Understanding these common contractor phrases can minimize hassle and save you big bucks.
Home improvement contractors talk a good game—sometimes without saying what they actually mean. So until someone invents an app for translating contractor-ese into plain English, here’s a handy cheat sheet of the hidden meaning behind several common contractor words and phrases that every homeowner should understand. (If you have other examples to share, please send them to firstname.lastname@example.org.)
When He Says: “I” or “We”
He Really Means: My crew. I don’t actually do the work myself. I spend my time bidding future jobs, organizing them, and sailing my boat.
What You Should Say: “Who will be doing the work, you or someone who works for you?” Unless he says it’ll be him, ask if he will be there at the start of every day to direct the crew, especially if it’s a complex improvement project like a full-house renovation or addition that involves numerous tradesmen. If he says yes, hold him to that promise. If he says no, hire someone else.
When He Says: “If I were you, I’d skip the permit and save some money.”
He Really Means: It’s a heck of a lot easier for me if you don’t get a permit, because I can disregard building codes, skip a lot of paperwork and inspection appointments, and dollars to donuts, nobody will ever even confirm whether I have a contractor’s license. So, I’m going to play up the permit fees and red tape, both of which are actually minimal.
What You Should Say: “Thanks, but I’d rather pay now than pay later.” Getting the proper permits assures that you won’t have problems when you try to sell the house later on, a situation that can arise if you do certain improvement projects without getting a certificate of occupancy, the town’s final approval on a project that has been fully permitted and inspected.
When He Says: “No problem. We can do that instead.”
He Really Means: I am happy to adjust the project as we go, but I will definitely be charging you for any change you make to the original plans I priced out for you. I’m not mentioning that now because I don’t want to discourage you from making this or other changes, because repricing the job is a hassle I’d rather put off until later, and because in the unlikely case I underestimated some other part of your job, I can make up that cost in the price of the changes if I wait to give them to you at the end.
What You Should Say: “Great, but before we make that change, could you jot down a quick description of the new work and what it’s going to cost me?” If the contractor doesn’t want to execute a formal change order, a simple handwritten notation on the back of the contract will do the trick. Then you can both initial it, and there will be no confusion about what the contractor is doing or what you’re paying.
When He Says: “Hi, I just did a driveway [or insert other job here] in the neighborhood and have a load of leftover asphalt on my truck I need to get rid of, so I will give you a sweet deal to do your driveway today.”
He Really Means: Hi, I’m an unreliable and unprofessional contractor you’ve never met before—or I might even be an out-and-out scam artist—and I’m trying to entice you into making a bad decision with the promise of a big discount. I know that you’d never normally hire a contractor without getting recommendations and doing your due diligence, but I’m hoping to catch you off guard with my surprise approach, winning smile, and promise of huge savings. When you discover my work is shoddy, you’ll also realize you have no idea who I am or where to find me.
What You Should Say: “Thanks, but no thanks.”
A budget renovation transformed this odd space into a cozy retreat.
In a blank space, there’s a lot of room for improvement. Just ask Vel Baricuatro-Criste and her husband, Gerson Criste. After having a contractor add a windowed egress dormer in an over-the-garage room for their teenage son, they were left with an odd, unfinished nook. Vel saw it as an opportunity to create a quiet reading alcove as part of an overall update of the bedroom.
What They Did
She painted both spaces white with an accent rail of bold navy stripes to create a cohesive look. To keep things cozy underfoot, Gerson installed striped carpet tiles over the nook’s plywood subfloor. Then he built a storage bench from prepainted cabinets, using stock lumber to fill in gaps at the back and sides and painting the exposed sides white so that they blend in. Vel made a seat for the bench by stapling fabric-topped foam to sheet pine that her husband had cut to size. Gerson installed floating shelves to display some of their son’s books; the rest tuck neatly away in the storage bench. Sconces flank the window seat, and a flush-mount fixture hangs overhead, providing plenty of light for nighttime reading. Now the nook is her 13-year-old’s favorite place to unwind. “He has a whole room to hang out in, but whenever he has friends over, they’re always in that space,” says Vel. “They love it!”
The Project Tally
• Painted the room white with navy stripes $109
• Finished the floor with carpet tiles found at a big-box store $98
• Created a bench from laundry cabinets and stock lumber $110
Home improvement projects that pay off for buyers and sellers, according to Porch.com.
That outdated powder room you never bothered to fix up? Well, that’s not going to fly with potential buyers. So it makes sense that general contractors were the most popular project home sellers took on before listing their home, according to a new report from home improvement firm Porch.
