Homeowner's Guide to a Stress-Free Home Improvement Project
Starting a home improvement project can be exciting, but it can also be stressful, especially if something goes wrong at any stage of the project. Knowing what to do and who to talk to when facing unexpected problems will clearly make a difference. In this comprehensive guide, we provide everything you need to know to help you save extra time and money in your home improvement project.
First, we provide the best tips for choosing which contractor to hire for your project and a list of questions you can ask them to determine if their professional profile meets your needs.
After that, you will learn how to communicate with them successfully, what to expect from your contract, and how punch lists can help you with the final touch-ups.
Toward the end of the guide, you will discover the common payment methods and schedules, recommended steps to follow if disputes or misunderstandings arise, and everything else you need to know to bring the project to a successful end.
Table of Contents
Starting a home improvement project can be exciting, but it can also be stressful, especially if something goes wrong at any stage of the project. Knowing what to do and who to talk to when facing unexpected problems will clearly make a difference. In this comprehensive guide, we provide everything you need to know to help you save extra time and money in your home improvement project.
First, we provide the best tips for choosing which contractor to hire for your project and a list of questions you can ask them to determine if their professional profile meets your needs.
After that, you will learn how to communicate with them successfully, what to expect from your contract, and how punch lists can help you with the final touch-ups.
Toward the end of the guide, you will discover the common payment methods and schedules, recommended steps to follow if disputes or misunderstandings arise, and everything else you need to know to bring the project to a successful end.
Table of Contents
Project Stage
Project Stage
Before Hiring Your Professional
01
Determine the Scope of Your Project
One of the toughest parts of your home renovation project is finding and determining the best professional for the job. It is necessary to determine early on the project type that needs to be done. Ask yourself if it is a small, medium, or large project. Depending on your answer, you may need a more or less specialized contractor.
For example, if your project requires structural modifications, consider a contractor with more experience than if you just need a quick fix like patching holes in your drywall.
Talking about the contractor’s competencies is one step that helps avoid most of the confusion and misunderstandings. Assuming the professional will take care of a task and then finding out after the project is finished that they have not been done could be very disappointing. For this reason, ask which tasks the professional will handle and which require additional payment. If the contractor cannot perform one or more essential tasks, consider someone more experienced to avoid hiring two professionals.
01. Determine the Scope of Your Project
One of the toughest parts of your home renovation project is finding and determining the best professional for the job. It is necessary to determine early on the project type that needs to be done. Ask yourself if it is a small, medium, or large project. Depending on your answer, you may need a more or less specialized contractor.
For example, if your project requires structural modifications, consider a contractor with more experience than if you just need a quick fix like patching holes in your drywall.
Talking about the contractor’s competencies is one step that helps avoid most of the confusion and misunderstandings. Assuming the professional will take care of a task and then finding out after the project is finished that they have not been done could be very disappointing. For this reason, ask which tasks the professional will handle and which require additional payment. If the contractor cannot perform one or more essential tasks, consider someone more experienced to avoid hiring two professionals.
02
Get Estimates From 4-5 Contractors
Now that you know the project scope, it is time to find the right professional. There are many ways to find good and experienced contractors, the most popular being word-of-mouth referrals. Ask relatives, co-workers, and friends for references or personal recommendations. You can also search for local contractors on the Internet or check with real estate agents or local suppliers. Whether you use Fixr.com’s services or not, it is essential to have a detailed consultation and get estimates from at least 3 contractors. More complex, long-term construction projects may require comparing 4 or 5 different estimates.
02. Get Estimates From 4-5 Contractors
Now that you know the project scope, it is time to find the right professional. There are many ways to find good and experienced contractors, the most popular being word-of-mouth referrals. Ask relatives, co-workers, and friends for references or personal recommendations. You can also search for local contractors on the Internet or check with real estate agents or local suppliers. Whether you use Fixr.com’s services or not, it is essential to have a detailed consultation and get estimates from at least 3 contractors. More complex, long-term construction projects may require comparing 4 or 5 different estimates.
