In the history of the world, chances are that all homeowners have, at one time or another, considered doing some kind of remodeling or repairs to their homes. Maybe it’s painting the fence, adding a swimming pool, removing the cracked patio slab, and replacing it with pavers. Whatever! We’ve all been there. And it’s safe to say that the very same batch of homeowners have all heard or seen or read about some kind of remodeling disaster or scam and realize that they must not—will not—make the same mistakes as the unfortunate examples highlighted by the media.
This much is certain: whatever the project, whether it’s DIY (do it yourself) or something you hire out, you’re ultimately in charge. And keep in mind, DIY is not always the least expensive option. There is risk if you do it wrong and have to change it. Likewise, if you complete it, but it doesn’t look all that good, then that’s the final price to be paid.
Basically, in order to pull this off, you need to effectively manage the project, especially if you are hiring any outside expert to do some or all of the work.
That said, here is a list of effective tips we think every homeowner needs to know to successfully manage their home remodeling project:
- Selecting the Right Contractor
Chances are that you might not know any contractors, or that you might know some, but just not the right type of contractor for this job. Or…and this is huge: the contractor you know might be a family member and selecting that person might bring with it a whole bunch of “baggage” you’ve never considered. So…allow me this bold proclamation, right here at the beginning. Unless you have no way out, graceful, or otherwise, please avoid relying on family or close personal friends to be your contractor. Why?
Visualize, for the sake of argument, that your project runs into problems, runs way over time and way over budget, and it’s still not done. Can you be as objective with family or friends as you can with a “third party” contractor? No, you can’t. And yes, you can… horribly mess up a family relationship or destroy a life-long friendship. So much for my personal opinion. Let’s get back to normal practice!
First, promise yourself that you will seek and interview more than one person. Don’t settle on the first contractor if you’ve not even seen a second. There’s an old “rule” in building, and it’s to always get at least three bids. Your project is no exception. If you can’t get three bids, because everyone is ‘so busy right now’, then this might not be the time to build. In really busy times, labor, materials, and equipment can all be in short supply—and all the while prices trend to go up.
Absolute necessities. If your state requires licensing of contractors, then so do you! In fact, in many states, any project or task over $500.00 requires a licensed contractor even to sign a contract! Liability and worker’s compensation insurance are non-negotiable. And, if your contractor hires any subcontractors, then those subs must also be similarly licensed and insured. Here’s a bonus: check that the license is valid, and in the name of the person signing the contract. It’s not okay for your guy to use the license of his Uncle Fred.
Your contractor must have adequate resources to the job, which means a trained and available crew and also trade credit adequate to supplying materials to the job.
While it is not advisable to use family or friends as your contractor, those same people might have suggestions for the names of just the right people to help you with your project. If no personal referrals, you can check online. For a search term use the trade name and your city, such as, roofer San Antonio, garage door repair New York, room remodeling Atlanta, and so forth.
Each contractor candidate should be able to provide examples of completed work, preferably in your area, and with phone numbers. Let the candidates know your criteria, and that you will be checking referrals, licenses, and such. Sometimes the references from past customers will even get you an invitation to come on over and look at the work—usually an indication of work well done—and an appreciative homeowner.
Part of the contractor selection process is getting a responsible quote. It needs to be written out, listing all of the inclusions and exclusions. Find out NOW—not later—what’s in and what’s out. Factor that into your decision process. Once you think you have decided, it’s time for a final interview.
- Defining the Project Scope and Goals
Often, a fair contract between an owner and a contractor need not be complex and overwhelming. It must, however, spell out the scope of the project, along with all of the work to be done. Conversely, items not expected of the contractor need to be listed as exclusions. Fair is fair.
There should be a timeline. How long will the project take? What happens if it takes longer? The manner or the sequence of the work can be spelled out.
Quality is always a concern, but how is it measured? Industry standard would be one way, but you can also say, for instance, that the quality is to be similar to that of the Jones residence, which the contractor listed as an example of his work. The contractor is entitled to know the levels of finish you are expecting of him or her.
