Rising house valuations and increased moving
costs are causing many people to remodel their homes rather than purchase new
ones. But before you make any home improvements, do your homework.
Kitchen fix-ups, the most common remodeling
project, typically yield the highest return when a house is sold. Adding a family
room, a master bedroom suite, or a bathroom also has a high resale value. Another
renovation that could return a big bang for the buck is a sunroom or a "bonus"
room built atop the garage.
Also keep in mind that it may not pay
to expand your house beyond the norms of the neighborhood. You may not be able
to recover the costs of adding a large "grandparent" suite, a backyard
pool, Jacuzzi, or elaborate landscaping.
When making renovations, keep energy
efficiency in mind. For example, replacing your furnace or adding double-pane
windows may help reduce heating bills. In some areas, your electric cooperative
may offer low-interest loans or cash rebates to encourage conservation.
Raising the cash
How will you pay for these improvements,
whether you and your family do the work or you call in an outside contractor?
The best strategy is to use as much
cash as you can afford. If that is not possible, consider a home-equity loan.
The interest paid on home-equity loans or home-equity lines of credit is usually
less than the rate for other forms of borrowing. In addition, these types of
loans offer a tax break because the interest is usually deductible.
Bidding out the job
If you and your family can’t do the
work involved in remodeling, make sure to get at least three bids from reputable
contractors in order to assess costs accurately.
There is a hidden advantage to hiring
the right professional: the implied warranty or guarantee that the person is
competent and will do a satisfactory job. Having this implied warranty means
that you will most likely have some legal recourse if things go wrong.
If you decide on outside help, you
will need to expend a little time and energy to find the right person. Write
down on paper the most important items you want from the person you hire. Competency
should be the priority. Ask family, friends, or acquaintances if they have had
someone do this type of work for them. Perhaps they would be willing to recommend
When you have decided on top candidates,
ask each one for an estimate. If any estimates are extremely high or low, you
may want to find out why they are so far off. Some contractors knowingly bid
a job below cost to land a contract, and then add on costs later.
If this is expensive work, you will
probably want to have a formal contract outlining who is responsible for permits
or licenses, if they are required, what is to be done, and when it will be finished.
Also consider how and in what way payment will be rendered, will insurance be
needed, and what procedure will be followed to resolve unexpected circumstances.
Be sure the contract says what you want before you sign it.
The best tip: Buy the best materials
you can afford, and spend the time (or money) to have them installed right.
Sloppiness is always offensive, but good craftsmanship, regardless of the style,
taste, or décor, never is, says Lou Manfredini, who is often seen on NBC’s Today
There’s help online for your renovation
work. Check out these Web sites:
The official site of the National Association of the Remodeling Industry has
lists of members and project-planning advice.
The National Association of Home Builders offers a list of contractors.
Help with planning specific projects before you talk with a contractor.
Find contractors to interview, listed by region.
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Tips on home building, remodeling, and improvements.