03
Ask Them any Necessary Questions
Once you have estimates from multiple contractors, it is time to decide. We recommend asking them several questions about the project and their working methods, from licenses and permits to deadlines and payment methods. Note all their answers and keep them in the same document or notepad. This makes the decision-making process much easier. One of the most complicated parts of the process is knowing which questions to ask your contractor. Here is a list of questions that cover some of the most important aspects of the project:
03. Ask Them any Necessary Questions
Once you have estimates from multiple contractors, it is time to decide. We recommend asking them several questions about the project and their working methods, from licenses and permits to deadlines and payment methods. Note all their answers and keep them in the same document or notepad. This makes the decision-making process much easier. One of the most complicated parts of the process is knowing which questions to ask your contractor. Here is a list of questions that cover some of the most important aspects of the project:
- Are you licensed?
- Do you have a certificate of insurance I can see?
- Do you offer a warranty?
- What is the payment schedule?
- Are you familiar with this type of project?
Download our full list of questions to ask a contractor
04
Check Their License and Background
When you receive proof of their license certificate, contact a local licensing agency for contractors to verify the information. Also, ensure the license is relevant to your project. For example, you do not want proof of a plumbing license when your project is about siding painting.
Not all states require licenses. Some require registration, others certifications, and some require both licensing and registration, so it is important to know the differences between them.
If the contractor is licensed, the contractor took a state exam. The professionals required to be licensed vary by state. Some do not license any, while others may require all professionals who work on your home to be licensed. In some states, licensing also includes registering with the state, while in others, registration may be separate.
A registered contractor means the professional is listed with the state in a directory. This is a way for the state to track who is working. Checking to see if someone is registered in your state can help you determine if this professional has a valid business.
Certifications are different and not part of the state. This is something the professional does to set themselves apart from others, gain knowledge, or become able to work on specific things. By using a certified contractor, you can rest assured that the material will be installed properly and come with warranties.
04. Check Their License and Background
When you receive proof of their license certificate, contact a local licensing agency for contractors to verify the information. Also, ensure the license is relevant to your project. For example, you do not want proof of a plumbing license when your project is about siding painting.
Not all states require licenses. Some require registration, others certifications, and some require both licensing and registration, so it is important to know the differences between them.
If the contractor is licensed, the contractor took a state exam. The professionals required to be licensed vary by state. Some do not license any, while others may require all professionals who work on your home to be licensed. In some states, licensing also includes registering with the state, while in others, registration may be separate.
A registered contractor means the professional is listed with the state in a directory. This is a way for the state to track who is working. Checking to see if someone is registered in your state can help you determine if this professional has a valid business.
Certifications are different and not part of the state. This is something the professional does to set themselves apart from others, gain knowledge, or become able to work on specific things. By using a certified contractor, you can rest assured that the material will be installed properly and come with warranties.
05
Ask Your Contractor for Proof of Insurance
As with licenses, check that the contractor is insured, and the only way to know this is by asking for it. Never hire an uninsured contractor because if you do and something goes wrong during the project and your property gets damaged, you will probably have to pay for it. Also, if a person gets injured during the project, that person may file a claim against your homeowners insurance, making you liable. For these reasons, avoid taking a person’s word about their insurance and always ask for their insurance certificate. After the contractor shows the insurance proof and you are concerned about its limits, requesting the entire insurance policy may be advisable.
05. Ask Your Contractor for Proof of Insurance
As with licenses, check that the contractor is insured, and the only way to know this is by asking for it. Never hire an uninsured contractor because if you do and something goes wrong during the project and your property gets damaged, you will probably have to pay for it. Also, if a person gets injured during the project, that person may file a claim against your homeowners insurance, making you liable. For these reasons, avoid taking a person’s word about their insurance and always ask for their insurance certificate. After the contractor shows the insurance proof and you are concerned about its limits, requesting the entire insurance policy may be advisable.
You can also check with the Better Business Bureau to verify that there are no violations or complaints on record for the contractor.
06
Do Not Leave any Question Unanswered
If unanswered questions remain, schedule a second meeting with the contractor. You can ask for more information, discuss your project in more detail, and ask any questions you forgot the first time. After the second interview, compare all the contractors using the notes you took and decide who is the most appropriate for the project.
06. Do Not Leave any Question Unanswered
If unanswered questions remain, schedule a second meeting with the contractor. You can ask for more information, discuss your project in more detail, and ask any questions you forgot the first time. After the second interview, compare all the contractors using the notes you took and decide who is the most appropriate for the project.
During the Project
How to Communicate With Your Contractor
How to Communicate With Your Contractor
01
Give Extensive Details of What You Want and Expect
Once you choose the professional for your project, communicate exactly what you need. Talk about your expectations, specific project details, and everything you want the professional to know. If you have anything you do not want the contractor to do, this is also a good time to express them. Communication is key to achieving the best project results.
02
Keep a Written Record of What You Agree On
Although both parties will be bound by a contract, keep written records of everything you and your contractor agreed upon. In the unfortunate case of a dispute, records could shed light on the matter and help solve the issue.
01. Give Extensive Details of What You Want and Expect
Once you choose the professional for your project, communicate exactly what you need. Talk about your expectations, specific project details, and everything you want the professional to know. If you have anything you do not want the contractor to do, this is also a good time to express them. Communication is key to achieving the best project results.
02. Keep a Written Record of What You Agree On
Although both parties will be bound by a contract, keep written records of everything you and your contractor agreed upon. In the unfortunate case of a dispute, records could shed light on the matter and help solve the issue.
03
Maintain Regular Communication
After the project starts, keep communication flowing and keep track of its progress. If there are misunderstandings or the project is not executed as you expected, it will be better to speak up before it is completely finished.
03. Maintain Regular Communication
After the project starts, keep communication flowing and keep track of its progress. If there are misunderstandings or the project is not executed as you expected, it will be better to speak up before it is completely finished.
How to Read a Contract
How to Read a Contract
01
Take Your Time to Read the Full Contract
The contract is the legal document you will turn over in case of a dispute, and it explains both parties’ obligations and rights. Make sure you take your time to read it. Do not assume it includes everything you and your contractor agreed upon. Anything that is not included in the contract is not legally binding. When you read it, ensure it is comprehensive and not ambiguous. If anything is missing in the contract or you think any part is unclear, the document should be reviewed and modified. If you have trouble understanding the content of the contract or have any questions or doubts, ask your lawyer for help.
02
Find Your Contractor’s Information
The first important part of the contract is the contact information. Look for the contractor’s or company’s basic information: name, physical address, phone number, insurance, and license. This information allows you to legally identify the professional and hold them accountable in a dispute or disagreement.
01. Take Your Time to Read the Full Contract
The contract is the legal document you will turn over in case of a dispute, and it explains both parties’ obligations and rights. Make sure you take your time to read it. Do not assume it includes everything you and your contractor agreed upon. Anything that is not included in the contract is not legally binding. When you read it, ensure it is comprehensive and not ambiguous. If anything is missing in the contract or you think any part is unclear, the document should be reviewed and modified. If you have trouble understanding the content of the contract or have any questions or doubts, ask your lawyer for help.
02. Find Your Contractor’s Information
The first important part of the contract is the contact information. Look for the contractor’s or company’s basic information: name, physical address, phone number, insurance, and license. This information allows you to legally identify the professional and hold them accountable in a dispute or disagreement.
03
Make Sure the Project Is Clearly Described
The project description is one of the most important things to look for when reading a contract. The more detailed the project contract, the fewer misunderstandings and complications during the job. From materials, brands, colors, and sizes to techniques, finishes, equipment, or any enhancement you wish to add to your project, it should all be specified in the contract. Sometimes, the project scope or any elements chosen beforehand may change during the job. In this case, make sure all those changes are reflected in a written change order and signed off by both parties.
04
Agree On Project Dates and Deadlines
The contract should clearly state the project’s start date and an approximate completion date. Talk to your professional and agree on a date that suits you both. It is not wise to push them to agree to a date they cannot meet. It is also possible to include a late penalty clause, although many contractors and companies may not agree to include it in the contract. This clause will allow you to get a discount on the total project price if it is not completed on time. You can also ask the contractor to include the times and days professionals will work on the project. This may be important if the contractor will work in high-traffic areas like the hallway or kitchen. Ask if there are days they will not work.
03. Make Sure the Project Is Clearly Described
The project description is one of the most important things to look for when reading a contract. The more detailed the project contract, the fewer misunderstandings and complications during the job. From materials, brands, colors, and sizes to techniques, finishes, equipment, or any enhancement you wish to add to your project, it should all be specified in the contract. Sometimes, the project scope or any elements chosen beforehand may change during the job. In this case, make sure all those changes are reflected in a written change order and signed off by both parties.
04. Agree On Project Dates and Deadlines
The contract should clearly state the project’s start date and an approximate completion date. Talk to your professional and agree on a date that suits you both. It is not wise to push them to agree to a date they cannot meet. It is also possible to include a late penalty clause, although many contractors and companies may not agree to include it in the contract. This clause will allow you to get a discount on the total project price if it is not completed on time. You can also ask the contractor to include the times and days professionals will work on the project. This may be important if the contractor will work in high-traffic areas like the hallway or kitchen. Ask if there are days they will not work.
05
Special Clauses
The clauses in a contract protect the interests of all parties involved. There are some important that you need to know about and look for in your contract.
- The Price Escalation Clause has become crucial today and is a must in every contract. It guarantees a change in the agreement of the project cost for contractors to recover some or even all the cost increases that may occur over the project, such as the rise in material prices.
- The Merger Clause, or Integration Clause, which states that any previous agreement is voided by the execution of the current agreement, so make sure all you speak with the contractor about is written in the contract.
- The Indemnification Clause is also very important because it releases one of the parties of the contract from any liabilities that may result in losses or damages because of certain events.
06
Look for any Mechanic’s Lien and Have Waivers Signed
A mechanic’s lien is a legal claim to your property until the job is completed and paid. This is a guarantee of payment that some contractors include in the contract. After the project is finished and before making the final payment, you need to have the waivers signed by all subcontractors to cancel the lien. If you do not want to consent to a mechanic’s lien, clearly state it in the contract.
Waivers can be conditional and unconditional, depending on the payment method. A conditional waiver is given when payment is submitted in full by a personal check. You will be released from your obligation once the check is cashed. If you pay in full with a certified check, you will be given an unconditional waiver, releasing you from the lien immediately.
05. Special Clauses
The clauses in a contract protect the interests of all parties involved. There are some important that you need to know about and look for in your contract.
- The Price Escalation Clause has become crucial today and is a must in every contract. It guarantees a change in the agreement of the project cost for contractors to recover some or even all the cost increases that may occur over the project, such as the rise in material prices.
- The Merger Clause, or Integration Clause, which states that any previous agreement is voided by the execution of the current agreement, so make sure all you speak with the contractor about is written in the contract.
- The Indemnification Clause is also very important because it releases one of the parties of the contract from any liabilities that may result in losses or damages because of certain events.
06. Look for any Mechanic’s Lien and Have Waivers Signed
A mechanic’s lien is a legal claim to your property until the job is completed and paid. This is a guarantee of payment that some contractors include in the contract. After the project is finished and before making the final payment, you need to have the waivers signed by all subcontractors to cancel the lien. If you do not want to consent to a mechanic’s lien, clearly state it in the contract.
Waivers can be conditional and unconditional, depending on the payment method. A conditional waiver is given when payment is submitted in full by a personal check. You will be released from your obligation once the check is cashed. If you pay in full with a certified check, you will be given an unconditional waiver, releasing you from the lien immediately.
07
Check What Is Covered Under Warranties
Your contractor may give a warranty for either materials, labor, or both. Any material, appliance, or equipment used in the project may be covered in the warranty. One year of labor costs is usually included in the warranty terms.
Make sure your contract clearly states what is covered by the warranty and whether it is full or limited. According to the Federal Trade Commission, a warranty is full if it meets certain criteria: the duration is unlimited, anyone who uses the product under warranty is covered, the warranty service is free of charge, a replacement or refund is offered if the product cannot be repaired, and homeowners are not required to perform any duty as a precondition for receiving the service. A limited warranty is anything that does not follow all those statements.
Different parts of the same product or different warranty periods may combine limited and full warranties. For example, some project materials may have a limited warranty while others have an unlimited one, or the warranty could be unlimited for the first year after the project and unlimited afterward.
What Else to Keep in Mind
There are other things to consider before starting your project. These are not crucial but can help you have peace of mind during the project. Talking to your contractor about them will often suffice, but to be safer, include everything in the contract.
Knowing who is going to clean up dirt and debris and when allows you to know if contractors will include it in the project cost or if you need to hire someone else or do it yourself. If the company or contractor offers to do the cleaning, ask if it is included in the project cost. If dumpster rental is needed, know who is responsible for hiring the service and who is paying for it. For larger projects, consider if heavy equipment will damage the pavement, flower beds, lawn, or patio. Expressing these concerns to your contractor and agreeing on a solution in case it happens allows you to know what to expect. Any other concerns, such as using your home toilets versus hiring portable toilets, should also be discussed.
07. Check What Is Covered Under Warranties
Your contractor may give a warranty for either materials, labor, or both. Any material, appliance, or equipment used in the project may be covered in the warranty. One year of labor costs is usually included in the warranty terms.
