Remodeling Revisited

Fixer Upper House

Trying to decide whether to buy a fixer-upper house?

 Follow these seven steps, and you’ll know how much you can afford, how much to offer, and whether a fixer-upper house is right for you.

1. Decide what you can do yourself. 
TV remodeling shows make home improvement work look like a snap. In the real world, attempting a difficult remodeling job that you don’t know how to do will take longer than you think and can lead to less-than-professional results that won’t increase the value of your fixer-upper house. 

• Do you really have the skills to do it? Some tasks, like stripping wallpaper and painting, are relatively easy. Others, like electrical work, can be dangerous when done by amateurs.
• Do you really have the time and desire to do it? Can you take time off work to renovate your fixer-upper house? If not, will you be stressed out by living in a work zone for months while you complete projects on the weekends?

2. Price the cost of repairs and remodeling before you make an offer.

• Get your contractor into the house to do a walk-through, so he can give you a written cost estimate on the tasks he’s going to do. If you’re doing the work yourself, price the supplies.
• Either way, tack on 10% to 20% to cover unforeseen problems that often arise with a fixer-upper house.

3. Check permit costs.

• Ask local officials if the work you’re going to do requires a permit and how much that permit costs. Doing work without a permit may save money, but it’ll cause problems when you resell your home.
• Decide if you want to get the permits yourself or have the contractor arrange for them. Getting permits can be time-consuming and frustrating. Inspectors may force you to do additional work, or change the way you want to do a project, before they give you the permit.
• Factor the time and aggravation of permits into your plans.

4. Doublecheck pricing on structural work.
If your fixer-upper home needs major structural work, hire a structural engineer for $500 to $700 to inspect the home before you put in an offer so you can be confident you’ve uncovered and conservatively budgeted for the full extent of the problems. 

Get written estimates for repairs before you commit to buying a home with structural issues. 

Don’t purchase a home that needs major structural work unless:

• You’re getting it at a steep discount
• You’re sure you’ve uncovered the extent of the problem
• You know the problem can be fixed
• You have a binding written estimate for the repairs

5. Check the cost of financing.
Be sure you have enough money for a downpayment, closing costs, and repairs without draining your savings. 

If you’re planning to fund the repairs with a home equity or home improvement loan:

• Get yourself pre-approved for both loans before you make an offer.
• Make the deal contingent on getting both the purchase money loan and the renovation money loan, so you’re not forced to close the sale when you have no loan to fix the house.
• Consider the Federal Housing Administration’s Section 203(k) program, which is designed to help home owners who are purchasing or refinancing a home that needs rehabilitation. The program wraps the purchase/refinance and rehabilitation costs into a single mortgage. To qualify for the loan, the total value of the property must fall within the FHA mortgage limit for your area, as with other FHA loans. A streamlined 203(k) program provides an additional amount for rehabilitation, up to $35,000, on top of an existing mortgage. It’s a simpler process than obtaining the standard 203(k).

6. Calculate your fair purchase offer.
Take the fair market value of the property (what it would be worth if it were in good condition and remodeled to current tastes) and subtract the upgrade and repair costs.

For example: Your target fixer-upper house has a 1960s kitchen, metallic wallpaper, shag carpet, and high levels of radon in the basement.

Your comparison house, in the same subdivision, sold last month for $200,000. That house had a newer kitchen, no wallpaper, was recently recarpeted, and has a radon mitigation system in its basement.

The cost to remodel the kitchen, remove the wallpaper, carpet the house, and put in a radon mitigation system is $40,000. Your bid for the house should be $160,000.

Ask your real estate agent if it’s a good idea to share your cost estimates with the sellers, to prove your offer is fair. 


7. Include inspection contingencies in your offer.
Don’t rely on your friends or your contractor to eyeball your fixer-upper house. Hire pros to do common inspections like:

• Home inspection. This is key in a fixer-upper assessment. The home inspector will uncover hidden issues in need of replacement or repair. You may know you want to replace those 1970s kitchen cabinets, but the home inspector has a meter that will detect the water leak behind them.
• Radon, mold, lead-based paint
• Septic and well
• Pest

Most home inspection contingencies let you go back to the sellers and ask them to do the repairs, or give you cash at closing to pay for the repairs. The seller can also opt to simply back out of the deal, as can you, if the inspection turns up something you don’t want to deal with.

If that happens, this isn’t the right fixer-upper house for you. Go back to the top of this list and start again.

