Over the past few weeks we’ve looked at some common construction contract myths and analyzed our first two remodel contract types: lump sum contracts and time & materials contracts.  It’s now time to breakdown the second of three common types of contracts you can use for your remodel.

Before doing so, remember each of the three contract types we will analyze have both benefits and drawbacks.  I’ll help you decide which contract is right for you.

The Spirit of the Contract

Cost Plus a Fee contracts are like clam chowder in a bread bowl.  You know what I’m talking about (OK, those of you in the Midwest may not): that delicious combination of creamy clam chowder and delightful, fresh french bread.  It’s a breeze to prepare.  In fact, I’ll go ahead and give you the recipe:

Ingredients:

• Clam chowder – enough to fill a bread bowl
• French Bread Round – Enough to hold clam chowder

Directions

• Make a hole in the top of the french bread round.
• Pull out the french bread guts and eat them right there.
• Pour hot clam chowder through hole.

See, pretty easy.

Now, why do I love clam chowder in a bread bowl?  It’s the best of both worlds.  You get the benefit of yummy clam chowder and french bread, and you have no bowl to clean-up.  BECAUSE YOU EAT THE BOWL. (My son once ate the bowl first, and thus learned an important lesson about edible bowls.)

And that’s the spirit of  Cost Plus a Fee contract: an owner gets the benefit of a maximum price plus the chance to keep savings if the project comes in under budget.

How a Cost Plus Contract Addresses Money

The Cost Plus contract says this: I, contractor, will build your remodel for no more than X dollars.  If I can build it for less than X dollars, you only pay me the cost of the project plus my pre-established fee percentage.

Example:  Contractor signs a Cost Plus contract with Owner for $50,000.  In the contract, the fee is 10% of total project cost.  The $50,000 contract amount (also known as GMP – Guaranteed Maximum Price) includes the contractors 10% fee. (His costs on the job were estimated at $45,000, his fee $5,000).

Scenario 1: Project comes in over budget due to no fault of the Owner.  Cost to Owner is only $50,000 (the GMP)  Contractor “eats” the overage.

Scenario 2: Project comes in under budget.  Let’s say costs equal only $40,000, not the estimated $45,000.  Cost to Owner is $44,444 ($40,000 cost plus $4,444 fee).  Owner saves the difference!

See, it’s simple.  But the question people often ask is why the heck would a contractor agree to this?  Well, here are a few reasons:

• Establishes great report with Owners, and almost guarantees referrals if the project goes well.
• Some contractors actually believe the Owners money is, well, the Owners money.  (If I went and bought a sandwich for a co-worker, and they gave me $10, and the sandwich was only $8, I wouldn’t keep the $2, would I?)
• This type of contractual relationship fosters a team approach and a much better process for the builder.

Will every contractor agree to this contract?  No, probably not.  Most contractors use business practices and concepts from the 1800′s.  They don’t understand such deep concepts as an Owner’s money belonging to the Owner.  They feel like if they are smart enough to dupe you into a bad contract, they should get all the cost savings (without telling you what they were, of course) and go out and by a new quad or lifted pick-up or perhaps a brand new Tap-Out t-shirt…

How a Cost Plus Contract Addresses Schedule

Like most other contracts, the Cost Plus contract establishes a project duration and perhaps a penalty for not completing the project on time. Typically the spirit of the contract is collaborative, so penalties for late completion are not as prevalent nor as heavy as the lump sum contract.

When to Use a Cost Plus Contract

Some project types lend themselves more toward a Cost Plus contract than others:

• Negotiated projects in which an Owner works with one contractor solely from start to finish.
• Projects in which their is great trust and respect between Owner and Contractor.
• Fast-track projects that must commence before every detail of the project is resolved.
• Any time an Owner can negotiate such a contract with the Contractor.

When Not to Use a Cost Plus Contract

Cost Plus contracts may not be best if:

• You don’t trust your Contractor to operate with your best interest in mind.
• You “hard bid” your project to multiple contractors and made your selection solely off low-price.

