Research Index
The research preparation for a flip of a residential property should take
longer to complete than the actual work on the property after you own it. During
this phase, issues may present themselves which make the project unworkable. Or
issues may become clear that this as one great prospect for making money.
Without spending time on research, entering a new project will be a guess at
best.
Here is an index of some of the topics which may be appropriate to research for each
property under consideration. Click on each as needed. Some projects will not
have as many research topics as others. Base the investigation on the assumption
that each research topic is important until it is ruled out as inappropriate for
a specific property.
The suggested method to use this index is to start at the top
left. Determine if this is an appropriate task to perform based on your specific
situation. When complete, move to the next index item to the right. Then move
across and down the table of topics until complete.
Some topics may need quite a bit of time to complete. Others
are just a matter of a few minutes. Be sure to take notes, keep names and
telephone numbers, and in general, be ready to research again and again each
appropriate topic.
Each of these topics would make a good tab in a file folder or
notebook for quick access of details as needed.
Use your back button to return to this index.
Table Of Research Topics
The greatest amount of money is paid to
contractors. Avoid problems by becoming educated in selecting qualified and
reputable contractors. Here are some useful details about selecting contractors:
| Home Sweet Home Improvement
Whether you’re planning an addition for a growing
family or simply getting new storm windows, finding a competent and
reliable contractor is the first step to a successful and satisfying home
improvement project.
Your home may be your most valuable financial asset.
That’s why it’s important to be cautious when you hire someone to work
on it. Home improvement and repair and maintenance contractors often
advertise in newspapers, the Yellow Pages, and on the radio and TV.
However, don’t consider an ad an indication of the quality of a
contractor’s work. Your best bet is a reality check from those in the
know: friends, neighbors, or co-workers who have had improvement work
done. Get written estimates from several firms. Ask for explanations for
price variations. Don’t automatically choose the lowest bidder.
Home Improvement
Professionals
Depending on the size and complexity of your project,
you may choose to work with a number of different professionals:
 | General Contractors manage all aspects of your project, including
hiring and supervising subcontractors, getting building permits, and
scheduling inspections. They also work with architects and designers.
| Speciality Contractors install particular products, such as cabinets
and bathroom fixtures.
| Architects design homes, additions, and major renovations. If your
project includes structural changes, you may want to hire an architect
who specializes in home remodeling.
| Designers have expertise in specific areas of the home, such as
kitchens and baths.
| Design/Build Contractors provide one-stop service. They see your
project through from start to finish. Some firms have architects on
staff; others use certified designers. |
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Don’t Get Nailed
Not all contractors operate within the law. Here are
some tip-offs to potential rip-offs. A less than reputable contractor:
| solicits door-to-door;
| offers you discounts for finding other customers;
| just happens to have materials left over from a previous job;
| only accepts cash payments;
| asks you to get the required building permits;
| does not list a business number in the local telephone directory;
| tells you your job will be a "demonstration;"
| pressures you for an immediate decision;
| offers exceptionally long guarantees;
| asks you to pay for the entire job up-front;
| suggests that you borrow money from a lender the contractor knows.
If you’re not careful, you could lose your home through a home
improvement loan scam. |
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Hiring a Contractor
Interview each contractor you’re considering. Here
are some questions to ask.
| How long have you been in business? Look for a
well-established company and check it out with consumer protection
officials. They can tell you if there are unresolved consumer
complaints on file. One caveat: No record of complaints against a
particular contractor doesn’t necessarily mean no previous consumer
problems. It may be that problems exist, but have not yet been
reported, or that the contractor is doing business under several
different names.
| Are you licensed and registered with the state? While most
states license electrical and plumbing contractors, only 36 states
have some type of licensing and registration statutes affecting
contractors, remodelers, and/or specialty contractors. The licensing
can range from simple registration to a detailed qualification
process. Also, the licensing requirements in one locality may be
different from the requirements in the rest of the state. Check with
your local building department or consumer protection agency to find
out about licensing requirements in your area. If your state has
licensing laws, ask to see the contractor’s license. Make sure
it’s current.
| How many projects like mine have you completed in the last year?
