Builders who undertake significant remodeling projects, such as room additions, are faced with some of the more complicated challenges in residential construction. Ironically, a remodeling business poses very few obstacles for entry – there are not any training or minimum financial requirements. Also, homeowners often mistakenly expect less from a remodeling contractor then they would in new construction. As a result, the remodeling industry is plagued with misrepresentation, incompetence and fraud. Fortunately, by asking the right questions, you can prequalify your remodeling contractor.


KNOW YOUR CONTRACTOR’S BUSINESS MODEL

Resources, Record and Experience. Who will actually manage your project? Does he have the required time and experience? What happens if he is not there? How critical is the owner to the operations and what happens if he is not able to work? If the same crew is doing the entire project, what happens when they get pulled away to another job? What is a typical size job?

Specialized Labor. Does your project require specialized work by plumbers, electricians, HVAC technicians, carpenters, roofers, and others? Is your contractor using less then qualified trades to save money? If the same crew is doing most of the work, do they have the requisite skills and licenses and are able to pass municipal inspections, if required? Please consider that it is unlikely that the same person will make a good electrician, plumber, carpenter, etc.

Good Contractors Gone Bad. All good contractors will get opportunities to grow their business. Many, however, will wind it down as fast as they have wound it up. Managing a business is a completely different job from managing construction. Make sure that your contractor’s growing pains and his staffing, financing, cash-flow and other operational issues do not take precedence over your project. You should understand your contractor’s business model and how it may affect your project.

KNOW YOUR PROJECT.

Level of Complexity. Larger projects, such as room additions, require a significant investment into materials and specialized labor. This is an area where a handyman-type labor becomes less cost-effective and experience in dealing with the trades, project management skills and diligence in following plans and schedules becomes critical. A contractor whose experience is limited mostly to basements and baths may find that he is outmatched by the technical and project management aspects of a room addition – excavation and foundation work, site grading, structural issues, enclosing the structure as soon as possible so as not to let it be open to the elements for a prolonged period of time, critical tie-ins to the existing structure and mechanicals, the ability to pass municipal inspections – all have long term consequences to the project’s completion, timeliness, long term quality and your satisfaction. Also, mistakes on jobs like these may be costly to correct – make sure your contractor has not only the experience, but the wherewithal to remedy errors if necessary.

Schedule. Ask the bidding contractors to show you their estimated schedule for your project, including material delivery dates and start dates by phase. Ask to see schedules from their prior projects as well. Your contractor’s ability to generate and follow a schedule may serve as a good indicator of his ability to complete your project on time. The time it takes to complete your project will have a direct bearing on the quality of the work and your satisfaction with the project. If you are financing your project and waiting to move in, you should also consider how the timing of your project may affect your interest, property taxes, rental and other costs.

Permits. In many instances municipal building permits are necessary and cannot be done away with. You should have a clear understanding of how your contractor will handle your permits before you give him any deposits or sign any documents. Many contractors put “permits by owner” clauses in their agreements, which create ambiguities concerning the process and work. If a municipality shuts down your project either because you did not get a permit or because the work does not meet their requirements, you should be able to look to your contractor to solve the problems at no cost to you. You should expect your contractor to handle permit applications for you.

Unknown Conditions. This is a common area of contention between homeowners and contractors. You should ask a contractor about what types of conditions he would consider to be “unknown”. Conditions, which may be readily observable thorough a plain visual inspection should not be considered to be “unknown”. Other conditions, although “unknown” may be anticipated by your contractor and can be discussed ahead of time.
The “Spill-Over” Effect. One of the critical aspects of a remodeling project is considering how it ties into the existing part of the home. For example: The wall separating your kitchen from the family room comes down, giving you a new open floor plan. However, none of the flooring or trim in the kitchen matches the family room and no work in the family room has been provided for in the contract. You suddenly find yourself having to pay more to finish the family room flooring, painting and trim. Similar issues can affect the exterior modifications as well – you should always consider the structural and aesthetic tie-ins for additions involving roof, siding, gutters, brick, windows, etc. A good contractor should advise you about the critical tie-ins and “spill-overs” to help you anticipate as many costs as possible.

Selections and Process. Will your contractor guide you in the selections process? Refer you to the right vendors? Provide technical assistance in making sure the materials you are selecting are appropriate? Have the time and skill to reconcile your selected items with your allowances? Who is purchasing the materials and other selected items? Is it your responsibility to make sure the tile, plumbing fixtures, electrical fixtures and other items are delivered timely to the job site or should you expect your contractor to take on that responsibility? Who chases the missing parts, returns damaged tile or wrongly shipped fixtures? How is the contractor’s time billed to you when you take on the delivery responsibility and parts are missing? There is a fine line between installation and material defects – you should have the contractor take responsibility for all items being installed and for processing warranty issues with suppliers (appliances would be a notable exception).

PLANS & CONTRACTS

Plans. Beware of contracts or deposit agreements that do not reference architectural or engineering plans. Larger projects, such as room additions cannot be completed properly without plans. Make sure that the scope of work includes a “building per plans and specifications”.

Contract. Your contract should reference the plans, the specifications, the allowances, the scope of work, schedule, work stoppage, payment terms, and complete contract sum. Many of the standards should be established as “per code”. Beware of “cost plus fee” basis contracts if the costs are yet unknown.

Specifications, Allowances and Inclusions. Beware of contracts or specifications that have allowances for construction-type items. While it is acceptable to have allowances for items you can purchase – appliances, fixtures, tile, cabinetry – you should never agree to allowances for labor or construction materials. Labor and construction materials necessary to complete the job should be the contractor’s responsibility. Also, be sure to get a complete specifications document listing all materials included.