In our next and final part of the construction contracts series, we’ll cover how to create the contract of your choice using some awesome techy stuff (that’s a breeze to use)..

PS:  After reading this post, whip up a bread bowl with clam chowder and then download my free e-book Remodel with Confidence.  It’ll guide you through the remodel process step by step.

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When I built this site a few months back, I decided to focus on basic information you, the remodeling homeowner, would like to learn about.  And that’s exactly what we’ve been doing.  First we spent a few weeks on defining remodel cost, and now we’re in the midst of a series on construction contracts.

But it’s going slow.

Real slow.

I am posting only every few weeks, at best.

But I’m OK with that.  Because I knew it would be a bit slow.  Because I am trying to remodel 12 properties in 3 months…  While working full time…  While raising two kids who get real upset when they don’t see me for a few days…  Who may end up living a life of crime and unleashing havoc on ya’ll if I don’t raise them right.

How did this happen?  Well, that’s a long story that I can’t get into right now.  But I will.  In case you care.  For now I’ll just say it involves a fear of being an employee for the rest of my life combined with a massive fall in home prices (in our region specifically) combined with the Obama administration being like your rich aunt who gives you a ton of cool stuff to play with.

So what have I learned?  Here are a few lessons from remodel-fest 2010:

Without a Team You Are Toast

Without Charlie and Jared and Seth (and I guess my business partner Ryan, even though he is worthless during remodels), I would be up the proverbial creek without the proverbial paddle thinking of jumping off the proverbial bridge.

Charlie totally stepped in and went from awesome landscaper to even more awesome home rehabber.  He jumped on the first three homes without a moments delay and kicked ass from day 1.

Jared added about 20 hours to his 40 hour work week, and his kids too will likely wreak havoc on ya’ll in the future because of it.

Seth completed his first house in like 3 weeks and is on to three more.  Nice.

And me?  All I do is walk the jobs, bug each of them to death, and spend copious amount of money at Home Depot, Floors Plus and DeHart Plumbing, Heating and Air.  I would be ruined without these guys.

No Matter How Bad the Economy, Most Contractors Are Still Flakes

It amazes me how hard it is to get good estimates and good production in this economy.  One would think that customer service would be paramount, every job pursued to it’s fullest, every call returned and every completed job perfect.  I know that’s what I’m trying to do at work.

But no.

I had a roofer that walked the first 4 homes, took measurements, talked me up, and then refused to return a single call for three weeks.

I had an air conditioning sub who had one guy take my first call, one guy call me to say he was going ot miss the job walk, one guy show up, then one guy bid the job (late).  Really?  Four contacts for one new A/C system in one small home?  Really?

A Good Remodel and a Great Property Manager = $

One of my biggest surprises of the last few months?  How quickly the team at Valley Oak is renting the properties.  They had one home rented 6 hours after turnover. Yes… hours!

This is due mostly to their professionalism and approach to the tenants.  It’s also due to the rentals being in prime condition. Certainly this is a lesson for all landlords: spend a bit more time and money on the front end, and begin the payoff quickly on the back end.

What’s Next?

Our team commences the second round of home purchases in a few short months.  This means more estimates, more job walks, and more inattention to this dear blog. But it’s only for a season.  I look forward to getting back into weekly posts as soon as possible.  Besides, who knows what else we will learn along the way…

PS:  To get more information on my remodeling tricks-of-the-trade, I recommend downloading my free e-book Remodel with Confidence.  It’ll guide you through the remodel process step by step.

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Now that we’ve dispelled some common construction contract myths and looked at the lump sum contract, it’s time to look at the second of three common types of contracts you can use for your remodel.

Before doing so, remember each of the three contract types we will analyze have both benefits and drawbacks.  I’ll help you decide which contract is right for you.

The Spirit of the Contract

In great contrast to the lump sum contract, the time & materials (T&M) contract is like that favorite Aunt we all had that gave us awesome gifts every holiday.  She wasn’t about rules and regulations, boundaries and “no’s,” she was about having a good time, getting the job done, and loving life.

