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People often wonder whether or not it makes sense to hire a general contractor (GC) for their home remodeling or 203k project. It really depends on the nature of your project, your construction knowledge and the free time you have available. But first, let's talk about cost.

As with any service, there is a cost to hiring a general contractor; they have to pay their staffs and make a profit for the company. However, unlike some other service providers where the fee is explicit -- like doctors or hair stylists -- a general contractor's management fee is often buried in the price of the project. For this reason, people sometimes think of GCs like retail stores, which buy a product and resell it at a profit. That's really not the case. A general contractor is a service company, providing construction expertise, planning, management, problem solving, advice and service. If you have the time and expertise to do that job well, then maybe you can manage your project on your own. But, be honest with yourself about the commitment required. Managing a large construction project takes time, expertise and attention.

For the right kind of project, a good GC should save you money in the end, because it will get the work done much more quickly than you could, with fewer mistakes and rework. And, when problems come up during the project, it can work with you to value engineer the most cost-effective solution. Plus, the general contractor should manage the subs to ensure you get a quality product -- saving you money in problems and maintenance down the road.

The larger and more complex your project is, the more likely you are to benefit from a GC. It's easy to understand the extremes. For example, if you are just having your bathroom painted, you don't need a GC. If you are building a custom home, you probably do. It's the projects in the middle where the decision gets more complex. In deciding whether you need a GC for your project, ask yourself the following questions:

• How many trades are involved? Multiple trades (e.g. electrician, framer, drywall, carpenter, painter) require planning and coordination. A well-run project follows a particular schedule. One task closely follows another, and in most cases, cannot proceed if a required decision remains unmade for any item in the chain. The more subs your project needs, the more likely you are to benefit from a GC. Most people need help if their project requires four or more trades.
• Do I know how to access reliable subcontractors? Remodeling projects rely on good subs that will prioritize your project above others. GC's have these relationships and can exert their buying power over their trusted subcontractors to get them do what they want when they want. If you also have these kinds of relationships -- or know people who do -- then you are better positioned to manage your own project.
• Do I understand the process? If you know how your project is supposed to proceed -- from beginning to end -- then you are better suited to run it. If you don't know which trades come first and how they interact with one another, it's best to hire a GC.
• What are the permit requirements? Permitting laws vary from jurisdiction to jurisdiction. However, one constant is that permitted work is harder to manage than non permitted work. In most places, you can replace the finishes in your home without a permit. However, once you include mechanical and structural work in your project, the permit office usually is involved. If your work requires permits, consider a GC.
• Do I know enough about the work being done to understand if I am getting a good product? Trades are like everyone else. They have good days and bad days. They fight with their girlfriends and get locked out of their cars. On good days, they may work hard and do a great job. On bad days, they may rush through the work just to get done. If you know enough to recognize the difference and make them correct their shortcomings, then you can manage your own project. If you have to rely on the subs themselves to tell you if the work was done right, then you probably need a GC.
• Do I have the time? Don't kid yourself. Managing a remodeling project takes work every day that it is going on. Subs need to be coordinated, materials assembled, inspectors met and on and on. If your job affords you the flexibility to be on the job site as needed during the day, during the week, then you might be able to manage your own project. If you can't be there to oversee the work, bad things that will cost you extra time and money will happen in your absence.

Of all the questions in the list, the last one is the most critical. You can talk to friends to find great subs, get needed advice from experts, and even hire an inspector to make sure the trades are doing quality work, but you can't be in two places at once-- no matter how hard you try. If you can't commit the time, and you can't be on site when work is being done (typically 7-4, Monday to Friday), then you can't competently manage your own project.

In our next post, we'll talk specifically about the work that a GC does -- all of the tasks that are required for a home remodeling project to proceed smoothly.

In the last post of this series, we talked about Setting Realistic Expectations for Your Home Remodeling Project. Today, we're going to discuss discovery items. These are the issues that are often unknown before a project starts. When they are discovered, they create additional costs and usually extend the project schedule. However, there are ways to anticipate many of these issues and to plan for them, so they do not become unpleasant surprises. The following are the most common discovery issues you are likely to encounter for your home remodeling, addition or 203k project -- and what you can do up front to avoid being surprised.