- Establishing a Contract
Your contract (or quotation) must be in writing. There’s a principle in real estate law which says that, if something is not in writing, it didn’t happen, words to that effect.
Your contract should include payment terms. A key point to remember: don’t let the payments to the contractor get ahead of the work. Sometimes it can be difficult to get certain contractors to come back to the jobsite and finish the work—especially if they have already been paid. You should have more work completed than you have paid for at the moment.
As the homeowner, you might be responsible for paying city permit and inspection fees, but you should not be the person tasked with pulling the permits. Leave that in your contractor’s scope.
Down payments. Some contractors ask for a significant amount of money at the signing of a contract. Many states limit that to funds necessary for payment of materials delivered to the jobsite. Other states might limit it to around 10%. Contracts seeking more than that are problematical.
Also, remember this: just because a contractor has written something in his proposal or contract does not mean that you have to go along with it. Take your time. Cross out and initial lines with which you disagree. It’s your house and your money. You can always find another contractor.
- Project Communication
All proposed changes should be in writing. No changes are to be handled verbally. Time and money changes must be agreed to in writing, in advance. Changes to the timeline of the project schedule, even if there are no physical changes, should be agreed to in advance, and also in writing. Time of construction is at the root of a huge percentage of issues in homeowner contracts.
An ongoing project could—and should–specify weekly meetings, at the minimum. It can, and should, specify workdays along with start and stop times. It can be very frustrating when your contractor does not show up at the scheduled time. Avoid that.
- Monitoring Progress and Quality Control
With any concerns over quality or pace of construction as the project moves along, convey that to the contractor, in writing. Emails are fine for that. If you ever get into a legal dispute, you will be very happy that you have a ton of emails to show the court regarding your concerns. A reasonable requirement is that all trash must be removed at the end of each day and placed into containers on the jobsite. A clean jobsite is a safer jobsite.
- Handling Changes and Modifications
As mentioned previously, any request for change and/or modification to the scope of work has to be made in writing, priced by the contractor, with material prices, labor and hours disclosed. Lump sum prices without any cost backup are not allowed. Markups to cost will be spelled out, with 15% being fairly standard in the industry. Time involved in the change should extend the project timeline appropriately.
- Managing Project Budget
If you are hiring a contractor and crew by the hour, then agree on a daily basis as to the hours expended that day, per tradesman. At the start of the project, your contractor should specify in his contract what the rates of pay are for each of the various trades. If it’s a lump sum project, then you will only pay on an agreed-upon basis, such as weekly, bi-weekly or monthly, and you should only pay for a maximum 90% of that work, with 10% held back in “retention”. Retention is to be paid only after the successful completion of the project.
- Dealing with Project Delays
While most of the smaller, residential projects tend to be less formal with completion times, you could write into your contract the amount of days it is to take, and what happens when the project runs over. There can be penalties assessed. There could even be a bonus for early completion. Both penalties and bonuses tend to be rare. Those must appear in the contract in order to be enforced.
Restrictions can be listed here, such as how you might be limiting deliveries or even access to the site by visitors. Spell out any concerns.
- Ensuring a Satisfactory Outcome
All inspection corrections must be made timely. At the weekly meetings, a job site walkthrough is in order. As items pop up during these walkthroughs, create a checklist. At the conclusion of the project there will be a final walkthrough, which should occur after the final agency inspection. Final payments and retention are to be paid only after completion of these items.
Also prior to final payments, your contractor must supply proof of payment to all subcontractors, suppliers, utilities, inspection fees, and any appropriate lien releases.
- Avoiding Cash Transactions:
When it comes to paying contractors, it’s crucial to avoid cash transactions. While it may seem convenient, or offer potential cost savings, cash payments can pose several risks for homeowners. Here is a true statement, coming from the world of real estate, and it would be a good idea for you to write it down: “If it isn’t on paper, it didn’t happen!” Paste that one on your refrigerator.
