Home Improvements - Avoid these Mistakes
By Steve Gillman - 2006
Different home improvements are made for a different reasons.
Unfortunately those reasons are often confused in the minds of
those making them. This helps explain the first of the three
common mistakes covered here.
1. An Unclear Purpose
If you're not clear about why you're doing home improvements,
you can't know if they're worth the price. Motivations are often
confused, and a given project may not only be to make the home
more livable, but is often justified as an "investment"
as well. But it may not be an investment that yields any return
when the home is someday sold.
Remodeling Magazine recently reported on the average cost
and added value of various home improvements according to which
area of the country the homes were located in. Many remodeling
projects, including creating a home office, only returned about
half of the cost in added value if the home was sold thereafter.
A basement remodel returned about 90% of what was spent in most
cases. That was the best "investment."
In other words, on average, every type of home improvement
in every area of the country is a money losing proposition. Certainly
some are better than others. For example, the average attic bedroom
addition only cost $13,000 more than it adds in value to the
home, while you lose $30,000 on the average master bedroom suite.
Of course it is also true that if you're careful and creative
you can add more in resale value than you spend on a project.
Still, consider this: If you spend $68,000 creating a master
bedroom suite, and it only adds $38,000 to the value of your
home (these are average figures), the real cost is in the long
run is $30,000. This doesn't count any interest you pay if you
finance the project, which could bring the total real cost to
more than $50,000. This is the price you pay for your personal
Now a question: How long you will live in the house? Divide
the true cost of your improvements by those months to decide
if it's worth the cost. Using the example above, if you move
five years later, that nicer bedroom was $10,000 per year, or
$833 per month for the pleasure. Using this approach, if it seems
reasonable, do the improvement. On the other hand, if an extra
vacation or two annually, or $10,000 per year going into a retirement
account, or any other way you could spend that $50,000 sounds
better, drop the project.
2. Unclear Contract
When you aren't sure what you want, you're likely to pay more
than you think for home improvements of any sort, because extras
cost more. Whatever you agree with the contractor on, that's
what you get for the quoted price. Changes will be extra, so
be clear about what you're trying to do in advance, and make
sure it's all included in the bid and the contract you sign.
Hopefully you're wise enough to have a deadline in the contract,
rather than an "estimated date of completion" or other
vague language. Still, a deadline is not always sufficient. Consider
including a clause that specifies penalties for not completing
the job by the deadline. Agreeing that the price will be reduced
by $100 for each day past the deadline is what I call a "motivational
clause." One more note: never pay in full until the job
is done in full.
3. Being Unprepared For The Process
Home improvements - especially large ones - involve large
messes. Dust and construction materials may be around for weeks.
Ask the contractor what to expect, and if he will be completely
cleaning up the mess in the end. Ask if they provide a bathroom,
or if the workers need access to your bathroom. Ask about security
issues, like walls that may be open to the outside for weeks.
Will you need to chain up your dog? What dangers to your children
are possible? Ask all of these things before you sign that contract.
Another page to check out:
How to Sell a House -
This free ebook is now on the pages of this site and has a chapter
about improvements to make before selling a home, and how to
judge their cost-effectiveness.
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