What if you just moved in? You were far more likely to hire a painter.
Whether they’re buying or selling, many homeowners turn to home improvement projects to boost property value or enhance curb appeal. Porch’s analysis of more than half a million projects by region show that many popular projects go hand-in-hand with practical considerations such as repairs and home inspections.
For sellers: The most popular home improvement hires are general contractors and handymen, followed by electricians, plumbers, and roofing professionals. The reason is simple: to avoid any issues during home inspections.
“Have a professional remodeler walk around the house with you inside and out,” Paul Sullivan, chair of National Association of Home Builders (NAHB) Remodelers, recommended. It will “make the process much smoother.”
The work appears to pay off. Contractors provide, on average, 68% return on investment, according to Porch.
One surprise, Porch said: Not many sellers said they were hiring painters. A fresh coat of paint returns close to 100% of the money spent in boosted value, its report said. Sullivan cited one home in a Boston suburb which sold for $60,000 over the asking price within four days, which was “absolutely” due to improved presentation.
Sellers often wonder if they should make the investment in improvements solely to sell, says Tom O’Grady, of the National Association of the Remodeling Industry. They might be comfortable accepting a lower selling price rather than risk not getting their money back in the form of a higher sale price.
Painting is one of the first things buyers tackle after moving in. That brings an average return on investment of 152%, Porch says. Other top projects included installation of new appliances such as dishwashers and refrigerators, roof repair, and home inspections.
Larger endeavors like renovating kitchens and bathrooms are common, Sullivan added, but both he and O’Grady advised against making drastic, costly changes immediately after moving in.
Instead, O’Grady said, small enhancements like crown molding, new tiles, and better light fixtures can dramatically change a room, making it more comfortable for new owners until it’s financially feasible to do a complete renovation.
“Live in the house for a month or two and get a feel for the place,” Sullivan said. “When you’ve lived in a house for 10 years, you know its shortcomings. But when it’s a new house, you only think you know.”
Nate Berkus says that we watch housing shows because we want to live better — and it looks like he's onto something
Nate Berkus knows a lot about houses. The celebrity designer, who got his start with Oprah Winfrey’s endorsement and now makes news with his personal life, has spent years renovating and redecorating homes for TV-viewers’ pleasure. The latest evidence of his know-how is his role as host of the NBC home-improvement competition American Dream Builders, which has its first season finale on May 25.
But Berkus’ knowledge isn’t just limited to the houses themselves. During a recent conversation about the appeal of home-improvement shows, he told TIME that he has a theory about why they’re so popular. “No matter who we are, no matter how much money we have or don’t have, no matter where we are in the world, everybody wants to live better,” he said. “When we watch shows that inspire us to make changes in our own homes, when we see how other people live, I think that’s a really powerful message.”
Berkus added that he saw home design on TV for the first time with TLC’s Trading Spaces, which debuted in 2000, a one-time behemoth in the genre and the show that helped make decorating cool by supplementing the staider fare that has held court on public television for years (This Old House, Hometime). In the years since, he’s come to believe that viewers are looking for “inspiration” and really do want to change their lives, that even if viewers are not exactly going to replicate the projects at home they’re still interested in fixing their real-life living spaces.
But how much do such shows really correspond with what viewers are likely to be doing with their homes?
It turns out, Berkus may be onto something. If you compare the number of home shows on air during a given calendar year to real-world housing statistics, including housing starts, sales of existing homes and foreclosure filings, the numbers seem to follow a pattern. (Especially if you ignore shows on networks like HGTV and DIY, where they have to fill up their schedules pretty exclusively with home-improvement shows; on a network like TLC, the presence of home shows is more of a choice.) Here’s what we found:
Shortly after Trading Spaces took off, there was a burst in house-related shows, peaking around 2005 with a television schedule that included Trading Spaces, While You Were Out, Trading Spaces: Boys vs. Girls, Monster House, Extreme Makeover: Home Edition, This Old House, Moving Up, Hometime, Flip That House, Flip This House, Sell This House and Property Ladder. Shortly after, the number of such shows declined. It’s worth noting that 2005 was right around when January housing starts and existing-home sales were way up.
On the other hand, 2010, when nearly as many housing shows were on air, was right after both housing starts and home sales hit a low and foreclosure filings hit a high. As the housing market has begun to recover from that bubble, the number of home-related shows has also increased, though not to the extent that was seen before the bubble.