There’s another example that goes with it and it is called ‘the bigger shoebox theory’. Visualize yourself being called in for an audit by the IRS, and they tell you to bring your records and all of your receipts. If you really want to pass that audit with flying colors, would you want to go into it with only a few miscellaneous receipts in an envelope, or with a bunch of them, all packed into a huge shoebox? You get the idea.
Everybody understands that writing things down makes them more real. With that in mind, let’s consider the problems with cash transactions, but let’s lead with this bonus observation: If your contractor gives you some reason—any reason—why he can’t take a check—that should be a huge, red flag. Legitimate contractors pay their bills and have adequate trade credit to run a job. Joe & Bob’s Remodeling? Not so much. But wait…there’s more!
- Lack of paper trail: Remembering the examples above, you realize now that cash transactions do not leave a reliable paper trail, making it difficult to track and document payments. Without proper records, it becomes challenging to prove that payment was made in case there is ever a dispute or an issue begins to turn legal.
- Transparency and accountability: Traceable payment methods such as checks, or electronic transfers provide transparency and accountability. They allow you to have a clear record of the transaction, including the amount, date, and recipient, which can be essential for financial management and dispute resolution. You can hold it in your hands and present it to the court—or to your forgetful contractor.
- Protection against fraud: Cash payments are susceptible to fraud and scams. Dishonest contractors may insist on cash to avoid taxes or manipulate payment records. By using traceable payment methods, you have a better chance of protecting yourself and your investment. Contractors working on a cash basis are also more likely to lack proper insurance and licensing.
- Legal and financial implications: Cash transactions may raise concerns about tax evasion and can complicate matters if you need to prove expenses or deductions related to the project. Additionally, insurance coverage and warranties may require proper documentation and proof of payment.
- Avoiding Liens:
If you are new to the construction or real estate realms, then you may not be fully aware of the workings of mechanic’s lien laws. Buckle up because some of this may surprise you. Lien laws are critical to understand to protect your property and avoid potential issues with subcontractors or suppliers. Likewise, they can also ‘infect’ your property if you aren’t careful. Here are some key points to consider:
- Mechanic’s Lien: A mechanic’s lien is a legal claim that can be filed by unpaid subcontractors or suppliers against a property to secure payment for their services or materials. If the contractor fails to pay them, they can seek payment by placing a lien on the homeowner’s property. And it doesn’t matter if the contractor told you that he paid his subs and suppliers. Even if he put it in writing, which could be fraudulent, you could still be subject to a mechanic’s lien on your property.
- Risk to homeowners: If a subcontractor or supplier is not paid by your contractor, they can legally pursue payment through a lien on your property. This means that even if you have fully paid your contractor, your property could still be at risk if the contractor hasn’t paid all parties involved.
- Release of Lien: A release of lien is a legal document provided by subcontractors or suppliers after they have received payment. It acknowledges that they have been paid in full and relinquishes their right to place a lien on your property.
- Ensuring payment to all parties: To protect yourself from potential liens, it’s important to verify that all subcontractors and suppliers involved in the project have been paid. You can request lien waivers or releases of lien from the contractor as proof that they have paid all parties. This ensures that you won’t face any surprises or legal issues down the line.
BONUS TIP: have everyone sign in at the project, every day, along with their phone numbers, so you can verify receipt of payments, if needed. Why? Because even if you have lien releases of your contractors, subs and suppliers, do you have proof that they have properly paid their own employees? It’s pretty rare when this happens…but it does happen.
By understanding lien laws and ensuring payment to all parties involved, you can better safeguard your home from potential liens and the risk of losing your property even after you have paid your contractor. Remember, the laws and regulations surrounding liens may vary by jurisdiction, so it’s important to consult with legal professionals or experts familiar with local laws to ensure you are adequately protected. As a disclaimer, please note that this article is written from the standpoint of construction manager and not from that of an attorney. Consult your own legal professional.
We close with one final, familiar saying: “You can’t be too careful.” Sad but true. Take a few minutes of extra time to get things done right. And if you ever feel overwhelmed, Alpha Living can help you find top-rated remodeling companies near you, compare quotes, and save time & money. Just enter your zip here to start!