Exclusions. You should understand the exclusions and how they affect your project. Pay particular attention to “supplied by others” or “supplied by owner” clauses. Exclusions are appropriate, even necessary, but you have to understand what is being excluded and how it affects your project.

REMODELING INDUSTRY PITFALLS.

Spiking a Job. Example: getting a deposit, starting demolition and pulling out to do another job, while your job is waiting. Many smaller contractors take on more jobs than they can handle and perform work sporadically to keep homeowners minimally appeased, while allocating resources to where they can collect the next payment.

Contractors in Distress. Beware of contractors who need your project to pay for the last job’s materials and labor. This is a dangerous pyramid that may collapse while your project is on-going. These tend to be the contractors who never finish punch list items.

Liens. Make sure you do not get liens or lawsuits from the people your contractor has failed to pay. Get lien waivers and material lien waivers from your contractor. Ask if your contractor would be willing to process his payments through a title company. Ask if his employees are really his employees or just subcontractors. If they are subcontractors (getting a 1099 from your contractor) they can lien your home if your subcontractor fails to pay them.

Cost-Plus-Fee Contract. This is a seemingly simple, but actually a complicated way of contracting with a builder. As the name implies, the contractor would charge you a fee on top of the costs. While this method works better in the commercial construction arena, it is filled with pitfalls in the residential field, particularly in remodeling. It creates incentives on your contractor’s part to overstate costs and to get kick-backs from the subcontractors. It allows a contractor to disassociate from the budget and to charge you for his mistakes. It does not provide you with a good budgeting model because you may not be protected from the material or labor costs going up.
GET REAL REFERENCES

Relevant References. Verify that the contractor had done the kind of work you need. For example, a contractor who does mostly basements and handyman-type of work may not necessarily be the right choice for a room addition.

Recent References. Ask for the last few jobs customer references. Most contractors can come up with some references. You should spend some time interviewing the references and getting as many details as possible.

Completed Job References. References from on-going jobs are not enough. Get references from jobs that were completed. Ask about how the warranty claims were handled.

COMPARING PROPOSALS

“Apples to Apples”. The best way to compare proposals “apples to apples” is for you to come up with specifications that would be adhered to by all bidding contractors. If this is not the method you are using, you will have to work harder at comparing the proposals by various contractors in different formats and with different features. In this case, the real value can be determined only after a thorough review of all inclusions, exclusions, allowances, and other terms – the lowest number may actually be the highest number – you should take the time to review the bids carefully. You should ask each one of your bidding contractors to help you compare their bid to the others. They should be able to point out items left out by the competition. Some contractors will put together a spreadsheet for you, comparing their bid to others, or you should create the spreadsheet yourself.

Items to Review in a Bid Proposal. Here are some of the items to ask questions about with regards to your remodeling proposal:

Stairs: Mill-made or carpenter built? (mill-made is preferable for the 1st to 2nd level stair). What kind spindles and banisters? Will it pass a code inspection?

Roof: All new or tied into existing? How is it tied-in? Are the shingles going to match? Has the older section been previously re-roofed? Is the ice-water shield included? Is there sufficient roof ventilation? Is a professional roofing contractor installing the roof?

Trim: Match existing? How do you provide for tie-ins?

Windows: Wood or vinyl? What brand and type? Casement or Double-Hung? Would the new section of the house need to be consistent with existing? Is the patio door a slider or a French door? Is there sufficient egress per code? Is the window supplier installing the windows or is it someone else? What does the warranty say?

Siding: Match existing? Is the existing profile available? Will the color match existing? (consider the weathering effects on existing siding).

Plumbing: Would the drain be vented properly or at all? Would the plumbing be tied into a sewer drain (per code) or is it just draining it into a sump pit or floor drain (if so, it may flood your home and generate a sewer gas smell). Do you know if a new water service will be required by the municipality? (this may be a hidden charge by your contractor). Some municipalities require that the older galvanized plumbing be removed and replaced with copper. If it is not in a bid or a plumbing allowance, will you incur additional costs?

Electrical: Would you need to upgrade to a 200amp or to a 400amp service? Is this included? Will the new outlets be grounded properly? Will the work be done by a license electrical contractor? (faulty wiring may cause a fire and work not done per code may have to be re-done).

HVAC: Have you determined if the furnace is sized properly to handle the additional space? Is the new space over the garage?

Insulation: How is the home being insulated? Per code? Pipes on the outside wall should also be insulated.

Warranty: Will there be a warranty? Who will come out to take care of a pipe that froze because it was not properly insulated?

Cleaning. Keeping the job clean and properly blocking off construction areas should be included in the proposal. Post construction clean can be costly and should be included in the proposal. Make sure the dumpster and the general disposal of construction debris is included.

Painting: Many contractors exclude painting from their proposals. Please make sure you understand if it is included or not.

Cabinetry. This item is usually left out of proposals. You should be aware of cabinetry costs, however and include them in your budget.

OTHER CONSIDERATIONS

Insurance. Make sure your contractor has sufficient Worker’s Compensation and General Liability coverage and that you are named as an additional insured. You should review the quality of your contractor’s insurer and coverage limitations. Your contractor’s employees’ claims can cost you! Make sure that your homeowner’s insurance provides sufficient coverage for you. In the event that you are using unlicensed trades or not applying for a building permit, please verify with your insurance company that you are covered in the event of any damage that may be caused in the construction process or thereafter.

Resale. The Illinois statutory seller’s real estate sale disclosures about the conditions of the property are getting more and more complicated and the buyers are asking more questions than ever. It would be in your best interest for the sale value of the property to keep as much documentation as possible: plans, permits, construction agreement, etc.