Lessons learned on the home renovation front

Scott - We are on the starting end of what you are doing...a two story addition to house a new kitchen and play room. We'll be retrofitting the old kitchen into a bathroom (the old kitchen was really small). Also adding a new deck. Architectural plans are being drafted as we speak. I think we also are on the same path with the contractor. We are using a contractor who did the attic conversion for us. He was quick, on budget and quality, so we are hoping that things stay the same for the bigger project.

As for financing, we are in a quandary. The local bank which holds our mortgage will refinance based on the appraised value of the house including the yet to be completed addition based on building permits. However, their rates are much higher than national banks (5.35). We haven't been able to get a commitment of such from a national bank yet, but their rates are in the 4's. We have the option to borrow from a family member to complete the addition and then refinance at the end, but we are weary that rates may have climbed up by then. We have enough equity to just refinance now and pay for most of the costs with just borrowing a bit from family. We could refinance again then if necessary. Any thoughts anyone? Scott, how did you finance your addition?

Are you willing to share an approximate per square foot on this project? Interested in getting a ball park figure as I might be doing a two story addition as well.

I've asked many times, but no one has ever explained to me why Mass. homebuyers are so clueless about home renovations compared to people in other parts of the country--which is especially strange considering the average age of the housing stock here.

Anecdote: Yesterday I was dragged to an open house. I went along chiefly out of curiosity, because it was a cute Tudor--my favorite house style--in a good neighborhood. I was astonished by the sheer blindness of the visitors, because I, a lookie-loo, was the only person actually poking into the state of the house.

For instance, I was the only one to ask who plows the street, which is a private road (the realtor pretended not to know the answer, which is "no one"). I was the only one to comment on the severe mold smell in the sun room, indicating unknown water problems. When visitors to the basement remarked that it didn't smell musty at all, I was the only one who pointed out that was because the garage door was open to the outside. With all that fresh air, you couldn't have smelled a corpse down there. I overhead someone smugly remark how easily the cabinets could be painted to "update" them; but I was the only one to open the cabinet doors and drawers, and see they were completely falling apart. (Sure, you can re-glue cabinets, but a DIY-er with such skills is not likely to be the same person who isn't alert enough even to open the cabinets in the first place.) Some folks wanted to convert the attic to a master suite; nobody else noticed the plumbing stacks were in the wrong place, or that a reno would require a dormer that would destroy the look of the house (remember, it's a Tudor).

Heck, a couple of people were visibly surprised when I pointed out the house only had 2.5 bedrooms. Couldn't they see for themselves?

In short, the house needed a good $100K in reno. Where were people going to get that money? The magic wayback machine that would take them to a Countrywide office in 2005?

The funny thing is, I have never been much of a handyman compared to friends and relatives who live elsewhere. I really don't know that much. But here, I feel like Norm Abrams.

I really want to know why.

Marcus

How do you know for sure it would take $100,000 to renovate? I hear lookie-loos throw out figures all the time and I wonder what the heck they are based upon.
I believe that most people have no idea what renovations will really cost. When I have a listing that needs repairs, I suggest to interested parties that they get a real estimate from a professional instead of guessing how much it will cost.

Marcus,

Usually, an open house is a first look to see if the house appeals at all. People look a lot closer at things in the 2nd viewing.

Are people in other parts of the country really that more knowledgeable about renovations?

Marcus makes an excellent point. The buyer behavior he witnessed is symbolic of this whole mess. Leverage yourself up as much as possible on an illiquid, overhead intensive, "asset" without having the first clue about repairs and maintenance (this ignorance probably extends to financing as well). As a nation it really is sad how we have allowed ourselves to be "dumbed down" so much. We want everything now without working for it, gains without risk, all our kids are "above average," and god forbid things go wrong, then the government should bail me out...

Not really paid attention to how knowledgable people elsewhere are, but I certainly agree most are clueless around here.

