8 Things You Need to Know about a Remodeling Contract

17 May 2016

Do you want to hire a contractor to paint your house or fix your roof or renovate your kitchen?

Of course, you should hire a dependable contractor to do the job, someone who is licensed by the state and insured and someone who has good references. Then you’re going to need that person to put everything in writing, in a bid or contract that you can understand before you sign it. Here are some of the basics you should know about bids and contracts:

1 - Dates, amounts and details

Your bid or contract needs to have dates, a fixed total that you will be charged, and lots of details about what will be done at your house -- and what will not.

If you’re paying for a really big job – like a kitchen remodel – have the contractor specify major exclusions, in other words, what will not happen. For example, the contract might say that the renovation will not include hooking up natural gas to the kitchen – something that might cost thousands. That language will alert you in advance to possible changes you want to make, but had not thought about much before. Other details you need that you may not have thought about include when the remodelers will clean up after work – everyday or once a week – and what the big final clean-up will be like. Will they just pick up their drop cloths and walk away or will they vacuum or clean the floor and the countertops?

2 - fixed-price contracts are best

Generally, you want a fixed-price contract instead of a cost-plus contract, and that’s what most contractors will propose – especially for small jobs.

rosie kitchen remodel beforeFixed price means the contractor gives you an estimate of the total price including labor, materials, profit and contingencies. If expenses are higher for some reason, like an increase in workers’ salaries or the price of paint, he or she picks up the difference. Recently, some online articles have proposed that homeowners can do better with cost-plus, but that can be confusing and frustrating. Cost-plus means the contract includes all the basic numbers we listed above, but if the project comes in under-budget, the homeowner and contractor split the savings. If it’s over-budget, they split the costs. Usually, these types of contracts are only written for really big jobs. In our experience, more disputes break out about cost-plus arrangements than fixed-price contracts. Homeowners may get worried when workers don’t work as quickly as they expect them to because they think the job is going over-budget.

3 - don't sign for major expense allowances

Never sign a remodeling contract that has product and materials allowances for major expenses.

rosie kitchen remodel afterAllowances occur when a contractor says he’ll redo your kitchen for $40,000 and will allow $12,000 for the cabinets, $2,000 for the stove, and similar allowances for other necessities, like countertops, a sink and faucets and so on. Then you shop for cabinets and find out you need to spend at least $5,000 more to get what you want. Perhaps the allowances weren’t realistic, but the contractor has already demolished your old kitchen and now you have to pay more than the estimate you had originally. You can avoid all this by shopping in advance and having your choices written into the contract.

4 - don't start until all materials arrive

In fact, don’t start the demo before all materials for a job arrive.  That’s why remodeling jobs take too long or stop temporarily, leaving homeowners waiting with no kitchen or short one bathroom because of a single missing component.

5 - unforseen conditions clauses are common

Even with a fixed price, there will be an “unforeseen conditions” clause in the contract.  So if something happens that could not have been expected before work started, the client may have to pay for an extra fix to complete the job. That might seem like overly generous protection for the contractor, but it’s likely to be something no one could have expected like broken pipes behind walls or termite infestation or dry rot. Sometimes contractors can fix these problems without additional time or money, but sometimes they can’t.

6 - Can I negotiate the estimate?

Yes. You can negotiate with contractors about the estimate for your job. Sometimes they can lower the price, but sometimes he or she will say, “Let’s look at the selections you made and see how we can save money.” You might take on a part of the job yourself, like the demolition or the painting; or you may lower the quality of the cabinets you want.

7 - have a comfortable payment schedule

Make sure the contract outlines a payment schedule you’re comfortable with, and don’t pay for everything in advance. You usually make an initial payment when you sign the contract. After that, it’s good to pay gradually -- what some people call progress payments. You pay a certain amount when the demo is completed; more money when flooring is laid; more when cabinets are installed; more when countertops go on. That way you can slow down payments if the job falls behind schedule.

8 - don't pay full amount until city/county inspector signs off

And don’t pay the final amount until you have full use of the remodeled area and until the city or county building inspector signs off on the job.  What if the job is done, but you’re waiting for a $1,500 faucet on back-order? Perhaps the remodeler installed a cheap $100 faucet as a temporary fix. But you still don’t make a final payment. Instead, take the value of the product you’re waiting for, multiply it times two and subtract the total from your check. Until you get that faucet, you hang onto the contractor’s last $3,000.

Even if you take all these steps, you’re likely to run into a glitch now and then, of course. But with the right contractor, you can work through the problems and take great pleasure in the final improvements made in your home.

For more information on all your do-it-yourself projects, visit the Rosie on the House, DIY Q&A Database.


Photo Credit: Rosie on the House

Above: Ceiling being rebuilt as part of a kitchen remodeling project.




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