Housing shows today aren’t the same as they once were. When Trading Spaces started, the genre was about redecorating and making the most of the space you lived in; the past decade has seen the growth of shows that are about improving houses in order to sell them rather than live in them.
It’s impossible to say whether there’s any causal relationship between the housing market and housing shows — some factors, like the celebrity of a person like Berkus, have little to do with stuff like mortgage data — but some of the relationships seem pretty obvious. For example, foreclosed homes are a big draw for house flippers who intend to buy cheap, fix up and sell for more; accordingly, the huge jump in foreclosure filings around 2006–2008 matches the jump in flipping shows around 2007, when more fodder for those shows was available. (Another possible explanation: more people having a harder time selling their homes means more people interested in watching homes be sold successfully on screen).
And again, while there’s no way to prove a causal link, the correlation may indicate good news for homes on- and off-screen. Though 2014’s crop of home shows so far remains below pre-bubble levels, those looking for hopeful signs may be able to find them on TV — and not only with Nate Berkus.
Though Berkus has made his fame in the renovation and redesign business, Jeff Lewis, who is behind a slew of Bravo shows, launched his first series, Flipping Out, right in the middle of the housing crisis, as foreclosure numbers climbed. A more recent edition to his oeuvre, however, deviates from the formula: during Interior Therapy with Jeff Lewis, which debuted as sales and construction climbed, the houses are renovated rather than flipped. His clients live in them, invest money in them, and plan to keep living there after. And that’s apparently what audiences want to see: the show’s second-season finale, which aired in September, drew its highest ratings yet.
On desktop, roll over this graphic to get a closer look; on mobile, click to zoom.
Methodology: We looked at housing shows on network television, PBS, A&E, Bravo, TLC and Discovery; all show data is according to IMDb’s records, by calendar year rather than television season, in order to better mesh with non-television data. This does mean that one season of a fall-spring show will fall in two calendar years; one season of a summer show falls in one year. It also means that the 2014 show count, which looks low, is actually only half complete. Housing starts information is for the month of January in each year, per ForecastChart.com. Existing home sales information is for the month of January in each year, per Mortgage News Daily. Foreclosure filings information, not represented on the chart above but discussed in the text, is for the entire year, per RealtyTrac. RealtyTrac data for aggregate yearly foreclosure filings prior to 2005 was not available.
When the real estate market was in the dumps, snagging a great contractor was a simple task. With few people remodeling, no project was too small for hungry pros, many of whom were bidding at 10% to 40% below their boom-time rates.
Those days are gone. Remodeling spending is now up 30% from its low point, and single-family construction spending has doubled. Depending on where you live, a project that cost $50,000 in 2010 might now come in at $60,000 to $70,000.
“Materials costs are up, much of the skilled labor pool has jumped to the oil and gas industry, and contractors’ phones are ringing,” says Bernard Markstein, U.S. chief economist at Reed Construction Data.
To get the best help, you’ll need to be strategic.
Start with referrals. Begin by polling friends and tradesmen, and tell the contractor who pointed you in his direction.
Using a referral will do more than just ease your mind — it will also make you a priority for the pro, who wants to keep his clients and subcontractors happy.
Don’t be vague. When you reach out, show that you’ve put careful thought into the project by expressing a clear vision of what you want to accomplish and a sense of what you can spend.
“Bidding on a job takes about a dozen hours,” says Boston renovation consultant Bruce Irving. “He’s not going to bother unless he thinks you’re serious.”
Get his opinion. When a contractor comes to see the job, don’t jump right into discussing price. First ask for his input on the plan and on any initial sketches your architect has put together. This shows you value his knowledge and don’t just see him as a nail banger.
Plus, his answers will show you how he thinks — and whether you want to hire him. Is he channeling what you want? Great. But if he suggests lazy solutions or pricey add-ons, move on.
Now negotiate. Solicit bids from three or more contractors. Be sure to stoke competition by letting them know that you’re gathering multiple offers. Skip any bids that are wildly high or low.
Should your first choice still be over your budget, haggling is risky: He’ll probably either walk or cut corners on the project. Instead, let him know how much he’s over, and ask for some suggestions on how he might tweak the job to lower the price with minimal impact, says UCLA law professor Russell Korobkin, a negotiation specialist.
Remember to hold out a contingency of 10% to 20%, since many remodels mushroom over the course of the project.
Be flexible. This is also the time to nail down scheduling. Ask him for approximate start and end dates. But don’t press too hard. For a top contractor, at a fair price, you may to have to wait a bit.
