1. Financial – The actual costs are much greater than the anticipated costs
2. Financial – They invest more money than they can get out during resale
3. Problems with Contractors
4. Style/Look – When it’s completed, there are certain areas or items that they’re not satisfied with.
5. Function – Don’t like way certain areas or items function

Successful Home Remodeling

And many of these areas overlap – For example, a contractor makes a decision on his own without asking about placement of an appliance or cabinet and the homeowner doesn’t like the result.

In this series of articles (on successive Mondays), we’ll address each of these area starting today with Financial Pitfalls – Costs Exceed Budget

Pitfall:  Actual Costs are Greater Than Anticipated:

Planning: The planning for a remodeling project must be extraordinarily comprehensive because even small details can have big price tags.  I got a question recently from a homeowner living in Pennsylvania saying that she wanted to do an attic remodel and got a ballpark from a contractor of $200/sf for the remodel  She wanted to know if that was reasonable.  It certainly is a starting point.  In the area I work – the greater Washington DC area – the price for an attic remodel could range from $100/sf to $250/sf.  For a 1000 sf attic, that’s a price range of $100,000 to $250,000.  Not a good basis for any planning except whether it’s even worth planning further.  Similarly, even for the exact same floor plan, I can’t give much closer a price range without having worked through the details.  Let me give just a few examples: a kitchen with laminate counters can cost $5,000 less than a kitchen with the same square feet of granite counters.  I can spend anywhere from $4,000 to $20,000 for appliances for the same size kitchen.  I can spend $1,000 to $6,000 on flooring.  And lighting can be anywhere from $1,000 to $15,000 for the same area.  A single sink can be anywhere from $100 t0 $1,200.  And the list goes on.  When I work with a client, I start with the ballpark only so they can figure out whether to continue.  Then I work on a floor plan with the functionality that they need.  And then we start working on the details WITH THEIR BUDGET IN MIND.

Compromise: With the basic goal in hand in the form of a floorplan and wishlist of specifications, we can then start to plan the specifics.  For most homeowners this means identifying specific compromises to get close to their goals within their budget.  I usually present a detailed budget that meets their budget and one that contains their full set of desires.  Sometimes these can be tens of thousands of dollars apart.  Then we start compromising.  Maybe some items are so important that it’s worth increasing their budget.  Some high priced items are jettisoned (maybe that higher priced stove or dishwasher or specialty cabinets) for lower priced items in order to stay in the budget.  Or maybe the project is phased so that they get it all – just not all at once.

Execution: The other reason for detailed planning is that a change at the planning stage is incredibly cheaper than a change-order after the job starts.  I always include 10%-25% contingency in the budget to take account of inevitable unexpected items when the walls are opened up and the equally inevitable “while you’re here” requests.  That’s why my projects almost never exceed the budget.  But when you don’t do detailed planning up-front, the costs can exceed the budget by 50% or even 100% because it’s costly to change plans in the middle of the project.  The costs of change come from

For further reading:

-    Budgeting for a Remodeling Project
-    How to cut $20,000 Out of A $85,000 Kitchen Remodel
-    What Does it Cost to Remodel a kitchen?
-    8 Way to Keep Kitchen Remodeling Costs Down
-    Price Drivers in Residential Remodeling
-    Budgeting for a Remodeling Project
-    Basement Remodeling – Cost Components
-    A Low-Cost Kitchen Remodel
-    You control remodeling costs
-    Comparing Price Estimates – Make Sure It’s Apples to Apples

Comparing Prices on a Stone Terrace

One of the most frustrating experiences for a homeowner looking to do work on their home is to get estimates that differ wildly in price – especially when all the contractors are recommended by friends or neighbors.  This article is about how to compare the estimates when you’ve provided the contractor a drawing of what you want.  In a future article, we’ll talk about the more complicated situation where you haven’t provided a drawing.

In my experience, the primary reason that contractor estimates differ by a third, 50% or even 100% is that the scope quoted is dramatically different.  Contractors, small contractors in particular, will often provide a sentence or bullet points about what’s included.  But often fail to spell out clearly how they’ll do the job, what is being done by others, and what allowances or assumptions they’ve made.

I recently designed a basement media room including a wet bar.  The total price I quoted after the design was approved was $45,000.  The price was based on estimates from subcontractors on individual components including demolition, construction, plumbing, electrical, tiling, painting, installation of the new media equipment, plus my time for construction management and a 10% contingency.  The contingency, of course, would only be used if necessary.

