How to Compare Bids for Remodeling
Choosing the right contractor is one of the most important decisions you’ll make in a home improvement project. Even the most gung-ho DIY-er has to call in a home professional sometimes. Although some homeowners may be tempted to go with the cheapest option, choosing a bid shouldn’t just depend on price. Here’s some tips to help you through the process:
Take your time and plan ahead
With any major room renovation or remodel, you will need take several months for planning. Go to home improvement showrooms and stores, talk to contractors, architects and others who have done these improvements. Go to new home communities and see what their high dollar designers have selected as colors and types of cabinets, flooring, or countertops and take lots of pictures of the designs you love. Check out home decor sites and magazines and take notes on anything you like. Ultimately, this will help you form a visual of your remodeled space. When you know exactly what you want, you will be able to have better discussions with contractors and get realistic bids.
Note: Any remodeling you do will always cost more than you anticipate. While this can be due to unexpected problems, cost overruns also commonly occur because the homeowner changes his or her mind. This is the most important reason why you want to take the time to determine as close as possible what you want before you move forward.
Making improvements doesn’t guarantee improved home value
Another important issue to realize is that while making improvements to your property may increase the home value, it probably will not increase the value as much as you spend on the improvements. For example, if you spend $50,000 on a kitchen, your home may not sell for $50,000 more. Check the cost vs. value for your remodel project in your area. Also, don’t make improvements if you are selling the property, let the new owner do those. Make major home improvements only if they are for your personal enjoyment as the continuing long-term owner of the home.
Get at least three bids
Time to get bids. Get at least three different reputable contractors to bid and have them detail the manufacturers of each product in their bids. The more specific their bids, (because you were more specific in your requirements), the less chance of disagreements and the higher chance you will stay within budget. Review the bids, if possible, with someone who is experienced in remodeling properties, perhaps someone who recently did a remodel. Make sure the contract has a time frame for completion and possible penalties for significant time overruns. Whatever you do, don’t rush to make decisions on the contractor you select.
Ask the contractors for names and numbers of references from their past five jobs and ask what the original project budget and final cost was. Call the references, ask questions, and if possible, go see some of the work. You should also check websites like the Better Business Bureau and state and local government sites to confirm the professionals are licensed and in good standing. Get a copy of their insurance and bonding information and fax it over to your insurance agent, lawyer or CPA to also help you review.
Know that costs can increase
A fixed cost contract is the optimal scenario, but if you change orders or possible issues arise, costs increase. You should also agree with the contractors on a payment schedule based on milestones of work being completed. There should be a hold-back amount, like the final 10-15 percent of the payment, for at least a week or two after all work is complete. This way you can closely review the work and you’ll still have some leverage if items need to be resolved.
Take the time
Again, take the time to properly specify the work you want done, put it in detailed writing, check out the past work of the contractor, verify their license, insurance and bonding information. Hopefully doing this will help you avoid significant changes and cost overruns.
Leonard Baron, MBA, CPA, is a San Diego State University Lecturer, a Zillow Blogger, the author of several books including “Real Estate Ownership, Investment and Due Diligence 101 – A Smarter Way to Buy Real Estate”, and loves kicking the tires of a good piece of dirt! See more at ProfessorBaron.com.
Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow.