HIRING THE RIGHT CONTRACTOR - 20 TIPS

Friday Jun 22nd, 2018

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A good investment in a renovation should increase the value of your home by at least 50% of what you spent. Before you plan any improvements, understand what adds value to your home.

 

5 renovations that usually add value

Type of improvement

Average recovery rate*

1. New or improved kitchens and bathrooms

75-100%

2. Low-cost improvements – Painting, new wallpaper, new rugs

50-100%

3. New windows or doors

50-100%

4. Basement renovation

50-75%

5. Investments in more efficient use of energy, especially if you are eligible for government rebate programs

60%

*The percentage of your cost that you may recover when you sell your home

 

DIY - NOT AS EASY AS IT LOOKS 

Watching the brawny contractors on TV might inspire you to break out your own toolkit. Sometimes the hosts even get husbands to do some drywall or drilling, but sadly, nothing is as easy as it looks.

 

CHOOSE THE RIGHT CONTRACTOR FOR THE RIGHT PROJECT

Someone who did a good job tiling your neighbour’s bathroom isn’t necessarily the right person to build an addition to your home. You want to find a company that routinely does the kind of project you want done. 

 

If you’re doing a big project, you’ll need a general contractor, who may hire subcontractors for specialty work such as plumbing and electrical. Homeowners with renovation experience sometimes work as their own general contractors, hiring specific tradespeople for each job. “While this may save you money, it can be time-consuming and will mean multiple contractor searches instead of just one, since you’ll have to find a specialist for each smaller job” says Betty Lau of All Womens Contracting+1.  Finding a contractor who stands for something usually means they will fall for nothing! Betty stands for equality in a male dominated industry and for the past 20 years has stood for nothing less than hiring the best sub-contractors in the business to get the job done.  Whichever way you go, there are steps you can take to find the right contractor while still keeping your budget – and your sanity – under control.

 

KNOW WHAT YOU WANT BEFORE GETTING AN ESTIMATE 

Start with a plan and some ideas. You’ll get a more accurate estimate if you can be very specific in what you want done and the materials you would like to use to make it happen.

 

ASK FRIENDS, CO-WORKERS & REALATIVES FOR REFRENCES 

People in your neighbourhood who have done similar projects are your best sources. If you know people in the building trades, ask them, too. Employees of local hardware stores may also be able to provide referrals.

 

INTERVIEW AT LEAST 3 CONTRACTORS

Ask a lot of questions and get a written bid from each one. When you compare bids, make sure each one includes the same materials and the same tasks, so you’re comparing apples to apples. Get three bids even if you have a contractor you like because you’ll learn something from each interview. Don’t be afraid to negotiate. While you might do some haggling at the interview, be prepared to do most of the negotiation after you get the bid and before you sign the contract.

 

REALISTIC TIMELINE

Draw up a timeline with the contractor so you’ll know what to expect. This will give you a baseline for discussion if things take longer than expected. If you need permits, be sure to build in extra time to get them from city hall.  It’s important to realize quality contractors aren’t necessarily available right away. “Depending on the job” Betty says, “we always like to come out and inspect the job first before deciding on when we should start based on our current scheduling.” 

To keep things running smoothly, discuss with your contractor about buying all your materials ahead of time, and remember it’s common for items to be out of stock or for the wrong product to be shipped. 

 

ASK WHAT WORK WILL BE DONE  

by the contractor’s employees and by the subcontractors

Ask for an employee list to make sure the contractor really has the employees they say they do and won’t be using casual labor hired off the street.

 

CHOOSE THE RIGHT CONTRACTOR FOR THE RIGHT PROJECT

Someone who did a good job tiling your neighbour’s bathroom isn’t necessarily the right person to build an addition to your home. You want to find a company that routinely does the kind of project you want done. 

 

CHECK LICENCES, COMPLAINTS & LITIGATION HISTORY

General contractors and most subcontractors should be licensed, although the procedure varies by province and municipality. Check the disciplinary boardsBetter Business Bureau and local court records for problems. Ask the contractor for a copy of his license and copies of the licenses of the major subcontractors who will work on the job.

 

CHECK REFERENCES 

Talk to both clients and subcontractors, who can tell you if the contractor pays them on time. Talk to current customers, because those clients have the most recent experience working with the contractor.

Read online reviews, but don’t consider that enough information.  You want to read the reviews carefully to make sure the contractor is the right person for your job and will work well with you. Keep in mind that reading reviews is not a substitute for checking references.

 

SIGN A DETAILED CONTRACT 

Make sure your contract spells out exactly what will be done, including deadlines, progress payments, the exact materials that will be used down to the model number and who will provide which materials. If you don’t have it documented, it’s your word against theirs. If the builder’s contract is not detailed enough, write up your own or provide addendums. Any change in the project, whether you change your mind about products or ask for additional projects, should generate a written change order that includes the new work, materials and cost.

