Best Time of the Year to Start Big Home Improvement Projects

There are a lot of folks who are happy 2010 is over and are looking forward to a better 2011.

For many homeowners who struggled to make mortgage payments and get bills paid, 2010 was a year of putting off big home purchases, like furniture and appliances, and big home-improvement projects, like recarpeting and repainting.

According to ServiceMagic’s Q3 Home Remodeling and Repair Index, Americans have switched their focus from adding on and doing major remodeling projects to completing “high cost” projects deemed “necessary.”

It’s no surprise that discretionary spending is down. Most households still haven’t seen their incomes rise, and millions of Americans are starting another year without a job. What most homeowners have been doing is saving as much money as they can to pay down debt, a process known in the commercial credit world as “deleveraging,” and a topic we’ve discussed elsewhere on the Equifax Personal Finance Blog.

But you can’t put off an important home repair forever, even if it is expensive.

According to Craig Smith, ServiceMagic CEO, “Homeowners have started investing in large-scale improvement and repair projects, like windows, roofing, heating and air-conditioning, and septic tanks and wells. Many homeowners told us that they have been putting these projects off for a year or more but could no longer wait to replace these major items. As homeowners decide to stay put, they are continuing to invest in their homes.”

The index, which looks at more than a million requests for home repair service, found that:

Forty-six percent of consumers have waited a year or longer to invest in necessary high-cost maintenance and repair services.
Sixty-two percent of homeowners surveyed said they invested in these high-cost home-improvement projects because the repairs needed to be done to avoid further upkeep.
Heating and furnace system service requests increased by 30 percent.
Window installation service requests increased by 25 percent.
Septic tank and well service requests increased by 12 percent.
Roofing service requests increased by 4 percent.

How can you afford a major repair?
But by putting yourself on a sounder financial footing, you may be able to spend a little more on your house next year, especially if not doing a particular home-improvement project could cause major damage to your home.

Here are a few things you might want to do before you sign a home-improvement contract with the first contractor who crosses your threshold:

Spend some time online. You should find out everything you can about your repair project, including what is involved, how long it typically takes, and how much it typically costs. You should also be able to find out who does this sort of job. Once you get recommendations from people who have used certain companies to get this job done, check the companies out online.
Draw up a plan. Map out exactly what you want done. Be sure you know the lingo the pros use to talk about the job so they can’t snow you with jargon.
Create a list of potential contractors. Tell your friends what you’re planning and ask for recommendations. Ask them if they have any friends who have had this same sort of work done. Go to your local home-improvement store and ask for the names of qualified contractors and subs who do this work. And then stop by your local building department to see if someone will tell you who they like (and, more important, who they don’t like) for this type of job.
Invite the contractors to come through your property. Explain all the details of the job to them. Invite them to submit a bid for the work. Make sure they put as much detail as they can into the bid, including a proposed timeline, a proposed cost, serial numbers for equipment, the lien waiver cost, insurance numbers, etc.
Check references. For any contractor you’re seriously considering, ask for five or six references and then call them. Try to arrange a visit to the reference’s property to see the work. Ask how timely, clean, smart, engaging, and capable the contractor and his subs were. Ask if the reference had any problems with the contractor and how these problems were resolved. Take photos of the work. Try to find out if the reference is related to the contractor, so you know how to judge the reference’s comments.
Put it in writing. Until you have a written contract, you’ve got nothing.
Don’t hand over too much money up front. A good contractor won’t ask for more than 10 percent down. You never want to pay all of the money before the job is completed. Hold back 20 to 25 percent.

One final piece of advice: If you’re starting a big home-improvement project, be sure to have someone with experience (like a real estate attorney) read over and approve your contract. And if the attorney recommends that you set up an escrow account and use that to pay the contractor, do it!

Ilyce R. Glink is the author of several books, including 100 Questions Every First-Time Home Buyer Should Ask and Buy, Close, Move In!. She blogs about money and real estate at ThinkGlink.com and at the Home Equity blog for CBS MoneyWatch.