Guide to Budgeting for a Home Remodel
By Alex Levin
Ask 100 people who have renovated their homes and all 100 will tell you that going over budget for a remodeling project is as certain as death and taxes.
But it shouldn’t be. Careful planning and research can help you avoid the feeling of budget-bursting humiliation when you realize your remodel will cost double, or even triple, what you originally expected.
Before you bring in a contractor or break ground on your DIY project, what can you do in your initial budgeting stage?
Stay grounded. It’s easy to dream big about redoing every corner of your house. Instead, focus on redoing one or two rooms or small parts of the house first. Concentrate on the areas of your home that are in dire need of repairs or renovations. Avoiding the “kitchen sink” approach to home renovation is a surefire way to keep your project’s budget slim.
Lay out and evaluate your priorities, your reasons for remodeling and your finances. If you are renovating to increase the resale value of your home, consult a realtor first. Your project may not add much value and a real estate professional can suggest renovating projects that maximize your return on investment. If you’re remodeling simply to change things around, consider shrinking the scope of your project. Will the budget for your remodel exceed everything that you have in your savings accounts? If so, you will have to find a source of financing.
Be truthful about what you want and don’t want. This means you want to stick to the plan you make! Don’t be wishy-washy about features you want. If you want something, be honest with yourself and add it to your budget. If you don’t include it initially and add it back in later on, you’re bound to have to pay more than what it had originally cost.
Don’t rely on ballpark figures. It’s easy to mindlessly jot down estimates for how much materials, tools and equipment may cost. Not surprisingly, your estimates are very likely outrageously wrong. Find multiple quotes and sources for the materials and labor you need. Search around for the best deals and obtain exact dollar amounts. This way, you can develop a budget that you know will be reliable and subject to little change.
The Search for a Contractor
We understand that you want to hire a contractor for your remodeling needs, but you don’t want to get ripped off or charged for shoddy work. Here are some tips to guarantee that you get a dependable contractor to conduct quality work without being nickeled-and-dimed to death.
Avoid allowances like the plague. Allowances, which allow for specific design details to be decided later when work is being done, are a procrastinator’s best friend and can easily double or triple renovating costs if they are done wrong. Not only do allowances bloat your expenses, but they also slow down the project by pushing planning back. Contractors love to suggest allowances so that they can lowball their competitors. If you do accept allowances, don’t be surprised when you go over your budget and your project is finished many weeks late.
Understand that no project goes 100 percent smoothly. Some home improvement experts have suggested doubling all the quotes you get to ascertain the real cost of renovating. Others will say to plan for, and not to be surprised by, up to a dozen mishaps that are bound to happen during your project. Never expect perfection, and always anticipate the unexpected.
Do your homework. Lots of it. We recommend searching for licensed contractors through the National Association of the Remodeling Industry (NARI). You should also pinpoint a contractor that is certified through NARI’s remodeler certification program. Finally, you will want to check references and ask contractors for the names of their five latest jobs. Follow these steps, and you’ll get a good idea of whether each contractor is reliable or lousy.
For Peace of Mind, Take Out a Surety Bond
Don’t think you’ll have enough dough for your renovation? Consider a surety bond. With a surety bond, you get the added benefit of having a third party who will guarantee that you get your money back if a contractor should perform shoddy or low quality work. Acting as an impartial party to the bond agreement, the surety makes sure that the principal, or the contractor renovating your home, performs all his or her obligations that the obligee requests.
Getting a surety bond is a great way to ensure that your renovating project stays on budget with a guarantee that contractors you hire won’t do poor work. Purchased through insurance companies, surety bonds are backed by all the resources of an insurance company’s research and risk assessment divisions. With a surety bond, you won’t have to worry day and night about hiring the right contractor. Because the insurance company wants to avoid losing money as much as you do, it can help you filter out contractors and select only the best ones based off their previous work and financial circumstances.
While a surety bond is backed by an insurance firm, it is not an insurance policy itself. Rather, the terms of the bond allow for you, the obligee, to receive a fixed payment should the contract with the contractor be broken.
This brings us to an important point about contracts. Always be as specific as possible in your contract about what you want and don’t want. The folks you hire can’t read your mind, so it’s in your interest to be as specific as you can when you’re scribbling down your demands. What kind of construction materials do you want? What kind of extra work do you want done? Do you want your remodeling project to meet or exceed environmentally-friendly building codes and standards? Write it all up in the contract. Not only will you be protecting your money, but you’ll also save valuable time by preventing any huge mistakes from cropping up.