A home renovation is one of the riskiest financial ventures that most people will get involved in and there is a lot of potential for things to go wrong. When things go right during a renovation you will beautify and modernise your home in a cost efficient way, but when things go wrong it can cost you an unbelievable amount of money, time, stress and headaches.
So what are the most common nightmares that occur when homeowners undergo a large renovation project? Here are some examples of home renovation headaches and what you can learn from them:
Hiring Cheap Non-Professionals
Sometimes a home owner, in an attempt to save money on their renovation, will hire a non-professional who offers to do the work at a cheaper price. However, cutting corners in this way doesn’t usually work out in the long run. Think about it – the contractor can probably charge a cheap rate because they have unlicensed or inept workers or because they are scrimping on their materials. Too often, these non-professionals will short change the client by delivering poorly executed and incomplete work. You might save money new, but it will cause you big problems in the future.
Usually, they will not have set out a written contract, so the home owner can’t really do anything about it. The lesson learned? Always hire a professional and complete a written contract.
When Sub-Contractors Let You Down
In some cases, when you hire a contractor they will hire sub-contractors to do some of the work. However, when the sub-contractor provides you with shoddy workmanship, the contractor will fail to hold them accountable. This means that you will be stuck with dealing with the problem and the extra cost of fixing the problem. Before you hire a contractor who will be sub-contracting the work out – clarify what happens if the sub-contractor’s work isn’t up to standard.
Misjudging Your Renovation Costs
One of the most common nightmares that happens during a home renovation is when your costs start to slowly creep up well beyond your original budget. Perhaps when you rip away the walls, you start to notice that your home needs all new wiring or that you need to reinforce the structure of the walls – a cost that you never anticipated.
Remember, there is always a chance that these renovation problems will manifest when you start working on your home – so you should expect from the beginning that your original budget won’t be enough. Always add at least 10-20% percent extra for unexpected surprises.
Reducing Your Home Equity too Much when Refinancing
Many home owners decide that their best option is to take out a home equity loan on their mortgage in order to fund the renovation. (visit NPBS to learn more about this option). While this can be a smart financial move, it’s important to do it properly.
Before the real estate bubble burst some home owners were refinancing their home based on property values that were overinflated and didn’t last. This meant that they took all the value away from their home when they refinanced then found that the investment didn’t pay back when they tried to sell later when property values were down. If you are planning to use your home equity to fund your renovations, make sure that you work with the professionals and do it the right way.
These are just a few examples of how home renovations can go very wrong and cause a lot of stress and turmoil – so try to refrain from making the same mistakes when you are fixing up your home.
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Category: Personal Finance