Your Money and Home Improvement

           

            Of course everyone needs an envelope, if you budget this way, for home improvement.  I don't care if you bought a brand new home or if your home is 200 years old.  You are going to need money for home improvement and/or maintenance because stuff around your house will break.  And when this stuff breaks around your house you should not consider it an unexpected expense.  You should have budgeted for the expenses because you know you aren't going to be able to live in your house for 15 years without having to replace a water heater, fix a leak, paint the house, get a new thermostat, etc.  The list is really endless.

              But what if, due to your master budgeting skills, you have decided to set aside money for a home remodel.  You have decided that the time has come that to update your kitchen and you have been putting away money each month for the past 5 years in order to pay cash for the improvements.  You have done an excellent job!  You are going to be able to update your kitchen using $50,000.00 saved and you aren't going to need to tap into home equity or have another mortgage put on your house to do it.

              But, your work is not over then.  You still need to be smart with your money in this instance because it is a very large transaction.  You need to obtain several bids from several contractors that lay out exactly the work to be done.  You need to make sure that you feel comfortable with the company you choose and you need to make sure that your agreement is in writing.  In addition, I recommend that you never give a contractor any money that is not for the company's profit on the job.  What I am saying is that I believe it is prudent to pay for the materials or subcontractors that will be used on your home remodel directly.  It would be important to bring that to the contractor's attention prior to agreeing to or executing a contract.  I say that if a contractor gives you trouble about paying for the materials and subcontractors directly that you should use a different contractor.

             Why?  Because you want to make sure that your money is only being used for your construction project.  Chances are that your contractor has many other jobs going on and he or she probably doesn't open a separate account for each job.  He or she probably puts your money into a general fund with a lot of other people's money.  So, what happens if another client with a really big job doesn't pay?  It means the contractor doesn't have enough money to finish your job.

           Or worse, you may have accidentally selected a contractor who is willing to steal your money.  Perhaps if you give the contractor the entire $50,000.00 up front he or she will disappear into the night never to be heard from again.  There goes all of your hard-earned money.  Even though you would have a claim in a lawsuit against them they may have already spent your money and may not have any more for you to recover.

           In my opinion, prior to signing an agreement with a contractor for a major job you should also do your homework.  Search local court dockets to see if (and possibly how often) the contractor and his or her company has been sued.  Lots of lawsuits can be a red flag.  You should also make sure that you have a copy of their certificate of insurance.  You should also ask to see some of the work they have done in the past and get reviews from their past customers.  Finally, I believe it is a good idea to have an attorney review the contract before you sign it.

           There are many great contractors out there that are well run, well organized and would not think of stealing your money.  However, there are also those out there who fly by the seat of their pants and would be willing to use your money for their own financial gain.  As the old saying goes, "buyer beware."  Don't let all that budgeting go to waste.  Do the extra work to minimize the potential risk in hiring a contractor for a major project.

Halcomb Singler, LLP, is a debt relief agency.  It helps people file for bankruptcy under the bankruptcy code.  No attorney-client relationship with the firm of Halcomb Singler, LLP, is created through this blog. Also, please note that Erika Singler is an attorney licensed in Indiana and does not seek to practice law in any jurisdiction in which they are not properly authorized to do so.  The information contained in this blog is general in nature and should not be relied upon for the circumstances of any individual(s) or businesses.