Love your town but less crazy about your house? MONEY asked architects and designers across the country for creative, cost-effective ways to address the most common complaints people have about their living spaces.
Allyn Brown didn’t really like the cramped, choppy layout of his 1970s ranch home, but the location was just too good to give up.
The house sits on two mountaintop acres overlooking vineyards and orchards, just minutes from the vibrant downtown of Sherwood, Ore. — fifth on this year’s list of Best Places — and not far from where Brown’s two adult children and four grandchildren live.
“So rather than downsize or move into a retirement community, I decided to stay right here,” says Brown. He hired designer Joel Fraley, of Neil Kelly Company, and ordered up a $140,000 overhaul, which included opening the floor plan, modernizing the kitchen, and installing a wall of windows that offers panoramic views of the lush valley.
“It transformed a funky home into a truly spectacular place to live,” says the 68-year-old attorney.
Happy with where you live but not so hot on your living space? Now might be the perfect time to address your abode’s architectural flaws.
With real estate prices on the rise, it’s safer than it has been in years to invest in your home — especially when measured against the prospect of moving, notes real estate agent John Ranco, past president of the Greater Boston Association of Realtors.
“Remodeling away your house’s shortcomings can cost tens of thousands less than trading up to an already remodeled house, which commands a major premium now,” he says. In addition, you avoid realtor fees, moving costs, and the inevitable expense of making a new place your own, no matter how “turnkey” it is.
What’s more, improving a substandard home in a sought-after location may be the best real estate investment you can make, says Omaha appraiser John Bredemeyer, spokesperson for the Appraisal Institute. Spend wisely, and you could get back your project cost — or more — when you sell.
The key is to remodel efficiently, by recasting existing space wherever feasible (vs. putting on a costly addition) or at least building up rather than out (to avoid the cost of a foundation).
MONEY asked some innovative remodeling pros for cost-effective solutions to the issues that most commonly force people to move. One of their suggestions may just turn a house you like — with reservations — into a home you love.
The problem: No first-floor powder room
Many modest, two-story prewar homes lack facilities on the main floor. So every guest and grandparent has to traipse upstairs to use the loo.
Solution: Recast a closet. You can squeeze a powder room into a space as small as four feet by four feet or even three feet by five feet, says architect Chris Turley of Highland Park, Ill. One option is to repurpose a large coat closet, pantry, or under-stairs cubby. Alternatively, you could build new walls to carve the space out of a hallway, back foyer, or porch.
Keep in mind that the closer you put the bathroom to existing plumbing, the less it will cost. Horizontal drainpipes must be sloped properly and tied into a stack, a basement-to-rooftop pipe that vents out sewer gases. Adding a new stack means significant demolition to walls above and below — and cutting a hole in the roof. So try to build directly next to, above, or below the kitchen, the laundry room, or another bathroom.
Cost: $10,000 to $20,000 if you use the existing walls and door of a closet and have a basement or crawlspace underneath to give the plumber easy access. Need to build a room? Make it $15,000 to $25,000. Add $3,000 to $5,000 if the new WC isn’t near existing plumbing.
The problem: Master suite that’s not so sweet
In newer homes, the master bedroom typically offers generous floor space, walk-in closets, and a dedicated bathroom featuring dual sinks plus a separate shower and tub. In older homes? You’re lucky to get enough room to fit a king-size bed and a couple of dressers, let alone a bathroom.
Solution 1: Steal a bedroom. Expand your boudoir, bath, and wardrobe by taking over an adjacent bedroom. “A lot of people do this when the kids go off to college,” notes Indianapolis contractor Geoff Horen.
Even if you can’t get by with fewer rooms, he says, you can make things right by replacing the lost sleeping quarters up in the attic. This can also help you avoid taking a hit on property value.
“You always want to keep your bedroom count on par with the neighborhood,” says Horen. “So, in a four-bedroomhouse area, dropping to three may not be a good idea. But in a predominantly two-bedroom neighborhood, you’d still be way ahead of the Joneses.”
Cost: $40,000 to $80,000, since your project can range from a simple workaday bathroom and basic pole-and-shelf closet to a spa-style retreat with stone finishes and a bubbler tub for two, and a walk-in wardrobe outfitted with kitchen-quality cabinetry.