Not many Tudors in metro Boston. Where was it, Newton? I'm a fan of the style myself.

How did we get so far off topic, as usual? We are talking about home renovations and the next thing I read we're talking about "above average" kids and a "dumbed down" nation. I'll agree with the sentiment in this one area...the most crucial place to look in a house when looking is the basement...furnace, electrical box, water, rotten beams, oil tank, etc. I am amazed at how many people skip the basement. Then again, for most people, looking at a furnace is not valuable. Most people, rightfully so I might add, don't even know how it works. They shouldn't, unless they are engineers. They hire people to maintain them and then focus on their chosen profession.

For what it is worth, our cabinets were painted and looked excellent. Of course, painted cabinets are not that exciting, but they enabled us to be pretty happy with the kitchen for a while. And it was free in the end. We'd contracted the painter for a fixed fee to paint the house sans the cabinets. Then, he suggested painting them and also suggested switching to an hourly rate incase they were easy or hard. In the end, the total cost (hourly) was less than the original quoted flat rate. It has happened several times that going with an hourly rate has saved us money, but I am sure we will get burned some day.

So, any thoughts about renovations. Anyone had major renovations done?

I agree with Sally. On my first look at a house, I'm not looking at all the details about who plows what. I'm looking at the neighborhood, the general location, the basic layout and floor plan. You won't find me poking into kitchen cabinets when I already know from a quick glance that a place isn't going to meet my needs.

In fact, since I have usually several houses to see, we do a quick walk-through and revisit properties later to ask some of those questions that Marcus mentioned. And no, I don't consider myself an expert on home repairs or renovations, but I would return with a qualified contractor to give me a REAL assessment of what needs to be done and how much it will cost.

Condores, offers at that open house were "due" last night. Attendees were falling over themselves to humbly beg the privilege. So, nobody was returning with a contractor--which, I agree, is the right thing to do before moving forward unless you have a ton of personal experience doing the work yourself.

I don' t think "dumbing down" is off-topic at all. Recently economists have been talking about the de-skilling of America on multiple levels, including the ability to care for one's family during a Depression. I am not only the only person I know who darns socks, I am the only person my age who even knows what the word means. In the same vein, people have really lost the ability to do home repairs themselves to a great extent. Kudos to Scott for doing his own painting; it is outright embarrassing to hear people claim they don't know how to paint.

And yes, it's worse here. I've been to open houses in a couple other parts of the country, usually with relatives, and I'm put to shame by some of the visitors' smart comments. Here, not so much.

The lack of knowledge extends to some pretty basic renovation financing issues. For example, the safest and cheapest way to finance a renovation is with cash.

BV, yes, I've done lots of renovations. Many with me swinging the hammer. In all cases I've basically been the contractor. So I really have nothing to add from the basic homeowner perspective.

On specifics like heating systems I'm happy to weigh in - they are actually very simple, a homeowner should really be up on them, even if not an engineer, its a basic part of the responsibilities of home ownership.

Charles, I do understand heating systems. I am simply stating that they are like cars. Most owner need to know that they run when you turn the key, not how the engines work. They don't need to under stand the combustion byproducts. They don't need to understand spark plugs. When furnaces break, most homeowners are going to call a plumber, and likely cause much more trouble if they do anything themselves.

While I am not directing this at you Charles, the smugness of some people is astounding! When I win the lottery, I'll do all my future transactions in cash!

When I win the lottery, I'll do all my future transactions in cash!

Amazing. My parents conducted all of their transactions in cash. And they never won a lottery. They used a sophisticated technique called saving.

At minimum, you should buy a home with a sufficient cash cushion to conduct all necessary repairs upfront, and then let the rest wait. Not blow your equity out the window in the first six months.

"My parents conducted all of their transactions in cash."

