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Remodeling? What Comes First?

Thinking about remodeling...where to start?Maybe it happens when you open the pantry door and three cereal boxes and a stack of Tupperware that had been carefully wedged in the small space fall at your feet. Or perhaps it happens when you're late for work yet again, because you can't get to the shoes in your closet, which is located on the other side of a locked master bathroom door. Regardless of the source of your frustration, you know that it's time that you did SOMETHING to make your house more functional, beautiful, hospitable … more your home.

Yet when you're considering a possible renovation, where do you even begin? When we meet with potential clients, we often see them make two different mistakes that we want you to avoid - not knowing what they want and not knowing what they want to spend. Here's how to begin your project the right way, so you won't fall into either camp.

First, take the time to make a list of your concerns. Simple statements like: "I hate my kitchen. My master bathroom is ugly." are fine at this point. Just jot them down and then prioritize them. By doing so, you'll naturally begin to define the scope of your project. Also, think about what isn't working for you now. Don't fret about how to design or construct it at this stage, just think about what you would really like to change or add. A professional, experienced remodeler will know exactly how to achieve the end results you want and will guide you through the process.

Next, give some thought to how much you really want to invest in your home. Since they don't do this every day, most homeowners don't have a solid grasp of what a renovation actually costs, but that's also okay at this point. Initially, your main concern should be with what you want to invest. Consider your home's value and the market value of other homes in the area. Bear in mind that we are living in unprecedented real estate times, so if a Realtor says your home is only worth $X per square foot, look at the history of the area and realize that value could escalate again in the future. Then take into account intangibles like how long you plan to stay in your home – is it one year, five years, ten years, or are you never planning to move. If you're considering moving, ask yourself whether you like your current home's location, the schools your children attend, the neighborhood, its level of convenience, etc. Ask whether you really need a larger house or just one that better fits your lifestyle. (Read our 10 Reasons to Renovate Instead of Moving blog article to learn more.)

Going through this process will help you crystallize your thinking. You may decide that you need a new home, which is great and you'll have made a well-informed decision. But you may discover that to fall in love with your home all over again, you just need to update a kitchen or bath, remove a wall to better utilize existing space or add more room to entertain.

If that's the case, then it's time to talk to a qualified, professional remodeler who has substantial experience dealing with the type of projects you're considering. Being honest with your contractor about your hopes and budget is critical, because at this point you will begin to officially define the project's scope and determine whether it is realistic within the confines of your budget. Don't lose heart if the initial proposal comes in over budget, because if you have clearly prioritized, a qualified, professional remodeler can find practical ways to phase in the project over time as your budget allows.

10 Reasons to Remodel vs. Moving

10 Reasons to Renovate Instead of MovingAre you frustrated with the lack of a workable home office? Does your home really need a more functional and updated kitchen?  A larger, updated master bathroom? An accessible master suite on the main level? Instead of selling your house, you may want to consider renovating. Adding an extra room, reconfiguring existing areas or even tackling a second-story addition may be your most cost-effective and least disruptive option. Here are 10 reasons why people opt to renovate:

Moving expenses

RemodelorMove.com estimates the average cost of moving a typical $200,000 home (Charlotte’s April 2010 average sales price was $201,410, according to the Charlotte Regional Realtors Association), at a staggering $15,000 to $50,000. That includes moving preparation, the actual move, Realtor commissions, upfits and purchases for the new home, and a possible increase of $0 to $10,000 in property taxes.

Fees

That figure doesn’t include seller-paid closing costs, which typically run 3-5% of the sales price.

Hidden issues

While you know what’s in your home, you may be inheriting someone’s problems if there are issues that don’t show up on your new home’s inspection report. If the seller is making repairs, make certain they have been properly completed by a licensed, professional contractor -  electrical, exterior wood, roofing, boxing, siding and subfloor structural issues often won’t become apparent for several months or longer, when the cost to re-repair correctly will come out of your pocket.

Moving disrupts families

You’ll need to pack up personal belongings and keep the house in “ready-to-show” condition to be prepared for prospective buyers.

Moving disrupts networks

In addition to the friends you’ll be leaving behind, there are school, church and social changes that impact the entire family.

You may have to move twice

If you haven’t already located or closed on your new home by the time yours sells, you’ll need a temporary place to stay.

Double jeopardy

If you move before your existing home sells, you’ll need to cover two mortgages for an undetermined period of time.

Quicker than you think

Depending on the scope of the project, here are some surprisingly fast (approximate) construction times for common projects done by a licensed, professional contractor: the average room addition takes five weeks, a complete kitchen remodel 6-8 weeks, and a complete bathroom remodel 4-6 weeks.