Unfortunately, she probably also taught you a few bad habits, caused you to over indulge, and perhaps even let you watch every Arnold Schwarzenegger movie made between 1983 and 1995 in one testosterone-laden evening.

Similarly, the T&M contract relies on great trust between Owner and Contractor.  Basically the contract says this: “do the job to the best of your abilities, bill me for the time and materials it takes, and we’ll all be happy in the end and maybe oven go out for an ice cream cone, maybe even one of the chocolate covered waffle cones that cracks before you are half-way done with it, leaving a sticky pool of ice cream on your jeans that really looks like something other than a sticky pool of ice cream on your jeans.”

How a T&M Contract Addresses Money

The T&M contract addresses money in perameters, not in actual dollar amount.

A good T&M contract establishes two things related to money:

• the labor rate for various workers on the project
• the mark-up on materials and the method for providing “proof of purchase”

The T&M contract rarely implements a “maximum price” or a “not to exceed” price, because then you are really using our next type of contract, the cost plus contract.  (My personal favorite!  I bet you can’t wait to learn about it.)

For example: Contractor agrees to remodel your bathroom for $50/hour for him and $25/hour for his young helper. He also agrees to make 15% on all materials he purchases, and for which he must provide a receipt of purchase.

See, pretty simple and easy.

How a T&M Contract Addresses Schedule

The T& M contract, like the lump sum Contract, may or may not have a defined completion date.  Usually not, though, because it’s used mostly when the scope and duration of the project are hard to define.

When to Use a T&M Contract

A T&M contract is most applicable if:

• You have a great idea for your project, but not much else (and you’re not about to hire an architect!)
• You are very vague with your project specifications, and have little or no finishes chosen.
• You know who you want to work with on the project and don’t care to use anyone else.
• You really trust your Contractor.
• You tend to be a straight-up hippy and like free love and freedom for everyone and all that stuff…

When Not to Use a T&M Contract

One of the other contract types might be best if:

• You want to get multiple bids on your project.
• You do not trust your contractor.
• You are risk adverse.

In our next part of the construction contracts series, we’ll take a look at the rockstar of remodel contracts: the cost plus contract.

PS:  After reading this post, be sure to watch all of Arnold’s movies from 1983 to 1995.  Then I recommend downloading my free e-book Remodel with Confidence.  It’ll guide you through the remodel process step by step.

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When your spouse leaves town, do you ever do crazy stuff?

Like pee with the bathroom door open, or eat peanut butter out of the jar with a spoon, or dress in clothing of the opposite sex…

OK, maybe that’s just me.

Either way, sometimes it’s fun to let your hair down and do something new.  That’s what I do with my guest posts.  Here are some of my recent posts:

• Over on Charles & Hudson, I recently posted Part I and Part II of a series on dealing with water damage in your home.
• And at Tearing Up Houses, I offered some tips on 5 Ways to Save on Your Remodel.
• Last, but certainly not least, I departed from the home improvement subject over on Penelope Loves Lists and posted on something dear to my heart, the Legacy Letter I write to my children daily.

Go check them out and enjoy!

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Now that we’ve dispelled some common construction contract myths, its time to look at the first of three common types of contracts you can use for your remodel.

Before doing so, remember each of the three contract types we will analyze have both benefits and drawbacks.  I’ll help you decide which contract is right for you.

The Spirit of the Contract

The lump sum contract, also known as the stipulated sum contract, is the drill sargent of the construction contract world.  It’s the “everything by the rules, no flexibility, feast or famine, hard-nose” contract.  It is simple in it’s arrangement and terms: basically Contractor is obligated to do exactly what they said they will do for exactly the price they say it will cost in exactly the time they say it will take.  The spirit of the contract can often be contentious, because it does not allow for much deviation or flexibility from either the project Owner or the Contractor.