Zoning - Local zoning codes determine what you can build on your property and how the space can be used. If you are planning an addition, the code will determine how high you can go, how close you can get to your neighbors, how much of the lot can be covered by buildings and/or how much living space is allowed. Additionally, your property is likely already classified for a particular "use," such as a single family home or a multifamily building. If your plans conflict with the code, you could have a problem. Often, people learn during the permitting process that a building's current "use" is different than what's on the books. For example, we had a client with a single family home that was actually zoned as a boarding house. In order for us to be able to pull permits for the new work, they had to have the zoning adjusted back to a one-unit use, which took time and money. Some zoning problems can be fixed by going through a process, others require a hearing and a ruling; others cannot be fixed at all. What You Can Do: Know where you stand before you start. Using either the Internet (many records are online) or by going down to your local planning and zoning office, make sure you know exactly what the current zoning and use are for your property. Also, make sure you understand the limitations imposed by the current zoning to be sure that your plans are in line with what can be built legally.

Structural Problems -Structural failures in a property can be expensive to address AND they can ripple through a property and cause problems with mechanical systems and finishes. A qualified contractor will see evidence of certain structural issues just by looking at a property. For example, if "lines" that are supposed to be straight and level are not, you may have structural issues. Or, if floors "give" way too much, this suggests that they may not be properly supported. Other structural issues are not so obvious, and can't be detected before demolition is completed and walls are exposed. What You Can Do: Keep your eyes open and look around windows and doors to see if they have problems opening and closing. Look at foundations, brick and interior walls for signs of cracking -- or cracks that have been filled. Ask your contractor if he sees any signs that there might be structural problems with the property. And, if you are concerned about the structure, engage a licensed structural engineer to come assess the property before you embark on a renovation project

Utility Issues - If you live in or are purchasing an older home, utilities may be a problem. Your existing sewer or water lines may be damaged or inadequate to handle to the additional requirements of your renovation. Your electric service may be out of date and undersized. As with all construction requirements, it's best to know what you're getting into up front, though damaged utilities (such as a cracked water line) are some of the hardest to anticipate. What You Can Do: Look at utility bills (if available) to determine if they indicate unusual usage. Check with the utility companies to see if they had any reports of damage or problems with prior owners. Have your contractor or mechanical subcontractor evaluate the utility needs of the proposed project and compare them with the service currently available at the property.

Environmental Issues - Some projects run into environmental problems that must be remediated. The most common ones are mold, asbestos, lead and wood-boring insects. In each case, there are additional costs to clean up the problem, and then often additional construction costs for repairs. What You Can Do: You can test for mold and lead before a project starts. Hire an environmental remediation company to come in and assess the condition of your property to minimize surprises. A qualified exterminator (and sometimes your contractor -- depending on how obvious damage is) can assess your home's exposure to wood-boring insects. Asbestos is sometimes right in plain sight in the form of tiles or other materials; other times, it is hidden as wall or pipe insulation. Get qualified professionals to look at your property.

Underground Issues - When you dig, you can run into different kinds of unexpected problems. Most pricing for underground work is based on a set of assumptions as to what will be found. However, rocks, stones, geotechnical problems and soil voids can dramatically affect costs. Sometimes, soil conditions can make additional construction very expensive -- especially if soil cannot bear weight as expected. What You Can Do: Conduct a geotechnical survey. Geotechnical engineers will do soil borings to assess soil structure, how it is composited and how well it can bear weight. If excavation is a large part of your project, this upfront investment can save you a great deal of aggravation down the road.

Unexpected Code Requirements: Often, crossing a certain threshold for amount of work completed on a property triggers requirements that the entire property be "brought to code." This means that even areas of your property on which you are not doing work must be updated to meet current standards (such as electrical). In extreme cases, you may need to add whole new systems, such as sprinklers. The worst situation is when you are forced to do additional work because of discovery issues and then this additional work triggers still more work to meet additional code requirements. What You Can Do: Pick qualified contractors familiar with your local jurisdiction AND do your homework. If experienced, your contractor should know what kinds of changes will trigger code upgrades and can help steer you around these obstacles. Your local permit office can also be a resource. Workers there can help you understand where you may run into code compliance issues.

In the first post of this series, we explored the Top Ten Problems Homeowners Face in Remodeling Projects. But, a list of problems is not very helpful without some solutions, so we'll start tackling those now.

Set Realistic Expectations for Your Home Remodeling or 203k Project

The first and best way to avoid problems in your remodeling project is to set realistic expectations for yourself and your project. We believe that "eyes wide open" is the best policy for everyone. For this reason, here at New City Construction, we start off every new renovation project with a client meeting to set expectations. Remember that when you undertake a whole-house renovation, a 203k project, a room addition or a finished basement, your goal is the outcome -- a brand new living space that your whole family can enjoy. But, even the smoothest remodeling project is no party for the homeowner. It's best for everyone if you are honest with yourself about that up front. There are ways, though, that you can make the whole process better.