Ask for a list. This will help you determine how familiar the
contractor is with your type of project.
| Will my project require a permit? Most states and
localities require permits for building projects, even for simple jobs
like decks. A competent contractor will get all the necessary permits
before starting work on your project. Be suspicious if the contractor
asks you to get the permit(s). It could mean that the contractor is
not licensed or registered, as required by your state or locality.
| May I have a list of references? The contractor should be
able to give you the names, addresses, and phone numbers of at least
three clients who have projects similar to yours. Ask each how long
ago the project was completed and if you can see it. Also, tell the
contractor that you’d like to visit jobs in progress.
| Will you be using subcontractors on this project? If yes,
ask to meet them, and make sure they have current insurance coverage
and licenses, if required. Also ask them if they were paid on time by
this contractor. A "mechanic’s lien" could be placed on
your home if your contractor fails to pay the subcontractors and
suppliers on your project. That means the subcontractors and suppliers
could go to court to force you to sell your home to satisfy their
unpaid bills from your project. Protect yourself by asking the
contractor, and every subcontractor and supplier, for a lien release
or lien waiver.
| What types of insurance do you carry? Contractors should
have personal liability, worker’s compensation, and property damage
coverage. Ask for copies of insurance certificates, and make sure
they’re current. Avoid doing business with contractors who don’t
carry the appropriate insurance. Otherwise, you’ll be held liable
for any injuries and damages that occur during the project. |
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Checking References
Talk with some of the remodeler’s former customers.
They can help you decide if a particular contractor is right for you. You
may want to ask:
| Can I visit your home to see the completed job?
| Were you satisfied with the project? Was it completed on time?
| Did the contractor keep you informed about the status of the
project, and any problems along the way?
| Were there unexpected costs? If so, what were they?
| Did workers show up on time? Did they clean up after finishing the
job?
| Would you recommend the contractor?
| Would you use the contractor again? |
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Understanding Your Payment
Options
You have several payment options for most home improvement and maintenance
and repair projects. For example, you can get your own loan or ask the
contractor to arrange financing for larger projects. For smaller projects,
you may want to pay by check or credit card. Avoid paying cash. Whatever
option you choose, be sure you have a reasonable payment schedule and a
fair interest rate. Here are some additional tips:
| Try to limit your down payment. Some state laws limit the amount of
money a contractor can request as a down payment. Contact your state
or local consumer agency to find out what the law is in your area.
| Try to make payments during the project contingent upon completion
of a defined amount of work. This way, if the work is not proceeding
according to schedule, the payments also are delayed.
| Don’t make the final payment or sign an affidavit of final release
until you are satisfied with the work and know that the subcontractors
and suppliers have been paid. Lien laws in your state may allow
subcontractors and/or suppliers to file a mechanic’s lien against
your home to satisfy their unpaid bills. Contact your local consumer
agency for an explanation of lien laws where you live.
| Some state or local laws limit the amount by which the final bill
can exceed the estimate, unless you have approved the increase. Check
with your local consumer agency.
| If you have a problem with merchandise or services that you charged
to a credit card, and you have made a good faith effort to work out
the problem with the seller, you have the right to withhold from the
card issuer payment for the merchandise or services. You can withhold
payment up to the amount of credit outstanding for the purchase, plus
any finance or related charges. |
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The "Home
Improvement" Loan Scam
A contractor calls or knocks on your door and offers to install a new roof
or remodel your kitchen at a price that sounds reasonable. You tell him
you’re interested, but can’t afford it. He tells you it’s no problem
— he can arrange financing through a lender he knows. You agree to the
project, and the contractor begins work. At some point after the
contractor begins, you are asked to sign a lot of papers. The papers may
be blank or the lender may rush you to sign before you have time to read
what you’ve been given to sign. You sign the papers. Later, you realize
that the papers you signed are a home equity loan. The interest rate,
points and fees seem very high. To make matters worse, the work on your
home isn’t done right or hasn’t been completed, and the contractor,
who may have been paid by the lender, has little interest in completing
the work to your satisfaction.
You can protect yourself from inappropriate lending
practices. Here’s how.