So what’s wrong with this?  Well, nothing is really wrong with it, however it requires the project Owner to have everything, I mean everything in the project accounted for before work starts.  I mean every finish selected, every detail drawn out, every question answered.  Everything.

Sometimes this is possible, and even preferred.  Sometimes not.

How a Lump Sum Contract Addresses Money

When it comes to the money aspect of this contract, it’s pretty cut and dry.

Contractor will complete project, as per plans and specifications, for exactly the amount the contract says. If the project goes over budget, the Contractor looses money.  If the project comes in under budget, the Contractor makes extra money.

Like all of the contracts, the lump sum contract has provisions for “change orders.”  Change orders are a contractual increase in the project cost and/or duration due to a change in project scope.  The change in the project scope could be caused by an Owner changing their mind, or discovery of an unknown preexisting condition, or an act of God.  Change orders are the only legal method by which a Contractor can ask for more money or time for the job.  Change orders have to be approved by the project owner to be in effect.

How a Lump Sum Contract Addresses Schedule

Much like the fiscal side of the contract, the schedule in a lump sum contract is almost always set in stone.  The contract declares a certain number of days for the job.  If the job takes longer than the contract says, the Contractor is in violation of the contract, and thus susceptible to all types of nasty things.

One of these nasty things is called “liquidated damages.”  Liquidated damages are a monetary penalty to the Contractor for going past the project due date.  For example, if you have a $100 per day liquidated damages clause in your contract, the Contractor has to reduce his contract amount by $100 for each calendar day he is late in delivering the project.  It’s like a reverse speeding ticket: you get penalized for going too slow.

Now are you starting to see how a lump sum contract can be a battle?

When to Use a Lump Sum Contract

A Lump sum contract is most applicable if:

• You have a great, detailed, thorough set of plans for your project
• You are very clear with your project specifications, and have all of your finishes chosen.
• You “hard bid” your project, meaning solicit 3-4 bids with the low bidder guaranteed the job.  A lump sum contract is usually best following a hard bid because you want a bullet-proof contract in case they tried to get the job by cutting corners.
• You don’t really trust your Contractor.
• You tend to be a hard nosed, by-the-book type of person.

When Not to Use a Lump Sum Contract

One of the other contract types might be best if:

• You expect your Contractor to help you design your project as you build it.
• You do not want to complete a thorough set of plans for the project.
• The spirit of the lump sum contract is in conflict with your relationship with your Contractor.

In our next part of the construction contracts series, we’ll take a look at a contractual opposite to the lump sum contract: the T&M contract.

PS:  If you’re reading this post, you probably have a remodel of some kind in mind.  (Sorry for the rhyme.)  If you do, I recommend downloading my free e-book Remodel with Confidence.  It’ll guide you through the remodel process step by step.

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It only takes one.

One project where the contractor stops showing up, and you’ve paid him a large deposit.

One project where someone gets hurt and you realize his or her employer was not insured.

One project where the change orders and extra costs start from day 1.

It only takes one project like this, and you will never deny the power and importance of a proper remodel contract.

Before we jump right into the world of remodel contracts, I’d like to dispel a few common myths about proper contracting.

The following four myths represent common perspectives I’ve heard over the last decade in the business.

Myth #1: If you trust your contractor you don’t really need a formal contract.

First off, trusting your contractor is a critical first element of any good remodel project.  In fact, it’s vital.

However, no matter how much you trust him or her, you must prepare for the worst case scenario.  Really, isn’t that what contracts are for?  If something terrible or litigious occurs?

I recommend having a contract in place for any work on your home exceeding a few hundred dollars. Why such a low threshold?  Because even a small project can lead to major damage.  And major damage could lead to insurance companies getting involved.  And insurance companies getting involved will lead to them requesting a copy of the contract between you and your contractor.  And not having said contract makes it real tough for your insurance company to successfully litigate.  And making it hard on your insurance company is never good for you, believe me.  They begin to view you as a liability.

Myth #2:  If you sign the contractors proposal that’s good enough.