Lets do some simple math: Save 10k per year...that is pretty realistic for a guy making 100 k / year, since he is also paying daycare, buying a car periodically, in cash, rent, taxes, occasional luxuries. Assume no interest (for the sake of ease, we could add that in later to make more realistic, but then we also need to add in inflation). You want to buy a 300,000 k house. How long does it take to save enough to buy? 30 years? OK, so the typical person waits until they are 22 +30 = 52 years old to buy a house? And you are paying rent all those years too?? Your parents sound really "sophisticated" to me too...or else rich by birth. What an utter joke!!!! Smug doesn't begin to capture the essence of your statement...or you are joking.

Opps...sorry Scott. I forgot I was going to ignore Marcus for this point on. feel free to delete my last post! He is so smart in the ways of financing (all cash) and apparently rich (again, all cash), he is perfectly happy to just read his own words.

bv, calm down. You have to admit that Marcus has a point . Part of what brought us here was that people turned to their houses for easy financing, using that "money" for cars, vacations, renovations, college tuition, big screen TVs - the list goes on and on. Not to mention credit card debt, which is pretty darn terrifying in and of itself.

Sure, our parents and grandparents purchased *houses* with mortgages - but there's no question that prior to 1997 it was a much more reasonable proposition. And outside of that, consumer debt was a lot less common. People spent what they had, and saved for what they wanted. As a country, we just don't do that anymore. Remember layaway? Kinda disappeared in the 80s, right?

And I can absolutely guarantee you that my grandparents (who never finished high school and learned English after coming to America in their teens) wouldn't have even considered the outrageous "mortgage products" available over the last 10 years. That's why the "poor borrower, they just didn't know any better" argument completely doesn't work for me.

leverage is often appropriate. The problem is, Americans have pretty much shown their tendency is to make errors by over-leveraging, not under leveraging. For most people, spending only cash on things would be a step forward. This is by no means true for all of course, but it does provide a margin of safety.

Buying a house with debt makes sense. Renovations to a house with debt might or might not make sense. Devil is really in the details on that one. Problem is, everyone tends to automatically think yes, borrowing for a renovation makes automatic sense. When analytically it might be a pure consumption expense (somethinghing which should almost never be levered)

I think that much like a car, people need to know the basics of how their house works. You may never change the oil on your car, but you should really understand the theory of it, and how to change a tire etc. Same applies to home systems. Failing to understand this stuff is likely to lead to expensive trouble.

Honestly, I don't think anyone cares what Marcus writes..except Marcus.

Posts 24 hours a day. Must not have to work!

Sophia, Charles,

You are of course right, I often let my frustration get the better of me. The mortgage products (interest only balloons, adjustable with high adjustments, etc.) are crazy and no right minded person should use them. I also agree that debt should be minimized. We only have mortgage debt. We've paid off cars, student loans, etc. And we have no credit card debt. However, we are relatively rich and very lucky. And unlike many people, we are doing very well even in this time of recession. However, I feel no right to preach about how people shouldn't have car or credit card debt merely because I do not have them.

Charles, I agree with renovations...some are valuable and some are not.. We purchased the cheapest house on the street in a nice town. 1 bath, 3 br, old 70's kitchen. The standard on the street is 2-3 baths, 4 br, newer kitchen, etc. We bought full well knowing the house was deficient in some areas for our needs. However, we decided instead of trading up later, we would design and build what we wanted. This was a conscious decision when we purchased. We essentially skipped the "starter home" and decided to make this our 30 year home. First thing we did was finish the attic into a bedroom, a remarkable cheap operation if you have a walk up third floor. House is now much more roomy. With some growing little kids, we decided that a second bathroom was the next step. Upon examination of the costs, and based on the house geometry, we decided to do the kitchen at the same time. Will we recoup 100% of our costs, almost certainly not. But we live here. This is our home and will be for the foreseeable future.

bv, where did I say people should be able to buy houses with savings? My post explicitly talked about renovations. Why not respond to what I wrote, and let's skip the personal attacks. (Speaking of which, whatever happened to the moderators on this blog?)