Top 9 Tips for a Better Home Remodeling or 203k Project

9. Move Out (or Don't Move In). If there is ANY way that you can avoid living in the property while it is under renovation, do it. Not only will you avoid an enormous amount of the frustration typically associated with home remodeling, you will also save time and money. When a property is occupied, your contractor must install temporary protection so that your part of the house remains livable. Also, there are additional labor costs for putting the site back together at the end of the work day. It is cheaper, faster and easier to be somewhere else -- if you can.

8. Make Your Selections Early. Materials arriving late can be one of the most significant delays in completing a project. Ask your contractor for a list of the finish materials you will need for the project (e.g. plumbing fixtures, cabinets, counters, lighting fixtures, doors, hardwood, tile, carpet, appliances and hardware) and start shopping as soon as possible.

7. Align Your Expectations with Your Budget. A remodeling project is like a trip to the grocery store; if you go in with more money, you can walk out with more "stuff." However, homeowners often want to put more "stuff" (or nicer stuff) in their cart then they can afford. If you have to remove items from your project scope in order to make it work with your budget, recognize that the end project will be different than you had hoped. So, if granite counters and new stainless appliances have to become laminate tops and existing appliances in order to accommodate the cost of your new septic line, you need to accept that the finished project will be different than anticipated, and adjust your expectations accordingly.

6. Pay Attention to Your Chemistry With Your Contractor. You will have a relationship with your contractor. Like all relationships, it will have its ups and downs. When you meet potential contractors, pay attention to the chemistry you have with them and how well your styles work together. Imagine that you are in a heated disagreement with this person and try to anticipate how it would go. You need to pick someone that you trust, that is capable and with whom you can get along through both the good and the challenging parts of your project.

5. Get a Written Schedule, and Then Expect the Project to Take 25-50% Longer. Ask your contractor for a written schedule, so you understand the phases of the project and what tasks should happen when. The schedule will also help you understand how much time you have to make selections and get finish materials delivered. Keep in mind that schedules are typically built on what contractors know, control and can reasonably estimate. While there may be some slack built in, most schedules do not anticipate delays that come from permits, inspectors, materials unavailability and other "uncontrollable" factors. For this reason, assume that your project will take 25-50% longer than shown on the schedule.

4. Check Contractor Referrals Thoroughly. The contractor you select will the biggest factor that drives how well your project goes. Demand several referrals and call them. Don't just ask them if they were satisfied in the end. Ask them detailed questions about their project, what went wrong along the way, how the contractor handled it and where the weaknesses were. Just because this homeowner would recommend the contractor doesn't mean that they don't have valuable information to share about what you can expect and what to avoid.

3. Make Regular Site Visits. You need to know what is happening on your job site, but going every day will drive you and the contractor crazy. Plan to visit the job site no more than once a week and no less than once every two weeks. This will ensure that you can spot any problems with enough time to correct them, and will allow for enough progress between visits to make the trip worthwhile.

2. Plan to Spend at Least 10% Extra. Renovation projects are filled with uncertainties and discoveries (which we'll discuss more in an upcoming post). For a large project, you should maintain at least a 10% contingency fund -- either in your loan or in your pocket. For smaller projects (those $25K and under), you should have at least an extra $5,000 available for items that come up during the project. If your budget is very tight to begin with, you will end up making tradeoffs during the job in order to accommodate the unexpected scope that's required for code issues, health and safety. Plus, you may decide along the way that you want to add items you didn't anticipate at the beginning of the process.

1. Get a Very Detailed Scope of Work. Your construction scope IS your project. If the work is not on the list the contractor provides, it will not be included on the job. Either it won't get done, or you will get a change order later. MAKE SURE you get a very detailed, clearly-written scope that identifies all work to be done and the material allowances provided. DO NOT RELY ON ANY CONVERSATIONS ALONE.

NEXT: We'll talk about the most common kinds of project discoveries, and what to do to handle the ones that do occur.

203Ks, Home Additions, Finished Basements and Whole-House Renovations

Undertaking a remodeling project -- especially a large one -- can be overwhelming. For most people, it's a new experience, it's one of the biggest purchases they'll ever make, and they find themselves dependent on people who know far more about the process than they do. This can be very uncomfortable.