Most contractors provide estimates with a signature block at the bottom.  This is a handy way for them to get approval on the project immediately after presenting the number  to you.

And most savvy contractors have wording, sometimes in 2-point font, on this proposal that says in essence “by signing this proposal you agree to all terms on this page.”  And when you read further on the page, you realize there is some pretty clever wording protecting the contractor from everything and exposing you to most, or all of the risk.

I recommend writing your own contract (we will cover how to do this quickly and easily in the last post of this series). In your contract, simply state that your contract trumps any and all other agreements.  Then sign the proposal. This way the contractor is happy and you have the law, and your contract, on your side.

Myth #3: Its really hard to create a contract and I probably need a lawyer to do so.

Nope.  Not at all.

There are some great standard contracts already in existence.

My favorite are produced by the AIA, American Institute of Architects.  The AIA is a hugely reputable entity that’s been around for more than 150 years.  Their contracts are well written, easily accessed and objective. We will talk much more about these forms in the last post in this series.

When filled in correctly, these contract don’t need to be reviewed by legal council unless you personally want this done.

Myth #4: A contract means my project won’t go over budget.

A contract simply lays the framework for the job.  It is not a magic scroll that protects an Owner from cost inflation.

It does, however, protect an Owner from unjust cost inflation, and also requires the Owner be notified before the contractor incurs additional costs.

When edited in an advanced fashion, a contract can even cap certain unit costs, like labor rate per hour for overtime work or cost per lineal foot for baseboard, for example.

In our next post, we will look at the first of three common contract types: the Lump Sum aka Stipulated Sum Contract.

PS:  Before getting too far into this series, download my free e-book Remodel with Confidence.  It’ll act as a good foundation for this material.  And I also make fun of a lot of things in it.

Image credit: http://www.flickr.com/photos/tnboriqua/

The world of construction is terrible, for the most part.

Why?  It’s filled with slimy contractors, slimy owners, slimy suppliers and umm, lots of other slimy stuff.  Ever read the wall of a jobsite port-o-potty?  ‘Nuff said…

That’s why construction contracts are imperative for both the project Owner and the Contractor.

Undertaking a remodel without a proper contract is like trying to slide across a dry slip-n-slide.  It’s like break-dancing with no cardboard under you and coming up from a wicked helicopter spin with grass stains on your head.  It’s like being attacked by a herd of feral cats genetically engineered to lick their prey to death.

Need I say more?  You get the point…

The Main Types of Construction Contracts

Construction contracts fall into three main categories:

• Lump Sum / Stipulated Sum – Both Owner and Contractor live or die by one single price for the whole project.  Over budget? Contractor looses.  Under budget? Owner looses.  Classic lose-lose contract, although used most often.
• Time & Materials (aka T&M) – Owner and Contractor agree to a labor rate and a materials/subcontractor mark-up, then the fun begins.  Contractor has a blank check, so to speak.
• Cost Plus a Fee (aka Cost Plus) – Owner agrees to pay Contractor an established fee on all costs.  Owner and Contractor work together to control said costs.

What’s In Store for This Series

In the next few weeks, we will investigate the following topics related to construction contracts:

• Construction Contract Myths
• The Lump Sum Contract: Be Ready for Battle
• Construction Contracts: Time & Materials or You Better be Family
• Cost Plus a Fee: The best of Both Worlds
• How Do I Create A Construction Contract?

By the end of the series, you’ll be able to determine which contract is right for your remodel.

And don’t worry, the series is not too long or academic.  I just have a short attention span and can’t write too much at once…

PS:  Before getting too far into this series, download my free e-book Remodel with Confidence.  It’ll act as a good foundation for this material.  And I also make fun of a lot of things in it.

Image credit: http://www.flickr.com/photos/lumaxart/

Our last three posts considered an array of methods for defining remodel cost including using contractors, creating your own spreadsheet (template provided by yours truly) and using online calculators.

In this final post of the Defining Remodel Cost series, we look at a little known yet highly effective method of using a remodeling coach to assemble your estimate.  Since I’m a remodeling coach, this post focuses on methods I use with my clients.