Solution 2: Build over the garage. Another possibility is to build a master suite over an attached garage. That’s no small job, since you’ll need to remove the roof, beef up the structure to hold the added weight, provide a vapor barrier to block car exhaust, and build out not just your master suite addition — from the structural framing to the decorative finishes — but a whole new roof on top of it. Plus, you may need to reconfigure your existing floor plan to provide an entrance that feeds off a main hallway. Still, because you avoid digging a new foundation, it could easily save $10,000 compared with a ground-level addition.
Cost: $50,000 to $80,000, depending on how much work the garage structure needs and how high-end you go with your project.
The problem: Bedroom shortage
For growing families, the number of bedrooms is often the biggest factor motivating a move to a bigger and more costly home. Because bedrooms do not require the plumbing, tiling, or appliances other rooms do, however, they can be fairly inexpensive to add — and may significantly increase your house’s value, says Buffalo Grove, Ill., architect David Wytmar.
Solution: Convert the attic. The ideal place to add bedrooms is the square footage you already own up in the attic. Not every attic is easy to finish, though. First of all, you’ll need a full-size stairway for the main access (a cliff-steep stair or pull-down ladder won’t cut it). You’ll also need a means of emergency exit, though that could be accomplished with a simple built-in rope ladder.
The bigger attic issue is the Rule of Sevens: By code, you generally need at least 50% of the finished space to be at least seven feet high, and that portion must also be at least seven feet wide and at least 70 square feet. To create more full-height space, you can add a dormer, says Riverton, N.J., architect Bogna Pro. That basically means raising part of the roof to provide more clearance.
Cost: $20,000 to $30,000 to strengthen the floor, insulate, and finish the space, assuming you have stair access. Add around $10,000 to $30,000 for a dormer, $10,000 for stairs, and $40,000 for a bathroom.
The problem: Kitchen is too small
Kitchens didn’t become the hubs of houses until the 1980s. So older homes often have cramped, closed-off cooking areas that are short on storage, prep space, and room for eating. In a recent CNNMoney.com poll, 18% of respondents complained that their home’s biggest flaw was an undersize kitchen.
Solution 1: Lose a wall. “Removing the wall between the dining room and kitchen creates a feeling of spaciousness — and also clears room for an island or peninsula that can become a key workstation or a place for family and guests to congregate,” says Portland, Ore., kitchen and bath designer Erin Davis. Putting stools around that new island allows you to lose the kitchenette set, if you want, making way for even more cabinets and countertops.
Tearing down walls improved the flow of Allyn Brown’s house. It was also an ideal solution for Angie and George Devanney, 42 and 51, of Berkeley Heights, N.J., No. 6 on our Best Places list.
“Our kids were getting bigger, and it was tough to squeeze around the kitchen table,” says Angie. Removing two walls as part of their $60,000 kitchen makeover kept the character of the old house — “and we got the livability of a brand-new home at a fraction of the cost,” says Angie.
Cost: $5,000 to $8,000 to remove the wall and refinish the surrounding floor, ceiling, and walls, with the ultimate cost depending on whether you need to add a beam or move plumbing. This does not include costs to redo the kitchen, which range from $30,000 to $100,000, depending on labor, finishes, and appliances.
Solution 2: Hang a small addition. Want to keep the dining room as is? Put on a small kitchen addition that hangs off the side of the house rather than sits on top of a full foundation.
This “air rights” space can’t be any deeper than two feet, but it can run the length of the room, potentially adding just enough square footage to reconfigure the kitchen layout. You might go from an L- to a U-shaped design, for example, or gain the space for a breakfast-bar island.
Cost: $10,000 to $15,000 for a two-foot- by-10-foot bump-out, plus the cost of your kitchen remodel.
The problem: No place to play
Today’s high-end houses are built with spacious rec rooms, sometimes including wet bars and home theaters. That gives tots a place to romp, older kids a spot to play videogames, and parents another area for entertaining.
Unfortunately, few pre-1990s homes offer such a space, which 35% of homebuyers think is “very important,” according to a survey by the National Association of Realtors. One in 10 respondents to our CNNMoney.com poll ranked the lack of a rec room as their home’s biggest flaw.
Solution: Finish the basement. The answer for Tom and Karen Henry, both 59, of No. 1 Best Place Sharon, Mass., was under their house. In 2007, they turned their cellar into a family room.
“It was our teenage daughter’s idea because she wanted a hangout spot with some healthy distance from her parents,” Tom says. Luckily their basement ceiling was high enough. In order to make this work, you’ll typically need a ceiling height of seven feet (check your local building code), including under beams, pipes, and ductwork in main traffic areas.