Don’t:
| Agree to a home equity loan if you don’t have enough money to make
the monthly payments.
| Sign any document you haven’t read or any document that has blank
spaces to be filled in after you sign.
| Let anyone pressure you into signing any document.
| Deed your property to anyone. First consult an attorney, a
knowledgeable family member, or someone else you trust.
| Agree to financing through your contractor without shopping around
and comparing loan terms. |
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Getting a Written Contract
Contract requirements vary by state. Even if your
state does not require a written agreement, ask for one. A contract spells
out the who, what, where, when and cost of your project. The agreement
should be clear, concise and complete. Before you sign a contract, make
sure it contains:
| The contractor’s name, address, phone, and license number, if
required.
| The payment schedule for the contractor, subcontractors and
suppliers.
| An estimated start and completion date.
| The contractor’s obligation to obtain all necessary permits.
| How change orders will be handled. A change order — common on most
remodeling jobs — is a written authorization to the contractor to
make a change or addition to the work described in the original
contract. It could affect the project’s cost and schedule.
Remodelers often require payment for change orders before work begins.
| A detailed list of all materials including color, model, size, brand
name, and product.
| Warranties covering materials and workmanship. The names and
addresses of the parties honoring the warranties — contractor,
distributor or manufacturer — must be identified. The length of the
warranty period and any limitations also should be spelled out.
| What the contractor will and will not do. For example, is site
clean-up and trash hauling included in the price? Ask for a
"broom clause." It makes the contractor responsible for all
clean-up work, including spills and stains.
| Oral promises also should be added to the written contract.
| A written statement of your right to cancel the contract within
three business days if you signed it in your home or at a location
other than the seller’s permanent place of business. During the
sales transaction, the salesperson (contractor) must give you two
copies of a cancellation form (one to keep and one to send back to the
company) and a copy of your contract or receipt. The contract or
receipt must be dated, show the name and address of the seller, and
explain your right to cancel. |
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Keeping Records
Keep all paperwork related to your project in one place. This includes
copies of the contract, change orders and correspondence with your home
improvement professionals. Keep a log or journal of all phone calls,
conversations and activities. You also might want to take photographs as
the job progresses. These records are especially important if you have
problems with your project — during or after construction.
Completing the Job: A
Checklist
Before you sign off and make the final payment, use this checklist to make
sure the job is complete. Check that:
| All work meets the standards spelled out in the contract.
| You have written warranties for materials and workmanship.
| You have proof that all subcontractors and suppliers have been paid.
| The job site has been cleaned up and cleared of excess materials,
tools and equipment.
| You have inspected and approved the completed work. |
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Where to Complain
If you have a problem with your home improvement project, first try to
resolve it with the contractor. Many disputes can be resolved at this
level. Follow any phone conversations with a letter you send by certified
mail. Request a return receipt. That’s your proof that the company
received your letter. Keep a copy for your files.
If you can’t get satisfaction, consider contacting
the following organizations for further information and help:
| State and local consumer protection offices.
| Your state or local Builders Association and/or Remodelors Council.
| Your local Better Business Bureau.
| Action line and consumer reporters. Check with your local newspaper,
TV, and radio stations for contacts.
| Local dispute resolution programs. |
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For More Information
• Federal Trade Commission: www.ftc.gov
• National Association of Home Builders
Remodelors™ Council: www.nahb.com
To order a free copy of How to Find a Professional
Remodeler, send a self-addressed stamped envelope to:
NAHB Remodelors Council
Dept. FT
1201 15th Street, NW
Washington, DC 20005
• National Association of Consumer Agency
Administrators: www.nacaanet.org
1010 Vermont Avenue, NW
Suite 514
Washington, DC 20005
E-mail: nacaa@erols.com
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The FTC works for the consumer to prevent fraudulent,
deceptive and unfair business practices in the marketplace and to provide
information to help consumers spot, stop and avoid them. To file a complaint
or to get free
information on consumer issues, visit www.ftc.gov
or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261.
The FTC enters Internet, telemarketing, identity theft and other
fraud-related complaints into Consumer
Sentinel, a secure, online database available to hundreds of civil and
criminal law enforcement agencies in the U.S. and abroad.
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