When to Use this Method

Hiring a remodel coach is best if:

• You are serious about your project and willing to spend a small amount of money to ensure you are heading down the right path.
• You project involves different scopes of work.  For example, a kitchen addition is perfect for a remodeling coach; installation of new hardwood floors is not.
• You seek detailed cost information and the ability to adjust or modify your estimate based upon different scenarios.  For example, let’s say you have a $40,000 remodel budget.  By working with me using the Getting Started Package, you discover the remodel you envision is more like $45,000.  We can then makes adjustment to different finishes, dimensions, etc. to bring the cost back into budget.  This is much better then going far into your project and then discovering a budget issue.
• You would benefit from a floor plan and 3D images of your remodel.  These are automatically generated by my cost estimating software.

When NOT to Use this Method

Hiring a remodeling coach may not be best if:

• You are just starting to consider a remodel and are not too sure what you want to do or how much you want to spend.
• One of the other three methods of defining remodel cost are a better fit for you at this time.
• You require face-to-face interaction with your remodeling coach.
• You do not have a digital camera or regular Internet access.

How to Use this Method

So, once you determine a remodeling coach is right for you, what next?  Here is the process we go through together.

Step 1: Click Here to Go To My “Hire Me” Page

Step 2:  Look Through The Packages I Offer

I offer three remodeling coach packages.  The first is a simple initial phone conversation.  The second is a package that includes a phone conversation, a complete project estimate, a design suggestions report and a project schedule.  The third includes all of the above, plus assistance with bidding your project, hiring a contractor and customer support via email throughout your entire project.

Of course, you can create your own package by emailing me at deren_at_meandyourhouse_dot_com or by clicking here.

Step 3: Delve Deeper Into My Sample Docs

From the “Hire Me” page, click on any of the remodeling coach packages for a complete description of each element of each package, along with samples of what each report looks like upon completion.

Step 4: Hire Me

Once you choose the package you want to purchase, you simply click the “Buy Now” button next to the package.  From there, you are taken to a secure PayPal page, where you can pay via PayPal or any major credit card.  Once payment is processed, you are emailed a receipt containing instructions on how to start your remodeling coach session.

Step 5: Watch Me Work For You

After your purchase, I begin work on your project.  Depending on the size of your remodel, we usually complete our initial phone conversation and project estimate in 3-5 business days.

Step 6: Watch The Information Show Up

All information is delivered via email, usually in pdf format for easy download and viewing.  I try to include clever and funny comments in my emails; I don’t think coaching should be dull and boring.  If you don’t think they are funny, please don’t tell me.  Help me live in denial…

Go back to Defining Remodel Cost home page.

Image Credit: http://www.flickr.com/photos/netphotography/

Who doesn’t like a good online calculator?

Need to calculate your body mass index?  There’s an online calculator.  How about figuring out your mortgage payment?  There’s an online calculator for that as well.  Determining future child support payments, figuring out how much alcohol you need for a party, ascertaining the cost of college  and even predicting when you will die.  There’s an online calculator for them all.

But what about defining remodel cost?  Of course!

I spent hours researching different online calculators and concluded:

• Some of them were developed by some pretty clever people.
• Many of them were developed by someone that lives in a vacuum.
• Trying to find a calculators via Google rarely gives you true calculators.  Usually it gives you referral sites for hiring contractors.  (And by the way, how many contractor referral sites does the world really need?  There are hundreds of them!  Here’s an idea:  How about we all just find contractors the good old fashioned way?  By asking people we know and trust who they have used?  By talking with local suppliers who know the local market?  It’s really not that hard, trust me…)  (Congratulations on reading the world’s longest bullet point…)

Let’s take a deeper look at using these online remodel cost calculators:

When to Use this Method

Defining remodel cost using an online calculator is a good first step for your job.  You need minimal information on your project (square footage and generic level of finishes) and can make decisions as you navigate through the questions.