Make sure your contract clearly states what is covered by the warranty and whether it is full or limited. According to the Federal Trade Commission, a warranty is full if it meets certain criteria: the duration is unlimited, anyone who uses the product under warranty is covered, the warranty service is free of charge, a replacement or refund is offered if the product cannot be repaired, and homeowners are not required to perform any duty as a precondition for receiving the service. A limited warranty is anything that does not follow all those statements.
Different parts of the same product or different warranty periods may combine limited and full warranties. For example, some project materials may have a limited warranty while others have an unlimited one, or the warranty could be unlimited for the first year after the project and unlimited afterward.
What Else to Keep in Mind
There are other things to consider before starting your project. These are not crucial but can help you have peace of mind during the project. Talking to your contractor about them will often suffice, but to be safer, include everything in the contract.
Knowing who is going to clean up dirt and debris and when allows you to know if contractors will include it in the project cost or if you need to hire someone else or do it yourself. If the company or contractor offers to do the cleaning, ask if it is included in the project cost. If dumpster rental is needed, know who is responsible for hiring the service and who is paying for it. For larger projects, consider if heavy equipment will damage the pavement, flower beds, lawn, or patio. Expressing these concerns to your contractor and agreeing on a solution in case it happens allows you to know what to expect. Any other concerns, such as using your home toilets versus hiring portable toilets, should also be discussed.
Make a Punch List in Your Final Walkthrough
Make a Punch List in Your Final Walkthrough
01
What Is a Punch List?
A punch list is a list of items that need to be checked or reviewed before the project finishes. This is not a mandatory document, but it is common in any construction project since it usually boosts the homeowner’s satisfaction. It is most commonly made during the final walkthrough when you should point out to the professionals the items that need to be modified or corrected. They will take care of each item and check it off the list. The project is complete when you agree that everything has been taken care of.
02
Which Items to Include
The list usually includes work that does not meet the initial specifications in the contract, elements that do not function properly, minor tweaks, or damage that occurred during the project. It does not usually include large errors or changes because those are normally tackled during the project.
01. What Is a Punch List?
A punch list is a list of items that need to be checked or reviewed before the project finishes. This is not a mandatory document, but it is common in any construction project since it usually boosts the homeowner’s satisfaction. It is most commonly made during the final walkthrough when you should point out to the professionals the items that need to be modified or corrected. They will take care of each item and check it off the list. The project is complete when you agree that everything has been taken care of.
02. Which Items to Include
The list usually includes work that does not meet the initial specifications in the contract, elements that do not function properly, minor tweaks, or damage that occurred during the project. It does not usually include large errors or changes because those are normally tackled during the project.
03
Choose the Right Format for You
Punch lists can be made the traditional way with pen and paper or in a spreadsheet on your computer or phone. Often, companies choose more advanced software where they can share the list with architects, subcontractors, and any other professional involved in the project, which should result in better coordination and cooperation.
04
Consider Creating a Punch-List-As-You-Go
Although not as common, some professionals prefer a “punch-list-as-you-go, ” meaning creating a punch list while the project is being executed with the objective of having a zero punch list or empty punch list by the time the final walkthrough takes place. Ask about their preferred method so that you reach a solution that suits both parties.
03. Choose the Right Format for You
Punch lists can be made the traditional way with pen and paper or in a spreadsheet on your computer or phone. Often, companies choose more advanced software where they can share the list with architects, subcontractors, and any other professional involved in the project, which should result in better coordination and cooperation.
04. Consider Creating a Punch-List-As-You-Go
Although not as common, some professionals prefer a “punch-list-as-you-go, ” meaning creating a punch list while the project is being executed with the objective of having a zero punch list or empty punch list by the time the final walkthrough takes place. Ask about their preferred method so that you reach a solution that suits both parties.
After the Project
What to Know About Payment
What to Know About Payment
01
Agree On the Payment Method
Never pay the contractor before you sign the contract. Before signing it, ensure you and the contractor agree regarding payment and the payment method. Although some contractors only accept cash, talk to the professional about accepting safer, traceable payment methods like credit cards.
02
Determine the Payment Schedule
Agree on the payment schedule, which will depend on the project complexity. Larger projects may require a down payment, while a one-time payment will suffice for smaller or simpler ones. For these payments, ensure all the project phases are accurately completed before paying the contractor. It is important to be familiar with the project to ensure everything has been completed properly. If you are not familiar, hire a consultant to advise you.