4 Ways To Avoid DIY Mistakes

New backsplash? You’ve done it. Upgrading a faucet? No problem. You’re a DIY master. But what about that electrical issue? Or fixing a leaky roof? Even though you (and your BFF, YouTube) have pulled off many DIY projects, you know there are projects you’ve no business trying on your own. But what about those projects that fall somewhere in between “I got this” and “I’m calling the pros”? How can you know if a project is really DIYable for you?

For Lucas Hall, finding that answer has been trial and error. As a “DIY landlord” for more than two years and founder of Landlordology, an online resource for landlords, he’s gutted three homes and renovated countless others.

“I’m just handy enough to be dangerous,” Hall says.

He’s suffered more than his fair share of DIY disasters, and with each, he’s learned a valuable lesson about his own limits, as well as how he can do better next time.

Think 10 Steps Ahead
When Hall updated a tiny kitchen in one of his rentals, he installed a brand-new, expensive fridge — and then built a peninsula countertop extension.

“We thought it was the greatest idea,” he says. But adding the peninsula narrowed the space in front of the refrigerator, making it impossible to remove without lifting it entirely up and over the extension. (Ever tried to lift a fridge?)

“I’m just praying the fridge doesn’t die on me, because I’m going to have to hire four or five burly guys to get it out,” Hall says. “Or just Sawzall the thing in half.”

DIY lesson: Measure once, measure twice, measure again, and think through every possible scenario before changing a room’s layout.

Don't Go With the Cheapest Option
Speaking of kitchen appliances: Hall was looking for an island range hood, which can be extra-expensive because it needs to be attractive from all angles. Dismayed by the prices he found elsewhere online, he went to Amazon, where he found an $800 hood on sale for about $250.

“Of course, it was from a brand we hadn’t really heard of,” Hall says.

Less than a year after installation, the hood was on the fritz. Removing the appliance was a challenge. The electrical wiring needed to be redone, and the wall needed to be drywalled, requiring a professional contractor.

“It probably cost me three-fold to fix my mistake,” says Hall. “For any appliance that’s more complicated than plugging it in and rolling it into place, upgrade and buy something that’s not going to break on you within a year.”

DIY lesson: For any DIY project, the cheapest option, from materials to appliances, should raise a red flag.

For Specialty Work, Seek Specialty Advice
Hall is no electrician, but since he’d done some minor electrical work before, he figured the job of adding a dimmer switch would be no big deal.

“We hung a chandelier in the dining room, and figured you might want to dim this giant chandelier for a relaxing candlelit dinner,” says Hall. Because the space had switches at both entrances, he added a dimmer to both — the more the merrier, right?

Wrong.

“After four hours spent blowing circuits and lightbulbs and struggling to get this chandelier to dim correctly, we called the manufacturer,” Hall says. Spoiler alert: You just can’t have two dimmer switches for one circuit.

A dimmer works by modulating the amount of electricity flowing through the circuit; adding another causes chaos. A little research would’ve indicated the second dimmer switch was a no-no.

“It just flips out,” says Hall. “It doesn’t know how much dimming should be happening. The lights were flickering like a poltergeist.”

DIY lesson: No one blames you for not being a specialist, but any time you’re taking on a specialty project make sure to do your research first or consult a pro.

DIY When Help is Available (aka, NOT on a Holiday)
Holidays might be a great time to tackle minor DIY projects, but if you’re working on anything that could require a professional if things go south, consider waiting for a normal business day.

“I was trying to get a property ready to rent,” says Hall. “Time is money. It was the Fourth of July … and I was adding a new cabinet [in the bathroom].”

It sounds easy enough, but the unit was in a condo building with a centralized water system; there wasn’t a water shut-off valve for just that bathroom. Not wanting to shut down the water for the entire building on July Fourth, he decided to risk it.

And oh, what a risk it turned out to be. When trying to loosen a pipe, the whole thing broke off. It was rusted out. Water sprayed out so hard, it hit him in the chest. After rushing to the basement, he flipped every knob he found until the water shut-off.

“Luckily my property was on the first floor and the basement was a laundry room, because water was leaking through the floor, destroying drywall,” Hall says.

Being a holiday, the rest of the day was no less of a disaster. The condo association’s emergency line sent him a plumber who was angry to be missing his holiday events and drinking as he tried to fix the problem. Sloppy work resulted in a fire — in a building with no water.

“He runs to my fridge and starts grabbing anything liquid — milk, a bottle of Sprite, cans of beer,” Hall recalls. “He’s dumping water into the middle of the wall, punching holes in it, trying to find the fire.”