They can also be helpful if you are checking validity of contractor bids to be sure you’re not getting gouged.

When NOT to Use this Method

This method is not ideal when trying to formally price your project.  A truly accurate online calculator requires so many technical questions that it would be useless for the average homeowner.  In addition, most calculators produce one of two estimates:

• A large price range to covey the fact that many variables were not addressed.
• A single price, in which case you need to be highly cautious, because you have no idea if it is a conservative or a liberal calculation of costs.

How to Use this Method

Here are the results of my research.  I am sure I missed some calculators out there, so if you have a favorite, shoot me an email or leave it in the comments below and I will add it to the list!

ServiceMagic.com

ServiceMagic.com offers a homepage for calculators covering an array of remodel projects:

• Bathrooms
• Additions
• Kitchens
• Painting
• Porch and Deck
• Roofing
• Interior
• Exterior

The calculators are produced by a third-party developer, CostEstimator.com.  Multiple sites, such as RemodelingMySpace.com and SimplyAdditions.com use the same program in their calculator links.  These calculators are fairly detailed and produce a single estimated price, not a range.

DIYOnline.com

DIYOnline.com offers calculators for the following projects:

• Bathrooms
• Kitchens
• Ceilings
• Decks

These calculators are more simple than those offered by ServiceMagic and produce an estimate with a very large price range (up to 35% in some cases).  In comparing the two calculators for a bathroom remodel, DIYOnline tends to produce a slightly lower average cost than ServiceMagic when using similar cost parameters and levels of finishes.

CraftsmenNetwork.com

Despite sounding like a place for single contractors to hang out and meet other single contractors (or perhaps contractors who are not single but are really scummy and just take of their wedding rings to go to this network), CraftsmenNetwork offers some nice cost calculators covering:

• Basements
• Bathrooms
• Deck Building
• Drywall
• Flooring
• Insulation
• Kitchen
• Painting
• Roofing

These calculators are a good balance between detailed and general in terms of their question depth.  My one complaint is they don’t offer the chance to input square footage of your project.  I feel this is critical information to specify in a calculator.  These calculators also produce a fairly large price range.

CNNMoney.com

This has to be my favorite calculator, and perfect for people who like just one option.  I debated on whether or not to include this but I thought you might find it entertaining.

You simply choose from a list of 24 different remodel options.  For example, there are four bathroom options:

• Bathroom Addition
• Bathroom Remodel
• Upscale Bathroom Addition
• Upscale Bathroom Remodel

You simply click which you prefer and out pops a price.  From 2005.  Perhaps this calculator would be best if you only wanted to spend 20 seconds on defining remodel cost.

One nice thing about this calculator is it shows the effect on your home value in terms of recoverable costs, whereas the others do not offer this option.

In our next and final post in this series, we will look at my favorite method for determining remodel costs: hiring yours truly!

Go back to Defining Remodel Cost home page.

Image Credit: www.flickr.com/photos/jeremylevinedesign/

Welcome to part two in our four-part series Defining Remodel Costs.  In our last post we looked at defining remodel cost via contractors.  Now we turn our attention to a more advanced, do-it-yourself approach: developing your own spreadsheet.

I am an Excel fanatic.  I have an assortment of Excel lists, budgets and estimates: upcoming blog posts, gift lists for others, important dates that I just can’t forget, estimated costs to remodel my own home,  goals for the coming year(s) and even books I have read or plan on reading.

Then Google Docs came along, and I thought I had died and gone to spreadsheet heaven.  Not only do I have all my spreadsheets in one place, accessible from any computer with an Internet connection (and really, is there such a thing as one without anymore?), but I can share my spreadsheets with others!

But what do I do most often with Excel?  I estimate projects.

And you can use it too!

Let’s look at defining remodel costs using your own spreadsheet.

When to Use this Method

Here are a few attributes that are recommended, if not mandatory, for effectively using this method:

• You are knowledgeable about remodel elements.  You can analyze a project and identify general steps needed from start to finish.
• You are good with manipulating Excel documents.  Not like “tax fraud” good, but like you know how to add rows and columns and write a formula or two.
• You have a source for quantifying unit costs for construction labor and material.  (If this is not you, keep reading.  Help is out there.)