You also must resolve moisture issues first. That could be as simple as repairing roof gutters to eliminate the source of water. Or you might need a sump pump, possibly with drainage piping cut into the floor around the perimeter to collect and discharge water that gets in.
Cost: $30,000 to $50,000 to finish the basement, which would include adding insulation, putting up walls and ceilings, installing flooring, wiring electricity and lighting, and connecting to your heating and cooling system.
Figure on paying an additional $15,000 or so for a wet bar and $20,000 or so for a bathroom. To relocate a duct or pipe, you’ll pay up to $2,000 more; raising a main carrying beam could set you back $5,000. A sump pump, with drainage piping, could run $4,000 to $10,000.
The Henrys wound up going whole hog with their basement, spending $125,000 for a 900-square-foot living area that includes a tricked-out home theater, pool table, mini-kitchen, and laundry room. “We had no idea how far we’d wind up taking this — or how great it would turn out,” says Tom. “It’s part man cave, part mom cave, and part kid cave. And it’s one more reason that we’ll never leave this house.”
With baby no. 2 on the way, Jonathan and Andrea Hildebrandt had to face an expensive reality. They needed more room.
Their home had only two bedrooms, and nowhere for their 2-year-old to play without waking up her future little brother. Moving didn’t seem viable. The family loved their Queen Anne neighborhood in Seattle, and given that home prices had fallen 20% since they had bought four years earlier in 2007, they doubted they would recoup the $530,000 they paid. So they started talking seriously with builders about refinishing their basement or adding a second floor.
Those conversations came to an abrupt halt, though, when the Hildebrandts found their perfect house, a $618,000 three-bedroom just blocks away.
When they got a $520,750 offer two days after putting their home up for sale, they decided to move. “We essentially got the house that we would have ended up with 18 months later, but for a third of the cost,” says Jonathan.
A RELOCATION BALANCE SHEET
What the Hildebrandts gained in the move:
Square feet: 1,000
What it cost them:
Sales price of the old house: $520,750
Cost of new house: $618,000
Sales commission: $32,000
Closing costs: $1,900
To move or to improve? For the first time since the housing market went bust, homeowners are seriously contemplating that question.
Until recently, selling a home was a dicey proposition. Even those who were lucky enough to find a buyer often walked away with far less than the home’s previous value, and in some cases even less than what they owed the bank.
Owners also put off renovation projects, causing home-improvement spending to fall 16% from 2007 to 2011, says the Joint Center for Housing Studies of Harvard University. Little wonder — who wanted to sink more cash into a home whose value had already plummeted?
Now the market has turned the corner. Houses are selling faster, and prices are climbing. In a Coldwell Banker survey, 82% of agents said they expect more home shoppers this spring, singling out trade-up buyers for playing a “significant role.”
Remodeling, too, is surging as owners, reassured by rising property values, tackle postponed projects. Spending on improvements hit $131 billion in 2012, its highest mark since 2006. “There seems to be a lot of pent-up demand,” says Paul Sullivan of the Sullivan Co., a Newton, Mass., remodeling firm.
But just as today’s market looks nothing like it did during the bubble, the decision to list or fix your home has changed dramatically. Buyers have become more conservative. The recovery is progressing unevenly, so where you live can have a huge impact on your options. And a limited supply of new homes means the relocation pickings are slim.
Are you grappling with the decision to fix up or trade up? Consider these factors, and ask yourself five key questions.
MOVING: Is selling a realistic option?
Start by assessing the prospects of your local housing market. While the biggest rebounds have come in places that were walloped by the real estate crash, they’re not necessarily the best bets for long-term gains.
Instead, experts say, many buyers are gravitating toward areas with key quality-of-life features. Good school districts have long been equated with strong home values, says David Figlio, director of Northwestern University’s Institute for Policy Research, adding that “people pay more attention to these things during times of tighter housing values than they do in go-go periods of real estate.”
The far-flung exurbs thrived in the boom years, but now an easy commute drives sales. “People want to live in closer to the city and in more walkable neighborhoods,” says Jessica Wilkie, an associate broker at M Squared Real Estate in Washington, D.C.
To see how your neighborhood stacks up against others in the area, compare three key metrics: price increases, speed with which homes are selling, and inventory of places for sale (you want a number that’s higher than that of nearby neighborhoods for the first two, lower on the last).
You can ask a community real estate agent to run these statistics for you, or do your own investigative work on Trulia.com or Zillow.com, both of which have tools for making comparisons. If your area fares better than those around you, you’re in a good position to sell.
