What to Look For in a Home Renovation Contract

  • By Jeremy Thompson
  • 02 Jun, 2016
A well written home renovation contract is thorough, and explains exactly what is to be done and how. The contract should also explain potential risks and issues and how they will be handled. Failure to read and understand the contract offers you as a homeowner no protection, but understanding your home renovation contract and making […] The post What to Look For in a Home Renovation Contract appeared first on J. Thompson Builders.

Scope of Work

The scope of work is a detailed outline of what the job entails. A renovation contract should include project descriptions along with the materials and quantities required, including product model, color, size and brand. And it’s helpful if the contract explains the timeline of when each part of the project should occur so you can ensure the workers are making the expected progress.

The Schedule

The renovation contract should set the estimated start and completion date. It’s not uncommon for delays to occur, some caused by the client or contractor, and some out of either’s control, but it’s important to have an end goal to strive towards and to try to get back on track whenever delays occur.

The Cost (i.e. the Bid) & Payment

The agreement should clearly state prices and be inclusive. Ask if there are any additional fees or costs not included in the contract such as clean-up fees or the cost for temporary power.
The agreement should outline the payment schedule for the contractor, subcontractors and suppliers, and it should include what payment methods are acceptable, and if installment payments are an option. The contract may also include late payment penalties; know what these are in advance.

Contractor Responsibilities

The contract should clearly state what the contractor will and won’t do, including site clean-up and hauling trash. It’s important to understand who will be responsbile for the site clean-up work. As well it should clearly state who is selecting materials if some materials are to be chosen later and are not included in the original scope of work.

Allowances

A renovation contract includes an estimate of the cost of materials. But because all costs can’t be completely accurately accounted for during the bidding process, the allowance acts as the budget for particular items, such as the kitchen cabinets. A contractor, through the contract, is allotted a certain budget in choosing such items so that the costs are still accounted for even through the total cost is not yet completely decided.

Agreement Changes

Renovation contracts should include a process for the contractor to follow if there are changes to the scope of work. A detailed contract should prevent a large amount of changes, but expect a few changes. Because changes are sometimes costly and time consuming, the agreement should clearly state how to handle such changes. (i.e. the homeowner must be notified and give consent first).

Warranties

The renovation contract should include information about any warranties which cover the material and work performed. It should include details of the names and contact information of who is covering the warranty, including contractors and manufacturers. The warranty period and any limitations should also be clearly explained.

Insurance

Because of the risks involved in construction, a renovation contract should contain information about insurance. If a contractor does not have adequate insurance, you may be held liable. Even if the contractor carries liability insurance (to cover harm caused by construction to non-workers and property), as well as worker’s compensation (to cover injury to workers), you may want to ensure you have builder’s risk or other renovation insurance to cover damage from fire, wind or theft.
Because a renovation contract, once accepted, becomes a legally binding contract, understand the terms and conditions completely before signing. This ensures both your and your contractor will face fewer issues during the renovation process.
Next Steps

J. Thompson Builders Blog

By 7052540976 15 Nov, 2017
Some of these considerations may not be in the forefront of your mind, but there is a long list of aspects you need to consider when building a new home. These should help to get you started thinking about some of the most important pieces of the home building process.
By 7052540976 15 Oct, 2017
This home is being built with our client’s specific wants and needs in mind. The homeowner
requested a single family home with a modern contemporary house design. Previously, he lived
in a townhome and desired a more private, spacious residence. A main floor living with a large
space to entertain and big volume ceilings were a must on the client’s list.

The client decided building as opposed to finding a pre-existing home was a better solution for
him because he wants something specific to his needs. He already had the perfect location in
mind and it was time for him to own his dream home.

The area is ideal for this client because it allows him to live in close proximity to his hobbies and
interests and it also allows him the ability to walk to nearby restaurants or bike to the
surrounding shops. This homeowner will be close to everything. He truly loves the location!
The design concept picked is pictured below. In sticking with a contemporary influence, the
design has clean, simple lines that will result in an extraordinary modern home. We combined
elements of residential and commercial materials and design to bring our client’s unique requests to life.
By 7052540976 15 Sep, 2017

You decide that you are ready to build a custom home for you and your family. Now it is time to figure out how to finance your dreams!

Let’s start with the basics. As with any loan process, do your research. Talk to several mortgage companies that specialize or have a strong understanding/history of working with construction loans. Ask questions and voice your concerns. Companies of course want your business, but they also want to make sure they are a good fit for you and what you are wanting to accomplish. Reviews and referrals are strongly regarded these days. They want to make sure you have the best experience possible.

There are several main differences between a construction loan and a regular existing home loan. An individual construction loan may require a longer credit history  or a higher credit score as well as more money down and along the way. It is more of a process, but it is most certainly worth it. With the right builder, the more involved process becomes a piece of cake; but, that is an article for another time.

Home loans can have a 30 year term whereas a construction loan typically has a max of 1 year. “The rates on this type of loan are higher than rates on permanent mortgage loans. To gain approval, the lender will need to see a construction timetable, detailed plans and a realistic budget, sometimes called the “story” behind the loan,” as reported by  bankrate . While your home is being built, it is typical to make interest-only payments. 

If you are thinking, “I don’t have enough money to pay off a newly built home in 1 year!” Don’t panic.

A popular option is the construction-to- permanent financing sometimes called “one-time close,” a “single close,” or an "all-in-one" loan. Upon completion of construction, the remaining loan balance is converted into a permanent mortgage with terms up to 30 years. Like most loans, “the rate and other terms of the permanent mortgage are set up-front when the entire loan package is closed” according to the  National Association of Home Builders .  Construction/permanent loans are offered by many different lenders, including banks and mortgage companies and are a great option for those of us wanting to finance their home purchase over an extended period of time.

Another option is a stand-alone construction loan. This type of loan can be beneficial if you currently own your home and want a smaller down payment option.   Read more about stand alone construction loans.

There are many different loan options. What makes sense for one person doesn’t make sense for everyone. Make sure you find the right product for you and your particular project. If you want to talk over some options, contact us! We would love to hear your ideas and figure out how we can build your dream home.

View our work , read our reviews on Houzz.com , and visit our Facebook page to get inspired!
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We’ve offered you lots of advice over the years about building a custom home. Here is a condensed version of some of the most important tips to follow. Get on the fast track to planning your new custom home! 7 Tips for Building a Custom Home Pay attention to your subdivision covenants. Yes, these are […] The post Building a Custom Home: 7 Quick Tips appeared first on J. Thompson Builders.
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By Jeremy Thompson 15 May, 2017
Building a new home is an exciting time, filled with anticipation and satisfaction as you watch your vision come to life. However, it can also be a little overwhelming when you’re unfamiliar with some of the technical terms. To help remedy this we’ve defined a few of the custom home building terms you may hear […] The post 5 Key Terms to Understand in Custom Home Building appeared first on J. Thompson Builders.
By Jeremy Thompson 01 May, 2017
Whether you’ve just unpacked your first box or you’ve been living in your house for years, chances are there’s something about your home you’ve desired improving. However, before beginning a project there are a few key home remodeling terms you should become familiar with. Understanding these terms will help you navigate conversations with your remodeling […] The post 6 Key Home Remodeling Terms to Understand Before Beginning a Project appeared first on J. Thompson Builders.
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