Having been a client of home improvement contractors long before I ever became a contractor, my philosophy is a bit different from most contractors.  As the client I did not want cost surprises at the end of the job.  If I was told the job was going to cost $30,000, I didn’t want to end up paying $35,000 let alone $45,000.  So when I do job costing, I use assumptions – often called allowances – based on the client’s actual tastes and not assuming “builder” grade materials.  I also always include at least 10% contingency and often 15% to 20% contingency depending on the job and the age and general condition of the house.

My business model is different in another way from most design/build firms in that I separate the design and build phases.  Clients are free to take my design to others for bid.  That’s what this client did; he took the design to a carpenter he’s used in the past and got a quote of $20,000.  He asked me to talk with this other contractor to see if the lower bid made sense to take.

While at first blush it seemed like the homeowner could save a lot of money by using the other contractor, it turns out that the carpenter was really bidding only on the part of the job that he was comfortable doing – the demolition, construction, and tiling.  The bid did not include plumbing, electrical, electronics, painting, or construction management.  In addition, the carpenter assumed that the homeowner would purchase all the decorative items like tile, carpet, plumbing fixtures, drawer pulls, and so on.  And, of course, there was no provision for contingency.  When we added back in the other trades, the cost of materials, and the contingency, the difference in the bids was about $3,500.

When I asked the homeowner whether he was interested in performing the construction management role – sourcing and ordering materials, hiring and scheduling subcontractors, he indicated that he did not have time and wanted me to play that role.  When we added back in this time, the actual “bid” was just slightly higher than my original bid.  But the homeowner still wanted to use contractors that he had used before so I kept the build contract but subcontracted to the carpenter with whom the homeowner was already familiar.

When you have a good vision of what you want – and you share that vision clearly with a drawing – to contractors, the difference in price has to come down to 3 things:

1.    Scope: A likely source of price differences comes from differences in scope.

Proportion of the full Job: When you get a quote that excludes portions of the full scope, you can’t evaluate that estimate until you also get estimates for all the work excluded.  Plus you need to think about whether you want to be in the position of construction management where you need to hire multiple trades and determine the appropriate sequence of work.

Construction Approach: Sometimes contractors will go about building the same thing differently.  I built a “stone” patio for a client where I used an underlayment to separate the movement of the deck from the stone tile.  I also “overbuilt” the deck to limit the amount of movement.  Another contractor could have produced the same look with less caution about making sure the stone tile didn’t crack.   My approach took more time and materials and therefore more money than another contractor might have charged.

You may need to ask sufficient questions about the construction process to identify that the approach is different and why each contractor is taking the approach they’re taking.  Ultimately, you’ll need to exercise judgment about whether the extra precautions taken by one contractor are “worth” the additional price.  Often the differences in construction approach are only noticeable in months or years as the work “wears” differently.

2.    Materials: Another source of price difference comes from either actual differences in material costs or assumed differences in material costs.

Allowances & Mark-ups:  Sometimes a contractor will include “builder grade” allowances for fixtures and materials in order to keep the estimate appearing low – even if they know that the client is likely to want to purchase more costly materials.  Material costs can add up to over 50% of the cost of the job.  So look closely at the contractors assumptions or allowances about material costs and how much the contractor “marks up” material costs.

Material Quality:  Most of us know that cedar decking costs more than pressure treated decking.  But there are lots of other less obvious material choices that can affect total price, maintenance, and longevity.  Staying with deck building, the price of galvanized hardware is considerably less than stainless steel hardware.  The price of azek bandboard is more expensive than pressure treated but requires less maintenance over time.

3.    Labor Rates & Business Model: If scope and materials are the same, the only other variable is labor.  Labor costs can differ either because one company charges more (or less) for the same work or because a company is also charging for additional supervisory or overhead time.  In my experience, there are 3 tiers in the remodeling business.  At the top are mid-sized construction or design/build companies.  Overall, their labor is often more expensive because the wage rate they charge for construction workers must also cover overhead and supervisory time.  On the other hand, they are often more able to respond quickly and can provide full-service including sourcing of materials and design assistance.  At the next tier are very small companies where management and labor is the same person – it’s one or two guys who quote the work, plan what to do, and perform the work.  These are US-born men or women who work for themselves and who are putting kids through college and saving toward retirement.  Their wage rate reflects a middle-class vision of themselves.    The next level are also very small firms but they are often foreign-born workers whose wage level keeps a roof over head and food on the table but who might not be saving for college or paying a mortgage.  All 3 models can produce identical work for differing costs.  However, the homeowner is sometimes required to know more and to take on more of the sourcing and management when using the the 2nd and 3rd business models described here.

