| When do you know it’s time to make some major
changes in your home? Most likely when you can’t
bear to look at your old bathroom fixtures and
cracked tiles or the outmoded kitchen cabinets
and shabby vinyl floor. Or it could be that
you need some additional space to accommodate
your growing family. Regardless of your reasons,
you’re certainly not alone when it comes to
remodeling your home.
Demand Drives New Products and Services
Even when the stock market falters or mortgage
rates rise, economists seem to agree that home
building will continue to grow because rising
home prices permit the homeowner’s equity to
be reinvested. As a result, renovations have
become more upscale and home remodeling businesses
have expanded to meet the demand for more sophisticated
projects.
The Open Kitchen
The most popular remodeling job is for the kitchen,
which also leads in adding resale value to the
home, according to Remodeling Magazine. One
of the hottest trends is the "open design"
kitchen, which is incorporated into the overall
living area of the dining room, den and/or living
room. Additionally, kitchens are being rebuilt
larger to accommodate more people, food preparation,
and storage. Space is being designed more efficiently
with rollout shelves, lazy Susans, trash compactors,
recessed lighting, and underground cook-top
venting. Many designs include dual work areas
with separate sinks and cutting areas or large
granite "islands" doubling as preparation
and dining surfaces. Skylights, dimmable lighting,
stainless steel appliances, and wine coolers
make the kitchen an attractive setting for entertaining
guests while preparing a meal.
Manufacturers have developed many efficient
appliances to meet the needs of the time-challenged
consumer. For example, there are convection
ovens that move heated air directly onto the
food instead of into the oven cavity, reducing
cooking time up to 25%. And at least one manufacturer
offers an oven that uses intense light to reduce
cooking time. Meanwhile, the so-called smart
appliances on the market can interact with your
computer, so you can activate or control the
dishwasher, oven, heating/air conditioning,
or Jacuzzi over the Internet.
The Lavish Bath
Bathroom improvements are also extremely popular
with homeowners, who are eager to sacrifice
their small spare bedrooms to make way for huge
bathing areas that often include a hot tub,
separate shower, dual sinks, heated towel racks,
bidets, and lavish marble floors and countertops.
Moreover, ceilings are often being raised to
the roof to create an atrium look with skylights
and small trees, and it is not uncommon to find
dedicated telephones for the toilet and the
Jacuzzi.
Remodeling Resources:
- U.S. Department of Housing and Urban Development,
Washington, DC (202) 708-1112, www.hud.gov
- NAHB (The National Association of Home Builders)
Research Center (800) 638-8556, www.nahbrc.org
- National Kitchen and Bath Association (800)
843-6522
- National Association of the Remodeling
Industry (800) 611-6274, www.nari.org
- Remodeling Online, www.remodeling.hw.net
- Canadian Home Builders’ Association,
www.chba.ca
- Better Homes and Gardens, www.bhg.com
- Home Ideas, www.homeideas.com
- Home Doctor, www.homedoctor.net
The New Home Worker’s Office
An office at home is also in demand now, as
workers choose to "commute" from home
— saving time, dry-cleaning bills, and transportation
hassle and expense to become more productive
and efficient. Since electronic communication
can deliver corporate office and customer site
meetings at home, an attractive, workable home
office is needed to accommodate this new work
culture.
How to Finance Renovations
Home equity loan: Line of
credit, at fixed or adjustable rates. Interest
generally tax deductible on principal up to
$100,000. Banks, credit unions, other lenders.
Second mortgage/refinanced mortgage:
Based on percentage of home value minus amount
owed on first mortgage. Fixed rate. Interest
generally tax-deductible on principal up to
$100,000. Banks, credit unions, finance companies.
FHA Title 1 Home Improvement Loan:
up to 20 years. Home improvement lenders.
Cash value life insurance/profit sharing
plans: Interest not tax deductible.
Insurance companies, employers.
Buyer Beware
While these innovations are impressive, so are
the costs. A standard kitchen redesign can run
$20,000 to $40,000. Add in granite countertops
and special appliances, and the price can climb
well over $60,000. Although time-saving and
fun, these new appliances can cause sticker
shock, so comparison shop.
But before you even think about making a home
improvement, you need to find a reputable contractor,
and that may not be easy. Even if you know one,
a reputable contractor may have a long list
of projects. It may take months or even years
to start the work, as the boom in home renovation
demand often exceeds contractor availability.
And then there are some horror stories to give
you pause. For example: A homeowner [in Canada]
wanted his fire-damaged house renovated. The
contractor asked to be paid in cash to avoid
workman’s compensation and taxes. The homeowner
agreed, hoping to save a few bucks. Later, he
found the work unsatisfactory and, unable to
work things out with the contractor, decided
to sue. The court did assess damages, but held
that because the homeowner had participated
in an illegal agreement [to avoid taxes], his
right to receive compensation from the contractor
was voided.
Other common stories include contractors who
never show up; contractors who start the job
and then disappear for weeks (leaving portions
of the house open and exposed to the elements);
and contractors who fail to return at all and
never finish the job. Of course, then there’s
the contractor who does shabby work that’s not
up to code. Since the work can’t pass inspection,
sometimes the whole job needs to be redone.
In response to these scenarios, the American
Financial Services Association (AFSA) has developed
a voluntary standard designed to protect against
home improvement scams. Under AFSA guidelines,
members who provide financing agree not to make
final payment until they receive a certificate
signed by the homeowner and contractor acknowledging
satisfactory completion of the work.
The best and most obvious way to avoid problems
is to get the contract in writing. A worker
injured on the job without workman’s compensation
insurance could sue you personally. There may
also be complications with your homeowner’s
insurance if the contractor is not properly
licensed. Without a contract, you have no recourse
against shoddy work, work not done as specified,
cost overruns, and potential legal proceedings.
A written contract will state the proper building
materials to be used and that warranties from
manufacturers be honored. Additionally, it will
specify exactly how "change orders"
from the homeowner will be handled by the contractor.
If your contractor is interested in cheating
or cutting corners, chances are it could happen
on your project. Remember, laws are created
to protect both you and the workers. Trying
to save money illegally could end up costing
you more.
Do Your Homework on Your Biggest Investment
This may be a great time for home renovations.
Sophisticated new appliances and larger living
areas can create beautiful, stress-relieving
surroundings while also saving you time and
money. Banks are eager to make home equity loans,
and loan interest is tax deductible as well.
So take the time to find a reputable contractor.
Do the research, talk to your friends, check
references, get several estimates, and most
important, get the contract in writing. These
simple steps could keep your new dream home
from becoming a "money pit."
Points to Remember
1. Remodeling demand is driving new product
technology and costs.
2. Kitchen remodeling ranks first in popularity
and resale value.
3. Retain a reputable contractor through references
and estimates.
4. Do not proceed without a written contract.
5. Project financing is available through home
equity loans, mortgage refinancing, and home
improvement loans from banks, credit unions,
and insurance and finance companies.
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