When NOT to Use this Method

This method isn’t ideal if you’re looking for an immediate estimate.  Thoroughly using this method takes the average person a few hours here and there over 7-10 calendar days.

You may also consider one of the other methods of defining remodel costs if you have a huge project on your hands.  Using this method to price a new 3,000 square foot house on two fully-developed acres might be a bit much.  I’ll let you use common sense on this once you read through the steps below.

How to Use this Method

Step 1:  Download the Spreadsheet

Here is the form to download the Excel cost calculator I created specifically for the  MeandYourHouse.com community.  (My free e-book will come with it as well.  Peruse it for more details on managing your remodel project.)  Simply enter your name and email below, click “Submit,” check your email, click the confirmation link, then check your email again for the free downloads.

Step 2:  Build the Spreadsheet

Now the fun begins!

1. Open the spreadsheet.
2. Click on the second tab from the left labeled “Scope.”  Tabs are along the bottom of the document.
3. Fill in the three yellow boxes on the top right of the page as instructed.
4. In the same tab, double-click on the “Project Description” box, and write a brief description of your project.  If you want, you can come back to this step later.
5. Click on the next tab to the right, called “Summary.”
6. On this tab, fill in the two yellow boxes.   The first is the projected project start date and the second is the number of calender days you think the project will take.  You can also skip this if you like.  It does not effect the final cost estimate.
7. Click on the next tab to the right, called “Soft Costs.”  Here you will see a list of costs sometimes associated with a remodel project.
8. On this tab, fill in the yellow boxes to the best of your ability.  Make guesses if you need to.  The goal is to arrive at a general project price, not an exact bid.  If an item does not apply, simply leave it blank.
9. Click on the next tab to the right, called “Estimate.”  Here you will see a list of hard costs sometimes associated with a remodel project.
10. Do not input hours or dollar amounts into the yellow cells yet!  Remember, we are still just building the spreadsheet.
11. Go through and delete line items that do not pertain, add line items that the spreadsheet may be missing, or alter line item descriptions to match your project.

Your spreadsheet is now built and you are ready to begin your research!

Step 3:  Gather the Costs

Let’s face it: the difference between a pro and an amateur is knowing the cost for each piece of a remodel project.  Thankfully there are a slew of resources that provide unit pricing.

One method is to search Google for unit rates for building materials and labor.  This is quick and easy.  Unfortunately, it is also prone to wide margin of error.

A better method is to pick up an estimating reference book like Means Residential Repair & Remodeling Costs 2009: Contractor’s Pricing Guide.  This book is an easy way to determine unit costs for virtually any aspect of a residential remodel project.

If you encounter an unusual condition in your project, another good method for determining costs is to give a quick call to your local subcontractor.  Most can quickly translate your description and size into a unit cost. (Dollar per square foot, for example).

Step 4:  Input the Costs

As you conduct your research, fill in the spreadsheet cells you created in step 2 above.  Simply go down the list of project components and fill in the yellow cells either by referencing your estimating book or calling subcontractors.  Feel free to have subcontractors come to your home to provide estimates as well.  This may be your best bet for complex scopes of work.

Step 5:  Check Spreadsheet Formatting

Now your spreadsheet should be complete and you have a detailed breakdown of your project.  Before printing, check to be sure the “print area” is correctly selected (File-Print Area-Set Print Area) and your page is oriented how you like.

Print the entire workbook and you are done!

As you can see, defining remodel costs via your own spreadsheet can be a lot of work but very detailed and precise.  It takes some strong knowledge of remodeling principles, time lines and processes.  Perhaps this method is not for you.

In our next post, we will look at a very simple method for determining remodel costs: using on-line calculators.

Go back to Defining Remodel Cost home page.

Image Credit: www.flickr.com/photos/jeremylevinedesign/