I strongly advise homeowners when faced with widely divergent price bids to take the time to figure out what’s driving the difference.  If the difference is in scope or materials, you will either end up with something different than you expected or will end up paying more than the low quote implies.  Either result will be very frustrating.  If the difference is in labor rates and business model, then you need to consider what’s being expected of you in terms of sourcing or construction management and whether you’re prepared to undertake these additional burdens.

It’s absolutely true that you can find terrific workers who charge a fraction of what larger companies charge for the same work.  I routinely use a mason who does work for about 1/3 less than larger masonry companies.  In exchange for the less expensive – but exquisite – results, I have to secure the permits myself, to keep a flexible schedule since the owner is not good at communicating work schedule, and I often have to use hand-signals or find a friend who speaks Spanish to communicate nuances of what’s wanted.  The product though is as good as I’ve seen in this area.

Kitchen #1

What does it cost to renovate a kitchen?  I’ve had 3-4 contacts within the past few weeks from homeowners who wish to renovate their kitchens for budgets ranging from $15,000 to $25,000.  In their words, they want to gut their kitchens and replace everything from cabinets to lighting to flooring.

My short answer to each of them was that I can’t do it for that money – and believe that it’s only possible if they’re willing to take on some of the tasks themselves – including my roles of design and construction management.

But it got me thinking about what drives the cost of kitchen remodeling.  Here are the actual costs for 4 very different kitchens that we’ve done recently:

Cost Comparisons for 4 Kitchens

The first 3 are nice but modest kitchens.  While the 4^th is clearly high-end – but is still more modest than what is usually depicted in the glossy magazines.  Homeowner 1 & 2 also reduced costs by doing some of the work themselves as I describe below.  All four kitchens are in the greater Washington DC area and all were remodeled during the 2007-2009 time period.  Three were in the close-in Maryland suburbs of Silver Spring, Takoma Park, and Bethesda.  One was in Upper Northwest Washington.  The prices — especially construction labor — will vary by region of the country.

Kitchen #2

Construction labor drives kitchen remodeling costs.  It takes skilled labor to handle the very diverse tasks that are required to fix and modify wiring, plumbing, flooring, and to hang cabinets so that they are level and secure.  Construction labor accounted for 40% to 50% of the total costs of the remodel.  The labor required to design, source materials, and manage construction accounted for another 15% to 20% of the total cost.  If the homeowner can take over some of these high-cost items, overall remodeling costs can be greatly reduced!  In my experience, the tasks that homeowners are most likely to be comfortable performing including design, selecting and purchasing materials, project management, painting and tiling.  A homeowner willing to take on one or more of these tasks might be able to remodel a kitchen for $25,000 – if they are also willing to make some accommodations regarding material choices AND the keep the kitchen configuration pretty much unchanged!

The homeowner for kitchen 1 did the painting themselves; the homeowners for kitchen 2 tiled the floor themselves plus (an artist) created the glass art windows & backsplash.  Both homeowners did some of the material sourcing themselves.

Changes that drive up both material and construction costs include opening up the kitchen to the rest of the house and to the outdoors – something that literally every single one of my clients desires.

The reason that construction costs seem to remain about 40-50% of total costs is that as more materials are added – such as windows and skylights or more complex plumbing and lighting – the cost of construction increases in order to properly install these additional features.

Kitchen #3

So now let’s look at how to control the 40% to 50% of costs that are paid for materials.

Cabinetry Drives Costs:  In all 4 kitchens, cabinetry was the highest price item accounting for 15% to 17% of the total budget.  And, in my opinion, it’s one area where you should pay for quality and function.  If we look at the first kitchen, we could have lowered the cabinetry costs by perhaps $2,000 by purchasing cabinets made with particle board frames and with doors instead of drawers in base cabinets.  But penny-pinching in this area can lead to cabinets that fall apart quickly and back strain and inconvenience.  All but the 4^th kitchen used stock cabinetry and even the 4^th kitchen only used certain specialty cabinetry.  None used cabinet fronts for appliances.  Custom cabinetry and finishes would have driven the costs of cabinets for the high-end kitchen up as much as $10-$20,000 (or more).

Kitchens 1 & 2 kept cabinets costs low simply by limiting the amount of cabinets.  Both kitchens used closet pantries to eliminate several thousand in cabinet costs.  Building walls is much cheaper than buying cabinets.  A pantry can use ventilated or solid shelving at a fraction of the cost and with much great convenience than using large pantry cabinets.