01. Agree On the Payment Method
Never pay the contractor before you sign the contract. Before signing it, ensure you and the contractor agree regarding payment and the payment method. Although some contractors only accept cash, talk to the professional about accepting safer, traceable payment methods like credit cards.
02. Determine the Payment Schedule
Agree on the payment schedule, which will depend on the project complexity. Larger projects may require a down payment, while a one-time payment will suffice for smaller or simpler ones. For these payments, ensure all the project phases are accurately completed before paying the contractor. It is important to be familiar with the project to ensure everything has been completed properly. If you are not familiar, hire a consultant to advise you.
03
Small Projects
Down payments are not necessary for minor tasks like maintenance projects or repair tasks that require only a few hours. In this case, a contractor generally charges a fixed fee, although some may also charge hourly. Once the project is completely finished, the professional is paid in full.
04
Medium or Custom Projects
For medium or custom tasks, such as built-in cabinets or painting projects where the needed materials are ordered and purchased upfront, the contractor usually requires a down payment because they do not want to lose money if you change your mind after purchase. So, agree on an upfront payment beforehand and pay the balance when the work is complete.
03. Small Projects
Down payments are not necessary for minor tasks like maintenance projects or repair tasks that require only a few hours. In this case, a contractor generally charges a fixed fee, although some may also charge hourly. Once the project is completely finished, the professional is paid in full.
04. Medium or Custom Projects
For medium or custom tasks, such as built-in cabinets or painting projects where the needed materials are ordered and purchased upfront, the contractor usually requires a down payment because they do not want to lose money if you change your mind after purchase. So, agree on an upfront payment beforehand and pay the balance when the work is complete.
05
Large Projects
There are two common payment options for large projects, such as room additions and remodeling projects.
- Cost-plus.
Cost-plus or cost reimbursement is one of the most common methods of paying a contractor. This contract says you will reimburse the contractor’s costs and services. Cost refers to the material costs, and you agree to pay the costs plus a service fee. A flat fee is added for additional modifications, services, and tasks that arise during the project. In most cases, you receive a cost estimate at the start of the project, but overages can and do occur. There are several ways the contractor may write a cost-plus contract. Some are similar to a bid basis, while others have full payment due at one time. You may have a fixed, flat, or percentage fee.
- Bid basis.
The contractor provides a contract with the estimated cost of all the materials and fees. Then, both of you agree on a payment schedule, which usually starts with 10% down when you sign the contract and then 3 payments of 25%. When you deem the job acceptable and complete, you pay the remaining 15%. However, each project is unique, and the payment schedule may change. So, the payments can be divided into more installments for high-cost projects.
06
Consider Financing
Financing can be an option for payment, especially for larger projects. Also, emergency expenses can make financing necessary. There are many financial options, so consider them all and the pros and cons before choosing.
For example, home remodeling or home repair loans are the most common options for midsize projects. These unsecured loans do not use your home as collateral. Another option is a Home Equity Line of Credit or HELOC. This loan is secured, so it needs to be backed by your home. Also, this is a revolving line of credit, so you can take the necessary amount whenever you need, up to your borrowing limit. Remember to make payments on time, or your home could be foreclosed on.
Another financing option is to apply for a home equity loan or second mortgage. Similar to this option is the cash-out-refinance, but this replaces the current mortgage with a new and larger loan.
For minor updates that need financing, consider using credit cards. Another option is government loans, which could save you on interest and insurance costs. They typically have better terms than private ones.
If you choose to finance your project, ensure the contractor adds a clause to the contract stating that it is void unless the financing is approved and obtained.
05. Large Projects
There are two common payment options for large projects, such as room additions and remodeling projects.
- Cost-plus.
Cost-plus or cost reimbursement is one of the most common methods of paying a contractor. This contract says you will reimburse the contractor’s costs and services. Cost refers to the material costs, and you agree to pay the costs plus a service fee. A flat fee is added for additional modifications, services, and tasks that arise during the project. In most cases, you receive a cost estimate at the start of the project, but overages can and do occur. There are several ways the contractor may write a cost-plus contract. Some are similar to a bid basis, while others have full payment due at one time. You may have a fixed, flat, or percentage fee.
- Bid basis.