Timing is everything

While the housing market is improving, values are not yet back to 2006 levels – which means holding onto your home until the market rebounds may make financial sense.

Solid investment

If planned and executed properly, you may recoup a large portion of your renovation expenses, particularly if you plan to stay in your home for a few years. Remodeling Magazine’s Cost Vs. Value 2009-2010 Southeast report puts recoup rates at 90% for attic bedrooms (mid-range project), 84.4% for basement remodels (mid-range project), 74.6% for a mid-range major kitchen renovation or 64.9% for an upscale version that includes features like granite countertops, 71.9% for a mid-range bathroom remodel or 64.3% for an more upscale bath renovation, and an impressive 146.8% for steel entry door replacement (mid-range project).

When considering those returns as well as all the issues involved in deciding whether to renovate, it’s vital to weigh what award-winning home improvement writer and author Kathy Price-Robinson wrote on her remodeling blog: “If you plan on living in your house for more than five years, you must factor in the quality of life increases as well as the payback on your investment. After all, is it a home where you live and shelter your family, or is it just an investment like a mutual fund?”

Six Misconceptions about Granite

Six Misconceptions about GraniteOver the past decade or so, granite has emerged as a solid leader in kitchen and bathroom surfaces. Yet many people still have misconceptions about the material. Here are some common myths and a look at the hard facts about this natural product.

Granite is Expensive. Actually, granite has become one of the more cost-effective options among solid surfaces. Thanks to its popularity, supply has increased, bringing the cost down by $10 to $15 dollars a square foot over the past several years. Some of the newer, fabricated materials are pricier.

Granite is Difficult to Maintain. Some homeowners worry about spotting or discoloration, but those fears aren’t well grounded. According to the Marble Institute of America, granite just requires warm water, mild dishwashing liquid and a soft cloth to maintain. If you can use a spray bottle like one you’d use to apply glass cleaner, you can apply the latest generation of sealants.

Granite Locks You into a Certain Style. There are myriad colors, shades and tones in even a relatively plain piece of granite. As opposed to a solid-color surface material, these variations give you unprecedented design flexibility – i.e., when you tire of a wall or accessory color, simply pick a different shade in the same stone and redesign from there.

Granite Isn’t Green. Granite is a natural material, so it’s difficult to get closer to nature.

Granite Isn’t Durable. Granite has withstood the test of time. There’s a reason we say “as hard as a rock.” It is heat-resistant and won’t crack under the pressure of normal wear and tear.

Granite Isn’t a Solid Investment. The kitchen is the area where homeowners are likely to recoup the most money from renovations – nearly 85% according to CNNMoney.com. And when it comes to the changes homeowners are looking for in kitchen renovations, granite is definitely a material of choice. It’s expected in high-end homes and is becoming an assumption in moderately priced residences as well. In this challenging market, you want to give your home every edge when it comes to resale, and granite in the kitchen has become an indicator of a quality project in what many buyers view as the most important room in a house.

Loans Put Renovations Within Reach

Loans put renovations within reachThe ebb and flow of the housing market over the past few years may have led us into uncharted waters, but one result has been a wave of people considering home renovation projects. Some homeowners that we at Palmer Custom Builders work with are in need of a change but have opted against selling, instead choosing to renovate their homes to improve their comfort and safety while protecting their longstanding investment. Others who are in the market for a home are eyeing existing home deals, hoping that updates will boost the value of their bargain while making it a more enjoyable place to live. We’ve helped many such homeowners renovate poorly functioning kitchens and baths, finish un- or under-utilized space to create beautiful living areas, bring safety issues up to code, and make much-needed repairs. Yet we’ve also heard of many people in both situations who are mistakenly crestfallen when they hear rumors about other homeowners who are unable to secure renovation financing.

The truth is that whether your project is large or small, financing is still available for qualified buyers and homeowners, but finding the right financing package is more important than ever.

Jack Snypes, a Renovation Specialist for Wells Fargo Home Mortgage in Charlotte, N.C., said there’s always a need for basic home improvements because of the aging U.S. housing stock. “And, when it comes to purchasing a home, renovation loans give buyers options when considering houses that aren’t perfect,” he said. “At an average age of more than 35 years, the nation’s housing stock is in need of improvements and repair, so there is demand for mortgage products that address the needs of buyers who are looking at homes that need TLC.”

To make it easier for lenders to offer renovation loans, the federal government has several programs they can turn to. (Talk with your lender to see if your home qualifies for these or other programs.) The Federal Housing Administration’s (FHA) Streamlined 203(k) is one of the more popular renovation loan programs. It permits homebuyers to finance as much as an additional $35,000 into their mortgage to improve or upgrade a home before they move in. The loan is generally used to update or improve a house or condominium needing essential repairs, such as new wiring or plumbing, weatherization, lead-based paint stabilization or abatement, roof replacement, kitchen and bath renovation or space reconfiguring, or interior upfits.

