YOUR MONEY NOW

Remodel behavior

 

You’ve got a plan for what you want your home to look like when the renovations are done. Now you need a plan to get it done right.

Resources

 www.bbb.org: Better Business Bureau site offers a list of accredited contractors in South Florida, as well as a history of complaints.

www.myfloridalicense.com: Verify license and check complaint histories on the Florida Dept. of Business & Regulation’s site.

www.ftc.gov: Federal Trade Commission’s site offers scam alerts and consumer protection information.

www.nari.org: National Association of the Remodeling Industry offers planning tips and tips on how to find a pro.

www.nahb.org: National Association of Home Builders offers remodeling tips and resources.


Special to the Miami Herald

Beth Mumby has been remodeling her 30-year-old Cooper City home for years. She has replaced kitchen cabinets and retiled floors, and now the married mom of two is in the midst of a bathroom makeover. Known for her meticulous research of materials and labor, Mumby said she’s learned a few things along the way about picking the right contractor.

Doing your homework is the first step in finding the best contractor for your home improvement job, said Michael Galvin, vice president of communications for the Better Business Bureau of Southeast Florida. Though it’s easy to get caught up in the excitement of a renovation project, it’s important to remember that it’s a business decision.

The biggest mistake in these economic times is that people are always looking for the cheapest price, Galvin said. “That doesn’t always work out. People need to do their homework up front and approach it as a business decision, rather than an emotional one,” he said. “People get all excited and say ‘Oh, that price is so cheap,’ which means it’s probably too good to be true.”

The U.S. home improvement industry is rebounding from its worst downturn in the past 50 years, according to the Joint Center for Housing Studies of Harvard University. Homeowners who shied away from maintenance and improvements during the recession are starting to open their wallets for repairs and upgrades. Foreclosed properties are being rehabilitated and homeowners forced to stay put during the housing market crash are making improvements for the long haul. Spending on homeowner improvements is expected to grow annually at 3.5 percent, according to the agency’s 2011 study.

People spend about $1,000 to $15,000 annually on home improvements and repairs, said Ellen Siegel, a certified financial planner with Ellen R. Siegel and Associates in Miami. “You have to be financially prepared.”

•  Get referrals: The best referrals come from your friends — people who have had work done to their own houses, said May Cheung, a certified financial planner for The Enrichment Group in Miami and a part-time real estate agent. “Then you can go to their house, look at their bathrooms, look at the floors, and see the work.”

Cheung has completed four home improvement projects on her West Kendall home. “I’ve learned a lot,” she said.

Mumby has used referrals from friends and contacted contractors working in her neighborhood, but now relies on Angie’s List, a subscription service that compiles consumer ratings of service people. “It gives a grade, and there are written reviews. I’ve found that to be really helpful,” Mumby said.

Many homeowners shy away from interviewing prospective candidates, especially in South Florida, where a lot of languages are spoken, and the contractor may not speak yours well, Siegel said. That can lead to decisions you’ll regret.

•  Verify licenses: It’s easy to get caught up in the moment, because you’re excited about your home renovation, Galvin said. But don’t neglect your homework. Go to www.myfloridalicense.com, to your county’s board of licensing and to the Better Business Bureau to check licenses and a complaint history.

“People say ‘Why do I need to do all this?’ ” Galvin said, “but if something happens, it’s too late. And it will have financial consequences.”

It can be tempting to go with an unlicensed contractor, a friend or a neighbor to do your project, Siegel said. “But business is business; money is money, and if there is a problem down the road, it may be best if it’s not a friend.”

Siegel said 14 years after she reroofed with a licensed contractor, a problem developed because of poor workmanship. She contacted the original roofer, who replaced the damaged portions of the roof at no charge. “He did that because he’s a professional,” Siegel said.

A cheaper, unlicensed contractor also could cost you more in the long run, Siegel said. If work done is not up to code, you may find yourself paying for unexpected repairs, or not being able to sell your house.

You can verify a contractor’s insurance, but make sure your own homeowner’s is up-to-date as well, Cheung said. “Theirs may have lapsed,” she said.

•  Get prices: Get at least three bids on your job. But before you ask a contractor for prices, choose your materials, Cheung said. “If you’re doing a bathroom, look at tile, vanities and tubs, because the first thing they are going to ask you is ‘What do you want?’ ” she said. Make out exact specifications so contractors will bid on the exact same job.

Mumby spent time poring over home improvement magazines, then looking in big box retailers and specialty tile stores to find what she wanted. Now she takes her iPad mini to snap pictures of materials she likes to show her husband, Richard Kaufman, and their children.

“When you’re picking the materials, think about the maintenance required afterwards,” Mumby said. “But go with what makes you feel good, because you want to be happy. How often do you do this?”

•  Study the contract: Put everything in writing in the contract, and make sure you understand it, Galvin said. What work is being performed? Can you cancel the contract? How?

“You don’t want to be in a situation where there is buyer’s remorse,” he said. “Make sure you clearly understand your contract.”

Include a deadline on your contract, with a penalty of deducting a set dollar amount if the deadline isn’t met, Cheung said.

Find out how long the workmanship is warranted, then ask if it can be extended, Siegel said. When she was replacing her roof, Siegel got a 10-year warranty instead of five years, just for asking.

•  Budget more: Always budget for more than you expect, said Cheung, who initially planned to spend $15,000 for a kitchen redo that rose to $20,000 when she threw in a powder room remodel. “Always expect to pay more,” she said. “Problems will occur, or you will find something that looks better that costs more.”

If you’re planning a home improvement project, set up a savings account and start pre-paying yourself for your improvements, Siegel said. Mumby said she and her husband started a home improvement savings account about eight years ago. “As our home started to age, we knew we would need to make improvements,” she said.

Apply for credit cards at Home Depot or Lowe’s to get a 10 percent discount on your first purchase, or an extended payment plan with no interest, Cheung said. Set aside money from bonuses or an extra job to pay for improvements. Cut out spending on extras and tuck that money away. Home equity lines or second mortgages can pay for a remodel if you have equity in a home and are a disciplined spender, but Cheung advises borrowing as a last resort.

If you’re going to set up a line of credit, then plan out a payoff plan. Don’t let it go on forever, Siegel said.

Siegel, who is in her 60s, said her parents used to tell her don’t buy it if you don’t have the cash. “But people don’t think like that anymore,” she said. “They want it now — but most people don’t have enough put aside.”

•  Don’t pay all at once: If a contractor wants a big payment up front, that’s a red flag, Galvin said. He said after Hurricane Wilma in 2005, scores of roofing contractors showed up from other states. Some took big up-front payments, then disappeared with the money.

Set up a payment system, such as a set amount up front, and partial payments as work is completed. “The final payment shouldn’t be paid until all of the permits are closed,” Cheung said.

Galvin said a final payment also shouldn’t be paid until you have proof that all subcontractors were paid. “Contracting is big business,” he said. “You have to protect yourself.”

Read more Personal Finance stories from the Miami Herald

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