate. Other than that, cheap probably means low quality, which is no bargain at all.

When it comes to remodeling, consider whether you would want a contractor to work on your house if they don’t know what the work is worth. If the job is under sold, it usually means something was missed. That’s not exactly the kind of attention to detail that you’d like to see. Then again, if there’s not enough money to do the job right, your contractor may have to cut corners.

Now consider the contractor that doesn’t care what the job is worth. Perhaps the competition for work is fierce and he just needs to sell something to stay busy. So he cuts his margin to the bone and basically works for free. Will he be able to pay his suppliers or will he need the money for himself? Contractors that operate on a razor thin budget will eventually go out of business, leaving you with no recourse if something goes wrong down the road.

Finally, there’s the contractor that’s just plain desperate. In this day and age, there are plenty of folks in this category. Imagine handing a check over to someone who has to turn around and get their tools out of hock. Worse yet, imagine handing a check to someone you’ll never see again. It happens more often than you might think.

Aside from the quality of the contractor you select, the quality of the products that go into your remodel is every bit as important. That shiny new faucet might look great when it goes in, but what will it cost you to have it replaced when it breaks in a year or so? Particularly if it leaks all over your hardwood floor. Does your contractor offer a warranty? Is he going to be around to honor it?

The lesson here is, quality may cost a little more to begin with, but it will pay off in the long run. Your best bet is to find a contractor that has the experience, the credentials, and the ability to deliver a quality result for a fair price. What more could you ask for? What more would you want?

Smith? Party of four?

Obviously if you’re going to remodel your kitchen, you’re going to have to find alternative eating arrangements. Even if you’re not remodeling the kitchen, the dust and disruption which is inevitable with many projects may cause you to eat out more often.

In the extreme, you may even want to move out during the construction phase. In this case, the associated costs could include moving your furniture into your temporary digs or a storage facility, the cost of rent added to your ongoing mortgage payments and moving your furnishings back in when the project is complete. If you’re financing the project, you can add the interest to the list of items you’ll have to deal with while you’re waiting to move back in.

Since most people are aware of these additional costs, one might not think of them as hidden costs. You’ll know in advance that you have to budget for these items. The question is, for how long?

Delays are to be expected in the remodeling business, particularly with large scale projects. It’s almost inevitable that something will show up damaged and have to be reordered. If all of the materials are in hand before the work begins, you’ll be ahead of the curve on this one. Unfortunately, accidents happen and the materials could be damaged during the construction process. Other causes for delays include the weather, building inspections, scheduling conflicts, and unexpected conditions such as mold behind the sink cabinet. The point is you need to plan for the delays and hope that you won’t have any. Therefore, the target date for completion should be worst case…unless it’s not.

Regardless of the type of project you’ve got going, the chances are you have some sort of per diem cost associated with the construction phase. As hard as it may be to understand, it’s not uncommon to hear stories about projects that take weeks or even months longer than anticipated. In these cases, the cost can be measured in more than just dollars and cents. The associated stress can become a serious health issue.

The best way to insure that you will not have to deal with an extended timeline is to select a contractor with a demonstrated history of bringing projects in on time – or at least within reason, all circumstances taken into consideration.

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