 

GET THE PROPER PERMITS

Nearly all home renovation projects require permits. Many fly-by-night companies, as well as some licensed contractors, will suggest the job be done without permits to save money. Not only does that violate local ordinances and subject you to fines if you’re caught, it means the work will not be inspected by the city or county to make sure it’s up to code. Be wary of contractors who ask you to get the permits – that’s the contractor’s job. Un permitted work can also cause problems when it’s time to sell.

 

DON'T OVERPAY ON YOUR DOWNPAYMENT 

You don’t want a contractor to use your money to finish someone else’s job. Betty says she requires 10% deposit to hold the start date and 40% prior to the start date depending on how large the project is. The contract should include a payment schedule and triggers for progress payments.

 

DON'T SIGN A CONTRACT FOR YOUR ENTIRE RENO BUDGET

No matter how careful you and the contractor are in preparing for the job, surprises can add to the cost. Walls are not see through. Expect to spend at least 10 percent to 15 percent more than your contract.

 

NEGOTIATE GROUND RULES

Discuss what hours the contractor can work at your home, what kind of notice you’ll get, what bathroom the workers will use and what will be cleaned up at the end of every workday.

 

TALK TO THE CONTRACTOR FREQUENTLY

For a big job, you may need to talk every day. If you see a potential issue, speak up immediately. Something that is done wrong will be harder to fix later after your contractor has packed up and moved on to their next job.

 

VERIFY insurance coverage

Know what is covered by your homeowners insurance and what is covered by your contractor’s business insurance. Get a copy of the company’s insurance policy.

 

GET LIEN RELEASES & RECIEPTS FOR PRODUCTS

If your contractor doesn’t pay their subcontractors or suppliers, they can put a mechanic’s lien against your house. You want copies of receipts for all the materials, plus lien releases from all the subcontractors and the general contractors before you pay. You can ask for some of those when it’s time for progress payments.

 

DON'T MAKE THE FINAL PAYMENT UNTIL THE JOB IS 100% COMPLETE

Don’t make the final payment until you are completely satisfied with the work and have all the lien releases and receipts.

 

FIGURE OUT THE FINANCES

A hasty, under-budgeted renovation can actually devalue your home and add little or no value to your home’s fair market value. And nobody wants to pay for a big blunder.

Before a hammer hits a nail you must first decide how you will pay for your home renovation project. 

 

No. 1: Savings

Like all consumer spending, paying for a renovation is best done through savings. By saving up the money, you’re more likely to stay on budget because you have more time to research costs and plan the project.

 

No. 2: Use a home equity line of credit (HELOC)

This is a loan that’s taken out against the equity you have built up  in your home. Under current regulations, a lender will only let you borrow up to 65% of your home’s value. That means on a $500,000 home you could borrow as much as $325,000. So, if you already have a $300,000 mortgage, you could qualify for a $25,000 HELOC.

The advantage of a HELOC over a standard loan is that it’s backed by an asset. This collateral allows the lender to offer the loan at a lower interest rate, usually prime plus or minus a percentage. Also, a HELOC allows you to borrow up to the limit, repay and borrow back again, without penalty. Plus, when cash is tight, you only pay interest on the funds you use.

Just keep in mind that HELOCs come with additional fees to open and close (called discharging) the loan, fees that can run as high as $1,000.

 

No. 3: Use rebates

If you’re doing extensive renovations, consider making upgrades with energy efficiency in mind. Upgrades, like insulating the basement or upgrading windows and the home’s furnace, can help you qualify for municipal, provincial and federal rebates that can quickly add up.

However, to get access to these rebates, you must first pay for and complete a home-energy audit—a test that will tell you how energy efficient your home is (or isn’t) and then provide a list of upgrades. The audit is done in two parts (before and after) and can cost anywhere from $200 to $1,000, depending on your city, your home and the company you use. Once you’ve completed and paid for these improvements, you can submit receipts and paperwork to various rebate programs. Depending on what you’ve done, you could get as much as $10,000 back, just keep in mind it could take up to a year for the money to come in.

 

No. 4: Credit card

Charge cards often come with very high interest rates, meaning you pay an exorbitant premium just to do the renovation. Proceed with caution!

 

Remember: You can have it all in your lifetime:

People often feel under pressure to get their renovations over so they can be done with the stress and enjoy their improved surroundings, but you put yourself at increased risk of problems if you move too quickly. You don’t have to do everything at once, although it’s understandable that no one wants to live through constant renovations, but to plan it out slowly and wait to do some projects a couple years later, might be a lot easier.

 

 


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