If rising interest rates force move-up buyers to stay put and first-timers to reconsider their options, expect a run on the already over-worked home remodeling industry and a run up in complaints.

In hard money times, instead of moving up, home owners fix-up to shore up their home's value and new buyers give cheaper fixer-uppers a second look, according to the American Homeowners Foundation, a non profit consumer education and research organization in Arlington, VA.

"Remodeling also helps a home sell faster and helping to drive the trend are recent changes in tax laws, which have opened up home equity for a variety of uses, including home remodeling," according to Bruce Hahn, foundation president.

The bang-up residential remodeling market is already worth a record $150 million a year, according to "Improving America's Housing," a landmark study by the Joint Center for Housing Studies at Harvard University which documents the nation's penchant for home improvements.

That's likely to improve.

But with the home improvement industry already entrenched in a boom much like the new and resale housing markets, any more work and the over-taxed industry will likely retain its strong hold at the top the Better Business Bureau's most complaints list.

When the legitimate remodeling market booms so does its underground segment of untrained, unlicensed and unscrupulous contractors who prey on unsuspecting homeowners looking for a quick fix to their remodeling needs.

So how do you get the most for you money and not get taken?

Cost vs. Value

First look at those projects you and your home really need. Make sure they are in line with what your neighbors are doing.

"Ask yourself, 'How long will I be staying in this house?' If you will be selling in five years or less, there is no point doing a major remodel customized to your tastes in areas that will not pay back. Avoid swimming pools, hot tubs, bizarre-colored tile, wine cellars," said Kit Davey, a Redwood City CA-based interior designer and staging specialist.

"It's OK to over improve if you know you will be staying in your home for at least 10 years, your house is the 'dog' on the block and it would make the whole block look better if improved, and your neighborhood is already in a steady improvement trend," added Davey.

Also consider which jobs will give you the most for your money.

A good bellwether is Remodeling Online's 1998-1998 Cost vs. Value report, a national report revealing in each of 60 cities survey how much return on the dollar you can expect from a variety of jobs.

Here's the report's national average for jobs offering the most return.

Remember, neither the national average nor even the returns listed for your city may account for peculiarities in your particular neighborhood or on your block.

Finding good help

Poor quality workmanship could also reduce the return on your dollar. To find an experienced and professional contractor follow these guidelines.

Ask family members, friends, co-workers, neighbors who've recently had work completed, and others you trust for three or more referrals. The National Association of the Remodeling Industry also offers trade-group certified referrals.

Select several or more contractors and thoroughly check out the contractor's background. Web sites like ImproveNet and the League of California Homeowners can help, but be sure to check the contractor's license, insurance, bonding, credit standing and other factors with your state or local regulatory agency.

Ask to see completed work and talk with customers who had to foot the bill.

Grill the contractor thoroughly about his company, work habits, work crew, contracts, etc. Remember, you are the site boss. You are hiring an employee to work on what's likely the single most valuable asset you own.

Get written bid estimates from each contractor that itemize costs and define and detail the scope of the project, including materials and sub contractors. Add 15 to 25 percent to the estimates to allow for added items.

Shy away from both low and high bids. If you get five or more bids, taking an average of all to help you zero in on a contractor.

Examine any contract closely for a payment schedule, descriptions of the work being done, completion timetable, permits, warranties, liens, subcontractors, insurance, special instructions and provisions and other details.

Berkeley, CA-based Nolo.com's "Consultant & Independent Contractor Agreements," (Nolo Press, $16.95) by attorney Stephen Fishman and the homeowners foundation's six-page, $7.95 "AHF Remodeling Contract", offered in conjunction with the National Association of the Remodeling Industry are good templates that come with detailed instructions.

"Its greatest value is that it helps both parties understand and focus on their respective responsibilities in advance," said Hahn.

Published: August 12, 1999

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