IF your cabinets are in good shape, you can save half the cost of new cabinets by re-facing the cabinets instead of replacing them.  An even better way to save money if all you’re trying to do is change the look is to paint or stain the cabinets.  For one client, we spent only $1,000 to sand and re-stain the cabinets a very dark cherry color.  This totally changed the look of the kitchen.

Appliances & Countertops:  These 2 categories account for 10% to 16% of costs.  Here is definitely an area where one can save without sacrificing function.  Using laminate instead of granite, concrete or solid surface material would have reduced the countertop costs by at least 75% — $2,000 to $7,000 savings!  And today’s laminates are much improved in performance and looks from the Formica of the 1950’s.

Believe it or not, all of these kitchens could have spent much more on appliances than they did.  Even the high-end kitchen used a standard depth refrigerator instead of a counter-depth built-in refrigerator.  The first 2 kitchens used ranges instead of cooktops with separate built-in ovens.  This is definitely an area where homeowners can save money without sacrificing a lot of function or looks.

Windows, Doors &  Skylights: All the Kitchens were opened to the rest of the house.  Kitchens 2, 3, and 4 were all opened up to the outdoors as well.  This added anywhere from $2,000 to $18,000 in material costs alone – and even more in labor.  Again, in my opinion, these costs are well worth the improvements in lifestyle and enjoyment.  Something that may be worth postponing your kitchen remodel until you can afford.

Partial View of Kitchen #4

Flooring: The cost of flooring has a lot to do with the material and the detail. All of these homeowners kept costs relatively low – the 1^st, 3^rd and 4^th all used hardwood and the cost differences have to do with how much of the flooring was new and the size of the space.  The 2^nd kitchen used tile.  The cost reflects only the cost of the material since the homeowner saved money by doing installation themselves.  They also selected very attractive but low cost porcelain tile.  None of the homeowners used special inlays or patterns that would have jacked up the price.

Backsplash: Here’s an area where you can make a lot of impact with a low cost.

All the Rest: Lighting fixtures and plumbing fixtures were costly in the 4^th kitchen but quite modest in the other 3.  This area, in my opinion, is kind of like appliances where you can get a lot of function for a relatively inexpensive price.  Bells and Whistles and designer brands add a lot of price with only.

Summary: If you’re trying to get a sense of how much it will cost to “completely” remodel your kitchen, I would use the following ballpark formulas.  This will give you a reasonable sense of what it will take.  Then you can use the guidance, above, to think through how to keep the remodel costs as low as reasonably achievable.  Remember, these numbers are for the greater Washington DC area.  Prices — especially construction labor — will vary in different parts of the country.

Laminate Countertops

One of the readers of my newsletter asked me to pull together some thoughts about ways to keep kitchen remodeling costs down — So here they are:

1. New Cabinets are one of the highest costs in kitchen remodeling.  So the first thing I do with clients is to assess the existing cabinets.  If the boxes are solid and in good shape – I think first about replacing the doors and drawer fronts instead of replacing the whole cabinet.  If it’s primarily the color that you don’t like – think about staining the doors, drawer fronts and frames instead of replacing the cabinets.  That’s what we did in the kitchen, above.
2. I hate using cabinet bases that have doors instead of drawers – but if you’re keeping the old cabinets and staining them, you can use after-market organizers if you want greater access to old door front base cabinets.
3. Mix & Match.  If you can keep some but not all of the cabinets or need additional cabinets – for all but the most modern of design themes, you can very successfully mix and match different designs and woods.  In fact, an un-fitted kitchen can make today’s kitchen feel more like the center of the home that we all crave.
4. Another major expense is construction labor.  You can keep those costs lower by eliminating complexity – create rhythm and interest by use of materials instead of using lots of levels or soffits.
5. Keep plumbing costs lower by leaving the sink where it is (or close to where it is) and any gas appliances close to their current locations.
6. Appliances & Plumbing Extras are a 3rd major expense item.
   -    Use a 30″-36” Range instead of separate cooktop and ovens
   -    Plan for Single Sink — unless you usually have more than one cook in the kitchen
   -    Forego the Pot Filler — you’re going to have to carry the heavy pot full of hot water when you need to drain the pasta anyway
   -    Design for a stand-alone Refrigerator – make it look built-in instead of going for the built-in model
7. Use Laminates!  I know that granite is all the rage – but laminates have come a long way since the 1950’s!  Laminates are used extensively in European-style modern cabinetry and countertops.  Using laminates can save thousands of dollars.  If you can’t live without an undermount sink, use stone just around the sink area.  Use a large stone trivet near the range.
8. Lighting  – Fluorescents have also come a long way in terms of color and function.  We can now design in quite attractive and functional fluorescent fixtures at a fraction of the cost of large areas of recessed can lights.  Similarly, fluorescent under-cabinet lights keep cabinets cooler and save money over halogen or xenon lights.  Save money by finding unusual, but lower cost, pendants for a design accent.