DIY lesson: Always do tricky DIY projects when you know a pro — a pro you trust — can help out in a hurry.

How To Hire A Contractor

5 Ways To Save On Home Renovation

Is your kitchen hopelessly outdated, and your bathroom a blast from the past? 

Then it sounds like you're overdue for some home improvements. There's just one problem: Remodeling can be a huge undertaking-and a costly one at that. 

The average kitchen remodel will set you back $60,000; a bathroom overhaul, $17,908. Ouch! But hey, that's just the average price homeowners pay.

 Plenty of home renovations can fall way under that wire if you know some tricks to keep your home improvement budget in check. Check out these smart ways to save on home renovation costs to achieve the home of your dreams without blowing wads of cash.

1. Don't do a complete remodel

Unless the room needs to be completely gutted, you can cut costs by refurbishing existing fixtures. When renovating the kitchen, staining the current cabinetry, replacing old drawer handles and knobs, and refacing moldings can save you thousands of dollars.

In fact, refinishing existing cabinets can save you up to 50% compared with the cost of buying new cabinetry, according to Angie's List. You can also cut costs by purchasing materials (e.g., granite, flooring, or lighting) yourself, says Chris Dossman, a real estate agent with Century 21 Scheetz in Indianapolis.

2. Pick decent, midgrade materials

Picking premium options or materials can raise the cost of your remodeling project substantially. One area where you'll find a major price difference? Carpeting.

While basic olefin and polyester carpeting costs around $1 to $2 per square foot, wool can cost upward of $9 to $11 per square foot, according to Angie's List. Those costs add up if you're recarpeting a large room or an entire floor.

Another biggie? Countertops: Granite costs $60 to $100 per square foot; laminate (i.e., Formica) looks like granite for $10 to $40 per square foot.

3. Do prep work yourself

To reduce the hours your contractors will need to put in-and save money on labor-do light prep work yourself, says Dossman. By removing and discarding old carpeting on your own, for example, you'll shave time off the installer's bill, which can lead to substantial savings when you consider that many companies charge an additional $4 per yard to remove old carpet.

4. Go DIY, but know your limits

Another way to cut remodeling costs is, of course, to do the work yourself. That's a good move for small projects, like painting a bedroom, where the work is fairly simple. Also, the materials you'll need, including paint, brushes, sandpaper, and tape, cost only $100 to $200. (Professional painters, meanwhile, charge $25 to $100 an hour.)

With larger projects, however, rolling up your sleeves probably isn't the best decision-especially if you lack handy skills. For major home improvement projects, you'll most likely want to hire a professional to do the work-it'll cost more, but it's worth it. Let's face it: The last thing you want to do is cheap out and need to pay a second contractor to redo the work.

Here are six home improvement projects you should never do yourself.

5. Shop around for the best (and budget-friendly) contractor

Last but not least, a home remodeling project is only as good as whom you hire. It's crucial to find a reliable contractor who will quote you a fair price and deliver high-quality work. To find this special someone, you'll want to meet with at least three contractors and get in-person bids. Doing so will give you a good idea of the price range; it'll also give you a sense of whether you'd be comfortable working with the person.

When vetting contractors, pay attention to small details, like whether they show up on time for the appointment.

Punctuality indicates whether the person is well-organized, which can affect how much you'll have to pay, says Matt Parker, a real estate agent in Seattle and author of "Real Estate Smart: The New Home Buying Guide."

If a contractor has a habit of running behind schedule, that might affect how long the project will take to complete-and how many hours of labor you'll need to pay for. The adage -time is money- can be painfully true when contractors are involved, so you want someone who takes your time seriously.

Another money-saving safety measure: Insist on seeing all renovation estimates in writing, and get a cap on the hours if possible. Meanwhile, a punch list can ensure that the renovation isn't officially done until you're satisfied. Any contractor who isn't willing to provide this par-for-the-course paperwork may not be worth the trouble, because it protects you both in case any part of your renovation goes off the rails.

Home Improvements That Pay Off!

The Renovations That Up Your Home's Value (and the Ones That Don't)

Is digging up the backyard to put in a pool worth it? What about upgrading a tired-looking kitchen with gleaming marble countertops? And what about installing high-tech speakers—throughout the house? If you’re planning to renovate your home, you may already be asking yourself these questions. But when it comes to increasing your home’s appraisal value, the answer to them isn’t always a resounding yes.

