Home Improvements

9/21/2001

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Planning Your Project
Before selecting a remodeling contractor, you should carefully plan your project from start to finish. For example, if your project involves a room addition, determine exactly what your needs are, how the room is to be used, and what you want the completed job to look like. It is a good idea to coordinate your color schemes and draw a simple floor plan using miniature tables and chairs to lay out the room arrangement.

Be specific in explaining to the contractor what you want, and be sure to approve any architectural plans that are involved in the remodeling job before the contractor begins the work.

Hiring a Contractor
It is extremely important to compare costs before making a financial commitment toward any home improvement project. You should solicit at least two or three bids from prospective contractors—bids based upon the same building specifications, materials, labor, and time needed to complete the project.

Discuss bids in detail with each contractor, making certain you understand the reasons for any variations in the prices. Do not automatically choose the lowest price. One contractor's bid might be higher because the materials to be used are of a better quality or because the work will be especially thorough and, therefore, require more time and labor.

Ask the remodeling contractor for local references and find out if these customers were satisfied with the contractor's work. If possible, visit and inspect their completed projects.

Find out if the contractor is a member of a professional association which has standards or a code of ethics for remodelers.

Contact your local Better Business Bureau (BBB) to learn how long a contractor has been in business and if the firm has been responsive to any complaints filed with the BBB.

Another important matter to consider before hiring a contractor deals with insurance. Ask the contractor if the company is insured against claims covering worker's compensation, property damage, and personal liability in case of accidents. Then call to verify the contractor's insurance coverage after obtaining the name of the carrier and agency.

Finally, check with your state, county, or city housing authority to see if the contractor must meet certain licensing and/or bonding requirements in your area. If so, make sure your contractor is properly licensed and bonded. Never pay a contractor for the entire job in advance and avoid paying in cash whenever possible.

Home Improvement is not an exact science. Expensive hidden problems can be uncovered once work has begun.

Financing Your Project
To obtain financing for your home improvement project you may want to consider a personal or bank loan, a home equity loan, a loan from your credit union or insurance company, or a loan from a savings and loan institution. While your contractor may be able to assist you in securing the needed financing, it is important that you investigate the various sources of funding and compare the amounts, interest rates, terms, and tax considerations.

If you cannot pay for a home improvement project without a loan, it is a wise idea to put a clause in your contract with the remodeler stating that the agreement is valid only if financing is obtained.

Federal Housing Administration (FHA) loans for home improvements are available through certain banks and other lending institutions. However, FHA requires that the lender approve any contractor associated with the loan request and will not guarantee the work or the contractor. Be wary of any contractor who tells you that he/she has been approved or endorsed by the FHA.

If your home improvement project results from an accident or natural disaster that is covered by insurance, check with your insurance company to determine the extent of coverage before signing a contract to have the damages repaired.

Getting a Building Permit
Building codes are established by most cities, towns, and counties and may vary considerably from one jurisdiction to another. Your contract should state that the work is performed in accordance with all applicable building codes and zoning regulations in the area where you reside.

A building permit is generally required when performing structural work or when a home’s basic living area is changed. Separate permits for electrical, heating, or plumbing work are required in some cases. Check with your local department of licensing and permits when starting a job to learn if a building or work permit is required.

If the project does, in fact, require a building permit, the contractor should apply for it in his or her name. Thus, if the contractor's work does not pass inspection, you cannot be held financially responsible for any corrections that must be made. Terms regarding the application of any permits should be outlined in the written contract.

When a government agency issues a permit for home improvement work, it will inspect the work when that work has reached a certain stage to make sure it complies with various codes and regulations. It is the responsibility of the contractor to arrange for these inspections.

Contract Negotiations
Terms and Conditions: All agreements and oral promises regarding a home improvement project should be put in writing to protect both the customer and the contractor. If you intend to do some of the work yourself or hire another contractor to do it, such terms should be written into the contract as well. The written contract should also include:

A thorough description of the work to be done—specifying all materials to be used in terms of quality, quantity, weight, color, size, brand name, etc.;

  • Agreed upon starting and completion dates;
  • Total cost, with a breakdown of labor and material charges;
  • A payment schedule;
  • Any warranties and guarantees of workmanship;
  • The method for debris and material removal once the job is finished; and
  • A clause which states your right to cancel the contract within three business days if you sign it in your home or at a location other than the contractor’s permanent place of business. This clause should also state that the contract is null and void or will be renegotiated if the job uncovers unexpected or hidden problems or damage after work has begun.
In addition, make sure the written contract includes:
  • The contractor's full name
  • Address
  • Telephone number
  • Professional license number
  • Never sign a partial or blank contract. Read every contract clause carefully and ask any questions you may have before signing. Retain a copy of the contract once it is signed, and file it in your records.

You should make every attempt to pay a minimal or no downpayment for supplies or services; especially if you have not done business with a contractor in the past. You should not make any payments for incomplete work. Schedule payments at weekly or monthly intervals or after completion of each phase of the project. All of these terms should be spelled out in the contract and clearly understood by both you and the contractor.

Cancellation Rights: When you sign a home improvement contract in your home and in the presence of a contractor or contractor's representative, you have three business days in which to change your mind and cancel the contract. The contractor is required to tell you about your cancellation rights and provide you with any cancellation forms. If you cancel, it is recommended that a notice of cancellation be sent to the contractor by certified mail, with a return receipt request.

Never make final payment or sign an affidavit of final release until you are satisfied with the work done and know that all subcontractors and suppliers have been paid.

Lien Protection: For a large remodeling job that involves several subcontractors and a substantial financial commitment, you should protect yourself from liens against your home if the primary contractor does not pay his or her subcontractors or suppliers. You may do this by adding a release-of-lien clause to the contract or by placing your payments in an escrow account until the work is completed.

Warranty Clause: Any warranty offered on products by the contractor should be in writing and scrutinized carefully. Make certain you understand all the terms and conditions, including the length of the warranty. The warranty must state whether it is a FULL warranty that gives the consumer certain automatic rights or a LIMITED warranty that restricts certain consumer rights.

Quick Check List
Before selecting a remodeling contractor, you should do the following:

  • Plan your project from start to finish.
  • Be specific in explaining exactly what you want.
  • Be sure to approve any architectural plans that are involved before the contract work begins.
  • Compare costs before making a financial commitment.
  • Discuss bids in detail with each contractor.
  • Ask the contractor for local references and find out if he or she is a member of a professional remodelers association.
  • Contact your Better Business Bureau to learn how long a contractor has been in business.
  • Find out if a contractor is insured against claims covering worker’s compensation, property damage, and personal liability.
  • Check with state, county, or city housing authorities to be sure that a contractor meets all area licensing/bonding requirements.

Outside Contacts

To learn more about Home Improvement issues, contact the following:

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