Are you among the 22% of homeowners with a mortgage who, according to real estate research firm CoreLogic, are underwater, or one of the 23% who have 20% or less equity in their homes? If so, your choices are limited.
Even if you can sell, you will probably walk away empty-handed, or at least without the 10% to 20% cash needed to put down a deposit on a new place. Renovating is the better choice. Assuming that it will cost you less than moving, that you plan to stay in your home for at least five years, and that you can pay for the project without borrowing, it’s a good bet for improving the long-term value of your home.
Lisa and Josh Herman’s Palm Springs three-bedroom was recently valued around $300,000 — a far cry from the $495,000 they paid in 2008. Still, with two kids, the Hermans could no longer live with the home’s open floor plan. “All you saw when you walked in the front door were toys everywhere,” says Lisa.
Rather than sell at a loss, the couple opted to pull together $20,000 in savings and bonus money and started updating their bathrooms, converting an office into a fourth bedroom and turning their formal living room into a space for the kids.
The project’s nearly finished now, and the Hermans say it was money well spent. It may take years for the market to get back to pre-bust levels, and that’s fine, says Lisa: “I think we’ll be happy here for a very long time.”
Next: Is remodeling the better choice?
REMODELING: Can you renovate your way to the house you want?
During the boom many people threw the old “don’t over-renovate” rule out the window, assuming they could make their home bigger and fancier than those of their neighbors and still make a profit when they sold.
Now, agents say, buyers are focused on features that fall within local norms. “If you’re thinking of doing a gourmet kitchen but you live in a modest neighborhood, you’re unlikely to recoup your investment,” says Jessica Riffle Edwards, an agent with Coldwell Banker Sea Coast Advantage in Wilmington, N.C. To see what features work best in your area, ask an agent for a market analysis. A good pro will do this for free, knowing it could mean future business.
You’ll also need to determine what changes your house can practically accommodate. A contractor should evaluate your home in person, says Judy Mozen, president of Atlanta-area remodeling firm Handcrafted Homes, to be sure you have the necessary structural support for the project. Keep in mind that certain changes, like adding a story or digging into bedrock, often rack up unexpected costs.
Whatever your house can handle, remember that if your goal is attracting future buyers and boosting your home’s value, the bigger projects are less likely to pay off. Adding a high-end master suite, for example, costs an average of $220,000 and recoups just 52%, according to Remodeling magazine.
So what adds value? Simpler, more practical projects, like finishing attics and basements, says Mozen. On the other hand, if you are planning to stay in the home long-term and are less focused on recouping your investment, a large project that allows the home to better fit your needs may be worth the money, says Abbe Will, an analyst at the Joint Center for Housing Studies.
BUYING: Is the house you want for sale?
Another factor to consider is whether the kind of house you want, in the neighborhood you want it, is even out there. Housing inventory is tighter than it’s been in eight years, according to the National Association of Realtors. In some cities, such as Sacramento, there’s just a one-month supply of homes for sale. (Nationwide, there’s a four-month supply. A healthy market typically has a six-month supply.)
To find out what’s available, devote a few weekends to hitting the open-house circuit. Even if you don’t end up buying, you may come away with renovation ideas, says broker Wilkie.
The search is likely to be particularly difficult if you’re looking for a type of home that’s unusual in your market.
Bao Bui and Mike White discovered how frustrating this can be when they started looking for a small but well-appointed house in Fayetteville, Ark. They’d lived in their 1,600-square-foot home there for years, but after making countless little upgrades, the couple realized that no amount of tinkering would make up for the nonexistent garage, closed-in kitchen, and tiny closets and bathrooms.
When they looked into moving, though, all the houses that fit their criteria were too big and selling for more than double the $225,000 they could get for their place. “The house we wanted basically didn’t exist,” says Bui. Determined to stay in their beloved neighborhood, near White’s job as a controller at the University of Arkansas, they’re now in the process of gutting their house, adding nearly 400 square feet and turning it into something “very modern,” with a garage, a more open floor plan, and an expanded master bedroom.
All told, the $250,000 project will cost as much as moving, “but we’ll have exactly the house we want,” says Bui, adding that they plan to stay in the home for the foreseeable future.
A RENOVATION BALANCE SHEET
What Bui and White will gain from their remodel:
Estimated value of home pre-renovation: $225,000
Square footage added: 377
What it’s costing them:
Architectural fees: $22,350
Six-month apartment rental: $5,220
Estimated project duration: 180 days
PRICING: What are the hidden costs?