To help ensure that your reno dollars are well spent, the team at LearnVest asked real estate experts across the country to weigh in on the top five home improvement dos that can boost resale value—and five don'ts that just aren't worth the extra expense.

Reno Do #1: Upgrade Your Kitchen

All of our experts agree that a kitchen renovation should be at the top of your list, since it's the heart of a home—the room where families spend most of their time. But where to start? A couple of givens include upgrading to stainless steel appliances and installing countertops made from engineered stone or granite, because these fairly easy changes will improve the aesthetic appeal of the space. Details can also make a difference, like putting shiny knobs on cabinets and purchasing a sparkling new faucet for the sink.

Another wise kitchen upgrade? Knocking down a full or half wall, so you can connect the kitchen to a den or living room. “It makes the kitchen feel more spacious," says Phyllis Rockower, owner of the Real Estate Investors Club of Los Angeles in California. "If you’re cooking, you can still hear what people are saying during a party, or keep an eye on your kids while they’re playing.”

Reno Do #2: Revamp Your Bathroom

A toilet that looks old, cracked or dirty (or doesn’t flush properly) is a turn-off—and the same goes for a vanity, which should be eye-catching and practical. “Install a vanity that recesses into the wall, so it saves space,” advises Alen Moshkovich, a broker for Douglas Elliman in New York City.

Proper lighting can also be a great value booster, such as adding a window in the bathroom, so natural light can illuminate the space. There's one other more simple fix that homeowners tend to overlook: Reglazing a tub, rather than getting a new one, will save you money and upgrade the look of your bathroom.

Reno Do #3: Go Greener

“In the last four to five years, there’s been a growing demand for green housing,” says Tom Ferstl, a commercial and residential real estate appraiser at Ferstl Valuation Services in Little Rock, Arkansas. “Making your home more energy efficient is a plus—anything that helps keep heat in during the colder months and out during the warmer months will help.”

The changes can be small, such as adding storm doors or a ceiling fan in each room. Or they can be large, like double- or triple-paning your windows. Want more ideas on how to renovate your home in a green way? Check out Regreen, a site created by the American Society of Interior Designers Foundation and the U.S. Green Building Council.

Reno Do #4: Invest in a Sprinkler System

Many homeowners don’t want to be bothered with maintaining a stunning, landscaped garden, so planting tons of tress, bushes or flowers isn’t necessarily going to elevate your home’s value. But everyone wants green grass, so adding a sprinkler system that automatically turns on and off is a good investment, says Ferstl, because it allows a buyer to keep a lawn looking good without much work.

Reno Do #5: Install Built-In Speakers

High-tech homes stand out and will impress buyers. Your best bet is to centrally wire a sound system in your home, and put a speaker in every room, so you can control music from anywhere in the house with one remote. Rockower also suggests installing surround sound in the den or living room (basically wherever you watch TV), which makes watching movies or sporting events more exciting.

Reno Don't #1: Put in a Pool

You may think that a beautiful backyard pool will make buyers flock to your home, but many families don’t want to deal with the maintenance or the liability of an accidental drowning. “It’s an especially bad investment in the northeast and the northwest, where you have few hot months to actually use a pool,” says realtor Brendon DeSimone, a member of the National Association of Realtors and an expert contributor to Good Morning America and HGTV.

Reno Don't #2: Convert a Bedroom

Turning a bedroom into a room that’s specific to your interests—such as a wine cellar or a library—is a risk. Once you start embedding wine refrigerators or bookshelves and customizing the space's structure, the room becomes less valuable, because the next owner may not want to spend money renovating that room. “If you insist on doing it, at least make it easy to ‘un-do’ later when you want to sell,” says DeSimone.

Reno Don't #3: Lay Down Carpet

Don’t bother carpeting any room in the house. “Natural hardwood flooring is what everyone wants these days,” says Moshkovich. Plus, wood floors tend to be easier to clean, they don’t show as much dirt and they’re better for family members who suffer from allergies. “If you're looking to save, engineered wood is cheaper than 100% natural wood—and it still looks good,” suggests Moshkovich.

Reno Don't #4: Install Ornate Lighting

Buyers like bright lighting, but if you empty your wallet buying an over-the-top chandelier, you probably won’t get most of your money back, notes Ferstl. “Some people go all out when decorating a dining room, but the next owner may want to turn the dining room into a bedroom, so it’s often a waste," Rockower says. Her recommendation: Opt for subtle high hat or recessed lighting or get a basic chandelier or hanging fixture from Home Depot—you can find a bunch that look good for under $100.