My point is, people in MA buy houses and then just assume a bank will lend them the money to bring it up to snuff. As charles and I have repeatedly remarked, most fixer uppers in MA are priced too high to make renovations worthwhile. And the reason they're priced too high, is that people are making a lot of glib assumptions about easy borrowing.

bv...going back to your post #8...what I've learned from doing major renovations is knowing what you're doing capable of doing (or are willing to try) versus what should be done by a professional. Since we moved into our house at the end of 2007, we've completely gutted our kitchen and the bathroom. The kitchen was primarily done by us - replacing the cabinets, floor and appliances and having a plumber handle the sink and dishwasher hookups...total cost of roughly 5K. When it came to the bathroom, however, we knew we needed to outsource. We went from a 50's style 5'x7' (complete with pink and black tiles) to a modern, 5'x11' space with a huge spa-like shower. With windows being taken out and plumbing being rearranged, it was well worth the 20K spent.

I was a little taken aback by Marcus' generalization about painting in post #10...I know how to paint, but I also know what jobs are better suited for someone else. We just had a crew come in, remove wallpaper in our stairway, repair said stairway, and paint not only the stairway, but also the upstairs hallway and three bedroom doors for $1,500. They did it in two days; it might have taken me a year and the results wouldn't have come close.

BTW...I paid cash for EVERYTHING.

BV - from what you posted (clearly I don't know enough of the details) your renovation makes sense. Frankly, a renovation done properly should bring n more than 100% of expenditure, that 80% assumes most people will do it "non-professionally". But its a good safe ballpark assumption.

As an aside, I think Marcus has added extraordinary amounts to this blog. I do think the blog is well moderated - over moderation is not a good thing... I don't think pure vitriol is appropriate, but directly responding to other posters strikes me as useful.

And I agree with Marcus on painting - the difference between pro and an amateur who takes it seriously is merely a matter of time. Shouldn't be that long a time either.

I was a little taken aback by Marcus' generalization about painting in post #10...I know how to paint, but I also know what jobs are better suited for someone else.

Well, I certainly wasn't talking about you. You know how to demo and hang kitchen cabinets, and it can make sense to spend your energy on projects with a bigger payback than painting. But how can anybody deny the growing number of homeowners who don't know how to hang a picture or change the color of their dining rooms?

Marcus. My apologies if you felt insulted. I really did not mean to insult you. Finally, the topic I've been waiting for, the reason I started looking at this blog...really. I was going to get useful insight on how to go about doing an addition...from financing to dealing with contractors, etc. Yaa. I was happy because we are working on this now. I am no expert on this topic. I was hoping to learn a bit.

So imagine my consternation when the comments are (at least from my perspective) less than helpful. "people in the northeast are clueless", "no-one knows how to paint anymore", "america is dumbed down", and my personal favorite, "use cash". All of this is probably good advice and / or perhaps true, but none of it is particularly helpful to me.

So there you have it, my best apology. But please, can we try to stay on topic a little and try not to pass judgement on people's situation? (I'll try not to).

And in answer to your question about why people are so clueless here, I think they are not. Perhaps you are "more" clued in so the delta seems high. Perhaps there is a sharper division of labor in the northeast (e.g. when you make a lot of money knowing how to do one thing, it is often easier and perhaps cheaper just to pay others for what you don't know how to do). Perhaps it is just an illusion of history and you remember people being more clued in but if you returned to wherever you are from you would be disappointed. Really, I am not sure why you feel this way.

bv, "on topic" doesn't mean, "stick exclusively to topics that interest bv." Scott's post specifically addressed financing renovations; so did I.

If you're looking for practical info, this isn't necessarily the best place. You can try Angie's List for recommendations and tips about specific contractors. If you own an old house, there are several great forums where you can find out how to fix a window or repair slate. There's also a famous heating forum where regular folk can ask questions of HVAC contractors who really do provide helpful information.