The contractor provides a contract with the estimated cost of all the materials and fees. Then, both of you agree on a payment schedule, which usually starts with 10% down when you sign the contract and then 3 payments of 25%. When you deem the job acceptable and complete, you pay the remaining 15%. However, each project is unique, and the payment schedule may change. So, the payments can be divided into more installments for high-cost projects.
06. Consider Financing
Financing can be an option for payment, especially for larger projects. Also, emergency expenses can make financing necessary. There are many financial options, so consider them all and the pros and cons before choosing.
For example, home remodeling or home repair loans are the most common options for midsize projects. These unsecured loans do not use your home as collateral. Another option is a Home Equity Line of Credit or HELOC. This loan is secured, so it needs to be backed by your home. Also, this is a revolving line of credit, so you can take the necessary amount whenever you need, up to your borrowing limit. Remember to make payments on time, or your home could be foreclosed on.
Another financing option is to apply for a home equity loan or second mortgage. Similar to this option is the cash-out-refinance, but this replaces the current mortgage with a new and larger loan.
For minor updates that need financing, consider using credit cards. Another option is government loans, which could save you on interest and insurance costs. They typically have better terms than private ones.
If you choose to finance your project, ensure the contractor adds a clause to the contract stating that it is void unless the financing is approved and obtained.
How to Deal With a Dispute
How to Deal With a Dispute
01
Talk to the Contractor
Unfortunately, misunderstandings and disagreements between the different parties can happen during your project. The first step in dispute resolution is to talk to the company or contractor. Often, both parties can reach an agreement after expressing and hearing each other’s views on the matter. Communication is key before, during, and after the project. At this point, there may be several phone conversations to negotiate.
02
Have Written Proof of All Your Conversations
After these conversations, send a letter by certified mail explaining the content of those negotiations. This way, you will have written proof of what you and your contractor discussed on the phone. Having these records may make a difference if you take further legal action. Get a receipt to prove that the other party received the letter.
01. Talk to the Contractor
Unfortunately, misunderstandings and disagreements between the different parties can happen during your project. The first step in dispute resolution is to talk to the company or contractor. Often, both parties can reach an agreement after expressing and hearing each other’s views on the matter. Communication is key before, during, and after the project. At this point, there may be several phone conversations to negotiate.
02. Have Written Proof of All Your Conversations
After these conversations, send a letter by certified mail explaining the content of those negotiations. This way, you will have written proof of what you and your contractor discussed on the phone. Having these records may make a difference if you take further legal action. Get a receipt to prove that the other party received the letter.
03
Write a Formal Complaint Letter
If you prefer the written format for these conversations, write a complaint letter to the contractor or company. We recommend avoiding irony, sarcasm, and threats since they will not positively contribute to resolving the dispute. Be very specific and clear about your demands. If you have never written a formal complaint, use the sample the Federal Trade Commission offers. Keep any relevant contracts, proof, or other documents close at hand throughout the process.
04
Take Part in a Dispute Resolution Program
If this first step does not work, there are numerous other routes you can follow. Some involve mediation and arbitration, which are dispute resolution programs that could be good alternatives before going to court. Others involve asking your state attorney general or contacting Consumer Action. Other organizations may be of help in these situations, such as the Home Builders Association, Consumer Protection Office, or Call for Action lines.
03. Write a Formal Complaint Letter
If you prefer the written format for these conversations, write a complaint letter to the contractor or company. We recommend avoiding irony, sarcasm, and threats since they will not positively contribute to resolving the dispute. Be very specific and clear about your demands. If you have never written a formal complaint, use the sample the Federal Trade Commission offers. Keep any relevant contracts, proof, or other documents close at hand throughout the process.
04. Take Part in a Dispute Resolution Program
If this first step does not work, there are numerous other routes you can follow. Some involve mediation and arbitration, which are dispute resolution programs that could be good alternatives before going to court. Others involve asking your state attorney general or contacting Consumer Action. Other organizations may be of help in these situations, such as the Home Builders Association, Consumer Protection Office, or Call for Action lines.
Final Tips to Make the Most of Your Project
There are different stages to a project, and each has several considerations that should not be overlooked. Above all, it is important to check the contractor’s license and background, carefully read the entire contract, and confirm the payment method. Also, be clear on the project scope and think thoroughly about what you want, how you want it, when you want it, and most importantly, communicate all this to the contractor. Being clear about a plan and aware of the most important stages we listed above will make the difference between a successful and an unwanted project end.