Other renovation programs like the Fannie Mae HomeStyle® Renovation Mortgage offer higher loan limits for more extensive projects. The HomeStyle Renovation Mortgage allows borrowers to finance improvements of up to 50% of the as-completed value of the home with a first mortgage, while offering lower rates than second mortgages, home equity lines, or credit card debt. Another plus is that this loan allows homeowners to finance “luxury” items, such as swimming pools, major additions, sun rooms and outdoor living spaces.

“Renovation loans are great tools for homeowners and important for community revitalization,” Snypes said. “Investing in a home contributes to the financial well-being of a community, because the homeowners are preventing older homes from deteriorating and falling out of the housing stock.”

When you are working with a qualified contractor such as Palmer Custom Builders, these loans also can help turn a diamond in the rough into the sparkling heart of your family’s home life.

What’s it Worth?

What's your home worth?Whether you are looking to buy a new home, sell your existing residence, or renovate the home you already own, the first and most important question on your mind is likely to be: What’s it worth?

As consumers, we place a high level of trust in the professionals who assign a value to our homes. Early in May 2009, the U.S. Federal Home Loan Mortgage Corporation (Freddie Mac) and the Federal National Mortgage Association (Fannie Mae) adopted new guidelines to assist in accurately and independently determining the value of homes. Enacted in the aftermath of the housing crisis, the Home Valuation Code of Conduct (reprinted at the bottom of this article) was designed, in essence, to prevent lenders or other third parties from unduly influencing the results of the appraisal process.

As is true when you are doing anything new, accurately interpreting the intent of the change and then following the correct procedure to implement it can be a bumpy process.  Some lending companies have incorrectly interpreted the code to mean that they must use the services of appraisal management companies. This can be problematic if their employees are not familiar with local market conditions, or worse yet, are not even based in this state. To help combat home valuation problems that some buyers, sellers, and real estate agents have run up against, the North Carolina Real Estate Commission recently sent this letter to the Federal Housing Finance Agency.  The text of the letter (reprinted below this article) was reprinted in the October 2009 "Carolina Real Estate Commission Real Estate Bulletin."

Before an appraiser determines the value of your home, ask about the four main issues broken out in this letter to achieve the most accurate results: Does the appraiser work for an appraisal management company? If so, is it owned by, controlled by or affiliated with your lender? Is the appraiser state licensed, and will he conform to accepted practices? Is the appraiser familiar with the market, and does he have access to current market data? Asking these few simple questions can have a major impact on one of the most critical aspects of buying, selling or renovating your home.

Home Valuation Code of Conduct

Editor's Note: The recently implemented Home Valuation Code of Conduct is intended to enhance the independence and accuracy of the home appraisal process and provide added protections for homebuyers, mortgage investors and the housing market. In response to complaints from real estate consumers and brokers regarding the Code, the Real Estate Commission has announced its support for legislation requiring appraisal management companies operating in North Carolina to be regulated by the North Carolina Appraisal Board, and it directed that the following letter be sent to the Federal Housing Finance Agency.

September 23, 2009

The Federal Housing Finance Agency

1700 G Street, NW 4th Floor

Washington, DC 20552

Dear Sir or Madam:

To assist your agency in monitoring and evaluating the effectiveness of the Home Valuation Code of Conduct implemented May 1 by the U.S. Federal Home Loan Mortgage Corporation (Freddie Mac) and the Federal National Mortgage Association (Fannie Mae), the North Carolina Real Estate Commission has directed me to share with you its observations and experiences with regard to the Code and to respectfully offer its suggestions for improvement. The Real Estate Commission is a governmental agency charged with protecting the interests of real estate consumers in our State. The Commission recognizes and appreciates your efforts through the Code to address some of the more egregious abuses visited upon the public by the unscrupulous acts of certain mortgage lenders. However, like your agency, we have found when adopting rules and implementing new legislation, some innocent misunderstandings and intentional attempts to exploit ambiguities in them are perhaps unavoidable.

With regard to the Code, prospective homebuyers have complained to us that lenders assert that under "new rules" the lenders must order appraisals through appraisal management companies. We have also received complaints from buyers, sellers and real estate agents that appraisers assigned by such companies to perform the appraisals are not familiar with or sufficiently informed about the real estate market where the property is located to make accurate appraisals. We are, in fact, aware of cases where appraisers have traveled from other states and of cases where appraisers attempted to perform appraisals without consulting MLS sales data. Further, despite the apparent intent of the Code to distance lenders from the appraisal process, we have learned that some lenders own or have an ownership interest in the appraisal management companies they use.

