General contractors – they manage all facets of the project, including hiring and supervising subcontractors, obtaining building permits, scheduling inspections, and working with architects and designers.
Specialty contractors – these are the folks who install products, such as cabinets, bathroom fixtures, and bookshelves.
Architects – they design homes, additions, and major renovations.
Design/build contractors – they offer one-stop service and will see your project through from start to finish.
But remember you will want a home improvement that is done right the first time. That said, there are still ways you can save if you do decide to work with a contractor:
Shop around for the most reasonable bid - not necessarily the cheapest.
Ask friends and family if the contractors they refer stuck to budget.
Root out hidden costs written into contracts.
Insist that trade discounts on materials be passed on to you, or buy materials yourself.
Compare payment alternatives – flat vs. hourly rates, for example – and negotiate the more reasonable of the two.
Do part of the project yourself, such as some disassembly or prep work.
Only accept cash payments;
Pressure you for an immediate decision;
Ask you to pay for the entire job up-front;
Offer exceptionally long guarantees;
Just happen to have materials left over from a previous job;
Ask you to get the required building permits;
Not list a business number in the local telephone directory;
Offer you discounts for finding other customers;
Suggest that you borrow money from a lender the contractor knows, which could make you the target of a home improvement loan scam – a sure way to lose your home.
Here’s what you can do:
Avoid the Yellow Pages. Check with family, friends, neighbors and co-workers for recommendations.
Contact local trade organizations, such as the local Builder Association or Remodelers Council, for the names of members in your area.
Deal only with licensed contractors. The state licensing board and local Better Business Bureau also can tell you if there are any outstanding complaints against the license holder.
Interview each contractor, request free estimates, if possible, and ask for recent references. Make sure bids are based on similar project specifications. And do not automatically settle for the lowest bid.
Ask for proof of worker's compensation insurance and get policy and insurance company phone numbers so you can verify the information. If the contractor is not covered, you could be liable for any work-related injury that takes place during the project. Also check to make sure the contractor has an umbrella general liability policy.
Title 1 Home Improvement Loan. HUD insures the loan up to $25,000 for a single-family home and lenders make loans for basic livability improvements – such as additions and new roofs – to eligible borrowers.
Section 203(k) Program. HUD helps finance the major rehabilitation and repair of one- to four-family residential properties, excluding condos. Owner-occupants may use a combination loan to purchase a fixer-upper "as is" and rehabilitate it, or refinance a property plus include in the loan the cost of making the improvements. They also may use the loan solely to finance the rehabilitation.
VA loans. Veterans can get loans from the Department of Veterans Affairs to buy, build, or improve a home, as well as refinance an existing loan at interest rates that are usually lower than that on conventional loans.
Rural Housing Repair and Rehabilitation Loans. Funded by the Agriculture Department, these low-rate loans are available to low-income rural residents who own and occupy a home in need of repairs. Funds are available to improve or modernize a home or to remove health and safety hazards.
Can I finance the home improvement with my own cash or will I need a loan?
How much equity is in the property? A fair amount will make it that much easier to get a loan for home improvements.
Is it feasible to expand the current space for an addition?
What is permissible under local zoning and building laws? Despite your deep yearning for a new sunroom or garage, you will need to know if your town or city will allow such improvements.
Should I make the improvement myself or hire a contractor?
Other things to consider:
Will you be able to afford repairs, maintenance, insurance, and utilities?
What about fees to pay agents who rent the property for you?
If you live several miles away from your vacation home, who will clean up between tenants and take an inventory of household items once the tenants leave?
What if you are unable to rent your second home? Can your pocketbook withstand the strain of paying the mortgage?