What to ask before you remodel

Kiplinger's Personal Finance Magazine, March, 1998 by Elizabeth Razzi

Seven months before Jo and Jeff McClain began remodeling their kitchen, Jo began doing research. She went to a half-dozen home shows and decorator show houses. She leafed through "about a million" books and magazines. And the Spring, Tex., nurse says she got "up close and personal with every tile store between Galveston and Dallas."

You should do no less. The more homework you do before talking to a contractor or designer about a remodeling project, the greater the odds that you'll pull off the job under budget, on time and, most important, as you've visualized. But before you start your research in earnest, ask yourself these questions:

* Will the project pay off? You'll get back most of the money you spend on the most popular remodeling jobs. If you sell within a year of the job, you can expect to recoup 92% of the cost of adding a second bathroom, 90% of the cost of a major kitchen remodeling and 86% of the cost of a family-room addition, according to Remodeling magazine. Yet in every case, you're spending more than you'll get back -- which means a remodeling job is usually worthwhile only if you stick around to enjoy it.

You're safest taking care of a flaw that would turn off buyers, such as adding another bathroom to a house that has only one. That could make the home easier to sell at a decent price. But you could be at risk for not recovering the expense if your home is already near the top of the neighborhood's price list.

The McClains talked to some real estate agents familiar with their subdivision to see if their remodeling project would make their house a neighborhood white elephant. "We asked them whether it was better to remodel or move," says Jo. "Both of them said `remodel.' It's a desirable area, and houses are appreciating." To see where your home fits in, you can check out current listings of nearby homes for sale on the Internet at www.realtor.com. Or you could research recent sales by calling the United Homeowners Association's Home Price Line (800-842-6644). Sales prices are logged by address and zip code for 50 metro areas. A five-minute call costs $5.95 and is charged to your credit card.

* How will you pay for it? Most people finance a remodeling project with either a home-equity loan or with a cash-out refinancing of their first mortgage. Home-equity loans, which give you all the money at once, carry a fixed rate of 9.4% for five years, on average. In most places, the best home-equity fines of credit are being offered at prime rate, which was recently 8.5%.

* Will you have zoning problems? Most communities require you to keep your building a certain distance from the property fine. Any exceptions will require permission from the local planning commission -- and that can take weeks. Getting approvals is one of the services an architect will perform. You may be responsible for getting a zoning variance, however, if a contractor is handling your design. Always ask the contractor to get your building permits, however, so the contractor goes on record as being responsible for complying with local building codes. You may also need to have your remodeling plans okayed by your homeowners association.

* Do you know the looks you want? Start your research at least six months ahead of the planned construction date. Shop the home shows, designer showrooms and even model homes in new developments to get ideas about materials and trends. The high-design magazines, such as Metropolitan Home and House & Garden, offer ideas that can be translated to lower-budget projects, if you wish.

Jo McClain visited several decorator show houses. "They were all the big, whoop-de-do houses, and I just checked out what they were putting in their kitchen," she says. Jo and her husband, Jeff, now have cabinets finished with a whitewashed oak and a center island topped with charcoal-and-rust-colored granite.

Keep a notebook, as Jo did, with literature about (and pictures of) products you like. When you ask contractors for bids, you'll be able to make better comparisons if each bid specifies the brand names of appliances and even the types of paint and lighting fixtures. Get to know the prices of products, even if your contractor will do the buying. (Contractors often receive discounts of up to 20%, and you should make sure that at least some of the savings are passed on to you.)

* Have you checked out the contractor? The McClains found their contractor at one of the home shows. Jo says one reason they chose him was that he's a member of NARI, the National Association of the Remodeling Industry, and remodelers must have at least five years of experience and pass a daylong exam to earn NARI's certification. Also, "the fly-by-nights don't want to pay the dues," Jo says. Call 800-440-6274 for a free copy of NARI's guidebook, The Master Plan for Professional Home Remodeling, and for referrals to NARI members in your area, or check the Internet at www.nari.org.

Any major remodeling needs someone to think through the design. If you're not hiring a design-build contractor, your first step should be to hire a kitchen or bath designer or an architect to come up with plans that you can present to a contractor.