Use the money you save to open the kitchen to the rest of the house and to the outdoors.  Create eating and sitting areas on either side of the kitchen so family and guests along with the cook visit together in comfort.  The un-fitted, lower cost kitchen remodel can make the kitchen blend seamlessly with the rest of your casual, comfortable home.  And you can relax knowing you haven’t mortgaged your soul.

Stain Cabinets Instead of Replacing Them

Unfortunately, the answer isn’t always an easy one.

There are two different types of licenses in the jurisdictions in which I work.

Professional Licenses: Professional licenses provide assurance that a licensed individual has passed knowledge-based exams and has worked a certain number of years under a licensed professional.  Most jurisdictions require that electrical and plumbing work be performed by a licensed plumber or electrician.  A registered engineer or licensed architect, in addition to passing exams and having professional work experience must also finish certain degree programs.

Since I am not a licensed architect, I always use a registered structural engineer to approve certain types of structural changes.  Licensing says nothing about the quality of one’s designs or ability to work with and understand the needs of clients.  I am not comfortable designing a house from scratch, I would hire an architect to work with me on this.  However, because I’ve remodeled my own houses and am responsible for the construction aspects or remodeling for others, I’m in some ways better prepared than an architect to design and manage a remodeling design/build company.

I will also admit that I don’t always use licensed electricians and plumbers.  I always use a licensed professional for rough-in plumbing and for upgrades to electrical service.  In addition, I always get a permit which means an inspector will review the work to ensure it meets code.  But I don’t hesitate to use a handyman or other experienced contractor to change electrical or plumbing fixtures.  In fact, for remodeling my own homes, I’ve passed an electrical exam for homeowners and done my own wiring of lighting and outlets.  An inspector will inspect my work and this is comfortable for me.  Someone less familiar with construction might only be comfortable using a licensed professional for these tasks also.

Business Licenses: When a jurisdiction licenses a home improvement contractor, this is usually a business license and not a professional license.  The most basic protection that this type of license offers homeowners is the requirement for a certain level of general liability insurance – that level varies by jurisdiction.  In Maryland and the District of Columbia the amounts are $50,000 in property damage.  Both jurisdictions require that a company carry workers compensation insurance in case of worker injury.  In Maryland the license also requires a certain number of years of experience and passing an exam (which is testing knowledge of the laws and requirements not construction knowledge).  The District does not require this but does require copies of preprinted standard contracts.

So this home improvement business license basically assures the homeowner that the owner of the company has a basic level of business knowledge and a basic level of insurance.  But I carry far more insurance than is required for licensing and carry professional liability insurance as well as general and property liability insurance.

Importantly, Maryland also has a Guaranty Fund that can resolve claims made by homeowners should a licensed contractor fail to perform against a contract.

Conclusions: But licensing says nothing about the ease of working with a tradesman or how conscientious they are or about the neatness of their work.  A painting company large enough to go through the licensing process may also cost more and have an owner that only checks on work periodically instead of being on the job site working alongside his crew most of the day.  My favorite painter is not licensed.  But his work and that of his crew is the best I’ve seen.  Equally important to me and my clients, he is always on time, is neat, is easy to work with, has real pride in his work and has demonstrated that he can solve problems.

A decision about who to hire is much more complex than determining who is licensed.  Home improvement is like most everything else we do where we need to weigh risks and benefits in making a decision.  Just remember that a professional license does assure that a contractor has a certain level of training and knowledge (but the tested knowledge is a very small segment of the knowledge-based required for executing a complex remodel).  A business license assures a certain level of business knowledge and insurance.  Neither license says anything about whether that contractor is right for your job and for working with you.  In a previous article (link), I’ve offered guidance about what to ask references in hiring a contractor to help answer the questions about whether the contractor has the experience based required for your job and whether he’s a good match for you.  The questions are as relevant whether the contractor is a general contractor or a painter.