The idea of this blog series is to give you the "inside track" on home-remodeling projects, so you have the information you need to make yours a success. It doesn't matter whether you are interested in a room addition, a whole-house renovation, a finished basement or a new kitchen and bath. It also doesn't matter whether you are paying for the project with cash, or financing it with a 203k, conventional or other renovation loan. This series will help you understand what to expect, what to avoid, how the process works, and what kind of contractor will best fit your needs.

With a nod to David Letterman, let's start things off with the Top 10 Problems Homeowners Face in Remodeling Projects.

10. Living in Chaos - If you are planning on living at your home while work is being completed, plan for chaos. Construction is messy and noisy and will completely disrupt your life while it is going on. Most construction trades like to start early in the morning, so you will have workmen in your home joining you for your morning coffee. At times during construction, you will probably have to live without certain utilities for a short while, and there may even be periods during which it makes sense to relocate to a local hotel.

9. Becoming Overwhelmed by the Process - Whether or not you hire someone else to manage your work, you'll probably find that your home improvement project takes more of your time than you expect. And, the demands on your time are often urgent, because delays on your part will ripple into project delays. Sometimes, all these decisions can paralyze homeowners -- especially those that don't enjoy decision-making -- and can bring a project to a complete halt.

8. Inability to Visualize the Finished Work - Many homeowners have a hard time visualizing what their project will look like when it is completed. While you may get to see a floor plan of the finished work and samples of the materials to be used as finishes, this is not always enough. Homeowners sometimes find themselves disappointed at the end of a project when the reality doesn't match up to the vision they had in their minds.

7. Unrealistic Expectations of Work - Some homeowners don't understand that the work specifically identified in their construction contract (the scope) is the limit of the work that their contractor is planning to deliver. They look at the document as a starting point and think that they can make changes as they go along just because the construction company has workers and materials on site. In fact, changes during the construction process are more expensive than work contracted in advance, since these changes often require delays, expedited fees for materials, more coordination time from the contractor and inconvenience.

6. Third Party Control - You and your contractor do not control the entire remodeling process. During the project, you will have to deal with a number of players that don't necessarily share your sense of urgency. Unless your project is very small, it will require building permits -- which will be issued by local authorities on their own schedule. Compliance with local building codes is overseen by building inspectors, who have liberal control of the process - including when they visit your site and what they approve. Often, local utility companies must participate in your project as well, and as powerful monopolies, they set the rules for how you have to work with them.

5. Contractor Cashflow - In order to keep work moving on your project, materials must be ordered and subcontractors paid regularly. If your contractor does not have enough working capital (through your payments, its own lines of credit and its own funds), then work can move slowly or stop. Because timing of draw payments is impacted by many factors beyond the contractor's control -- inspections, bank processing and lead-times on materials -- even well-run companies can run into cash flow issues from time to time.

4. Discoveries - Issues often come up during the construction process that neither the homeowner nor the contractor expected. These can include structural defects in the building, inadequacy of existing utilities or environmental problems, such as mold, lead, asbestos or termites. These all add unplanned costs and time. Discoveries can really derail a project if the contingency in the budget or the schedule is too small to address the problems identified (see Insufficient Budget and Project Delays).

3. Project Delays - Project delays seem inevitable in home remodeling jobs, and it's not ALWAYS the contractor's fault. Part of the problem is that unlike the construction of a new home -- which is fairly predictable -- renovations require work to existing buildings that have problems which cannot be seen until walls and floors are opened (see Discoveries). Then, solutions have to be developed on site to handle these challenges. You should expect changes to whatever schedule is established up front.

2. Insufficient Budget - Sometimes, homeowners don't have enough money available to do all the work that really NEEDS to be done for a project. So, critical items must be cut from the scope in order to get the project to fit the budget. Since most projects grow in scope as they go along, starting out with little or no cushion creates problems down the line. What happens when a cracked sewer line is discovered? What happens when a beam is needed to stabilize the building?

1. Unqualified Contractors - You are trusting your contractors to be your construction experts. What if they're not? Especially in these tough economic times, many contractors are accepting any kind of work they can find -- even if they are not very good at it. Using an unqualified contractor for your project can result in project delays, cost overruns and shoddy workmanship. Worse still, an unqualified contract may ultimately walk off your job completely, leaving you with work half-done and bills unpaid. Choosing an unqualified contractor is the #1 problem homeowners face when taking on a home remodeling project.

NEXT: In the posts that follow, we'll explain exactly what you can do to avoid as many of these problems as possible, and what to do to handle the ones that do occur.