Reno Don't #5: Redo Your Garage

“I’ve seen some people turn garages into family rooms or play rooms—and then have a hard time selling their house,” says DeSimone. “Most people want a garage to stay a garage.” Not only do buyers want to protect their cars from rain and snow, but they also need a place to put dirty outdoor stuff, like lawnmowers, leaf blowers, shovels and garbage cans. Bottom line: Don't go glam with your garage!

4 Steps To Hiring A Qualified Contractor

If you own your home, you understand the advantages of do-it-yourself projects. You can do things your way, on your schedule, with the materials you select. You have the sense of pride that comes with completing a project with your own two hands. And of course, you can save some money at the same time.

But doing it yourself isn't always an option. Some projects are too big, too time-consuming or simply beyond your comfort level. When that happens, it's time to hire a contractor to get the job done. Which leads to one of the most common questions I get from readers:

"What's the secret to dealing with a contractor?"

Know what you want before you start

Before you ever start thinking about calling a contractor, you need to know what you want. That sounds pretty obvious, but surprisingly enough, most people simply don't have a very good grasp of what they want to have done. And if you don't know what you want, then the contractor certainly won't. That will lead to misunderstandings, disagreements, and ultimately to disappointment.

Determine as much as you can about your project. Look through magazines, take a home tour, go to the library, and walk through a home center. The more details you have ready for the contractor, from the sizes of rooms and their intended use to the types of windows and appliances and trim you want, the better the contractors will understand your vision. That will greatly improve communication, as well as your chances of getting the finished product you're hoping for.

Who does that type of work

Different contractors have different specialties. You can save yourself some time and ultimately some money if you understand the type of contractor you're looking for. If you want a contractor to repair your fire-damaged home, look for someone who specializes in fire damage, not a firm that only builds new houses.

There also are times when you need a general contractor, and times when you need a specialty contractor. A general contractor oversees several trades on a project. For example, if you want to have a room addition built, you would use a general contractor, rather than hiring five -10 individual specialty contractors and trying to coordinate each one. On the other hand, if you want to have a new heating system installed, you'd typically hire a heating and air conditioning contractor to handle that.

Referrals

Now that you know what you want to have done and who you need to do it, you need to find the right company. The single best way to do that is through a personal referral from someone you know and trust.

If you know anyone who's had work done on their home that they were happy with, that's usually the ideal place to begin. Talk to them, and get some feedback about the contractor's skills, pricing, on-time performance, crew and subcontractor performance, general cooperation, and anything else you can learn.

There are other sources of referrals as well. Maybe you've seen a plumber's van or an electrician's truck at your neighbor's house. Perhaps you drive by a room addition every day on your way to work. Stop and introduce yourself, and talk to the homeowner. As long as you're not asking a lot of personal questions, especially financial ones, most people are more than willing to share their experiences. You'll usually get some great first-hand information about the contractor, both good and bad.

Material suppliers also are great sources. Ask the people where you buy your lumber or your plumbing supplies if they know of anyone who's particularly good at the type of project you have in mind. Like contractors, retailers have a reputation to protect. They want to keep you happy and coming back as a customer, so they'll typically refer only those contractors they know are honest and will do a good job.

The initial call

Except for small projects, I always encourage people to talk to at least two different contractors. It gives them a comparison of different perspectives, different personalities, and different price structures. When you have your names, call the contractors. But before setting up an appointment for a site visit, ask the following four questions:

1. Do they do the specific type of work you're looking for? It could be they no longer do kitchens or room additions, or they now do fire damage work and have stopped doing remodeling. Clarify that up front.

2. What's their schedule like? If you have a project that has to be done within the next month and the contractor can't even start until then, there's no point in wasting your time or theirs.

3. Can they provide you with referrals? Most companies are more than willing to provide you with names and phone numbers of past clients. If they can't or won't provide you with referrals, don't hire them! Between the time you call the contractor and the time they come out to your home, be sure to follow up on a couple of the referrals and get some feedback from the homeowners. For larger projects, ask if you can come out and view the contractor's work.

4. What is their business name and license number? Get the contractor's full business name, address, and business phone number, as well as their contractor's license number. Immediately call the proper state or local licensing agency to verify the status of the license and that any required bonds and insurance policies are in place. If there are any problems with the contractor's license, bond, or insurance, do not deal with that contractor!