It’s no secret that many remodeling jobs end up coming in overbudget.
To get the most accurate estimate, do your own research on the types of materials and finishings you want to use. You may pick very different items — with very different prices — than your contractor would otherwise include in the bid. Shrink that number further by negotiating. Indeed, a recent Angie’s List poll found that 80% of contractors said they were willing to drop prices to get a job. Offering to pay subcontractors directly or being flexible on timing may help bring down the bids, says the site’s founder, Angie Hicks. And once you’ve settled on an estimate, build in an extra 10% to 20% to cover any unexpected expenses.
One big cost that would-be renovators may forget: temporary housing. For the Hildebrandts, that became a big factor in opting out of a renovation. Not only would a second-floor addition have cost more than $200,000, but the family would have been forced to move out of their house for close to a year. “That seemed like an incredible hassle on top of the money we’d be spending for renovations,” says Jonathan.
When they totaled the full renovation cost and compared it with the price of buying a new home that was only $100,000 more than what they got for their old house, moving started looking like a bargain.
Of course, people also tend to underestimate the price of relocating. If you’re planning to sell one home and buy another, plan to pay real estate commissions (generally 6% of the sale price) and closing costs (an average of $3,754 on a $200,000 mortgage, says Bankrate.com). Even relocating nearby can be pricey; hiring pros to move the contents of a four-bedroom home a few miles away typically costs between $1,000 and $2,500.
Will your new home need sprucing up? Buyers spend an average of $3,300 on small improvements during their first two years in the home, according to the Joint Center for Housing Studies. And that doesn’t include immediate expenses, like new blinds, cleaning supplies, even replacements for the fridge and pantry items that got tossed in the move.
WAITING: What does your gut say?
Finally, don’t force yourself into a decision that really doesn’t feel right. The housing market is still in a state of flux, and you could find yourself in a very different position in, say, six months or a year, when prices may be higher and more homes will likely be sporting FOR SALE signs. Indeed, for some the answer to the renovate or relocate question might be “sit tight.”
Aaron Rozeboom and his wife, Lina Walker, recently came to that very conclusion. When the couple had a son last year, they considered selling their three-bedroom in the Washington, D.C., Capitol Hill area and looking for a bigger place. After realizing just how much they would have to pay for the extra space and how competitive the local market is, they started leaning toward renovating their basement.
The catch: The neighborhood schools aren’t great, says Aaron, though that could change soon. So for now, he says, “we’re going to wait and see.”
For a busy — or simply hammerphobic — homeowner, it sounds almost too good to be true: A hired handyman (or woman) could tackle your odd jobs for about a third of the cost, time, and hassle of a general contractor.
There are plenty of jacks-of-all-trades out there, but is it possible to find one you can really rely on? The answer is yes—provided you know where to look and what chores to give him.
Pick the right project
“A handyman should do only things that a proficient homeowner could handle himself if he had the time,” says “Handyman Fran” Carito of Watertown, Mass.
That might include installing a ceiling fan, freeing a stuck window sash, or replacing a light fixture, faucet, or cracked windowpane.
Go with a licensed tradesman instead for work inside walls, like replacing a pipe or adding an electrical circuit; specialized tasks (say, repairing a roof leak or installing tiles); and, of course, remodeling.
Tap your network
General contractors don’t usually like to bother with small fix-up tasks anyway, so if you have a good working rapport with one, he might be willing to suggest one of his guys who takes side jobs.
Or ask a contact at a local school, church, or office park to recommend a staff handyman who does some moonlighting. Otherwise, check with friends for referrals.
A long-established local sole proprietor may be the most expert and reasonably priced option. A larger company, though, is more likely to carry insurance, especially if it’s part of a national franchise such as Mr. Handyman or House Doctors.
Get an estimate
Unlike contractors, who name their price upfront, handymen bill you for the materials they use and the time they spend — typically at around $40 to $70 an hour. That’s because, ironically, it’s trickier to commit to a fixed price for a little job, says Madison handyman Adam Shirley.
Still, ask for an estimate — and consider setting a ceiling. For instance, you could designate a half-hour for trying to repair a dripping faucet before replacing it instead.
Just as you might audition a car mechanic with routine oil changes, test your new handyman’s mettle with low-tech stuff, such as clearing clogged gutters or installing garage shelves.
It’s best to combine a few of these small projects, since most pros either have a two- to four-hour minimum or impose a one-hour service charge. Then let him earn his way to bigger assignments that require craftsmanship — and if he nails those, put his number on speed dial.