Although the Real Estate Commission does not at this time support a proposed moratorium on the continued implementation of the Code and we are aware that bulletins and other supplemental information about the Code have been published, it recommends for your agency's consideration that the Home Valuation Code of Conduct itself be amended to:

  1. Clarify that lenders need not engage appraisal management companies;
  2. Prohibit lenders from engaging appraisal management companies which are owned, controlled by, or affiliated with the lender;
  3. Expressly require lenders to engage, whether directly or indirectly, appraisers who are state-licensed and that the appraisals performed by such appraisers conform to the minimum requirements of state laws and rules and the Uniform Standards of Professional Appraisal Practice; and
  4. Expressly require appraisers who are engaged to perform appraisals to be familiar with the market where the property is located and to have access to and use the best available data for that market in performing the appraisal.

We hope our suggestions are received in the helpful spirit in which they are intended and that you will you not hesitate to contact our office if we can be of any assistance to your agency with this or any related matter.

Sincerely yours,

North Carolina Real Estate Commission

Reprinted from: Real Estate Bulletin October 2009

The Perfect Fit

The Perfect FitDo you have a good friend whom you don’t see very often, yet every time you get to talk, it’s as if you’ve never been apart? That intangible connection and natural flow of communication between two individuals is key to a long-lasting friendship, but you might not have realized just how important chemistry can be when it comes to selecting a contractor for your renovation project.

After all, you’ll be seeing your contractor on an almost daily basis, and he will be your voice in communicating your vision to all of the individuals who will work on your project. So ensuring that you and he are able to communicate well and comfortably from your very first meeting is essential.

Yet selecting a contractor goes far beyond picking someone with a compatible personality. Of course, there are the basics. The National Association of the Remodeling Industry recommends a number of areas you should consider: First, employ a contractor with an established area business specializing in your type of project. Check their references to ensure that past clients are satisfied with their service. Call the Better Business Bureau to make sure there isn’t an adverse file on record for the company. Ask to see a copy of the contractor’s certification of insurance or for the name of his insurance agency to verify critical coverage, such as worker’s compensation, property damage and personal liability insurance. Next, check your state licensing board to ensure that the contractor has the proper license. In North Carolina, a licensed residential General Contractor sits for a very extensive and intensive exam. The state also offers three types of licenses: A Limited License allows a contractor to work on projects of up to $500,000; an Intermediate License allows them to tackle projects of up to $1 million; and an Unlimited License – which Palmer Custom Builders possesses – is not restricted to any dollar value. The distinction is also important because they each have different minimum working capital requirements – $17,000 for Limited, $75,000 for Intermediate and $150,000 for Unlimited. A higher license ensures a greater depth of financial resources and may also be an indicator of diversity of skills and experience.

Experience is critical. Being a professional contractor entails far more than hanging a sign on a truck, it requires a great deal of education (and continuing education) combined with varied hands-on experience. There’s simply no substitute for having worked in the field for a number of years and having dealt with the challenges that are certain to “pop up.” Your contractor’s experience will allow him to implement creative solutions and will give you a comfort level that he has successfully “been there and done that” in the past.

Beyond that, it’s essential that the contractor you select runs a solid, stable business. The financial side is obvious – if it’s not a stable company, it might not be around to complete your project and it definitely won’t be there in a few years to stand behind its work. What you may not realize is that much of the critical planning, ordering and scheduling work in a project goes on back at the office and is dependent on the contractor’s ability to organize and run things smoothly from a business perspective. A professional approach is essential to handling the strategic coordination involved in ordering quality materials and scheduling the right trade professionals to ensure a timely result.

A good dose of common sense is equally important. For example, once on a time-critical project, we decided to postpone work for a day because of a predicted torrential downpour. While we could have done interior work that day, we knew that all the trades people walking in and out would have created a monumental mess that would have stressed the homeowner and which we would have lost even more hours cleaning up. Therefore, a short delay actually saved time and stress. Because the homeowner trusted our judgment, she didn’t agonize over the short delay, and we ultimately finished on time.

In the end, once you establish the credibility of the contractor, it’s simply a matter of finding that perfect fit. “I was referred to Palmer Custom Builders initially by our Realtor,” relates Kimber Morgan, who along with her husband Trey hired the firm to complete an extensive kitchen and master bath renovation and create an addition. “We did some further investigation, looking at their website and other sources of information. Ultimately, we thought they were very thorough and brought a lot of ideas to the table. They were a very professional firm and brought a lot of competence. We immediately felt like these people knew what they were doing,” she says. The results of that ideal fit will then speak for themselves.