Why You Should Hire a Real Estate Attorney When Renovating Your Home
Renovating your home can significantly improve your living conditions while also increasing the value of your property. However, although renovating your home can give you significant personal and financial benefits, this process can also be extremely stressful. Furthermore, if you hire an unskilled contractor, sign a poorly written contract, or are lied to by any party involved in the project, renovating your home can cost you thousands of dollars more than you expected to spend or leave your house with significant structural issues. These issues are the most common reasons why you should hire a real estate attorney when renovating your home.
Many people believe that they only need to hire a real estate attorney when litigation arises. However, a real estate attorney is just as valuable before you start a project as they will be able to mitigate any potential issues that could otherwise occur. Below are common issues that occur when renovating residential real estate and how a real estate attorney can help to mitigate or fix these issues.
Prevent Extra and Unnecessary Costs
All around the country, contractor competition for home improvement projects is fierce. Thus, in order to receive more projects, many contractors may give an initial offer at an extremely attractive price to beat out the other bids. However, once they get the property owner to sign the initial contract, these contractors will upsell you with add-ons or claim that they need extra money because they ran into a serious issue. Thus, what initially seems like a bargain quickly turns into costing you as much or more than all the other project bids.
A contractor may try to upsell your project by making minor project suggestions to inflate their profit margin. For example, if you have already put $50,000 and three months into a remolding project, you will probably accept your contractor’s idea to spend another $2,000 to redo or install a new lighting system in your kitchen. While this may not seem like a large add on to you, a project such as this comes with a high-profit margin and will allow your contractor to pad their income. Another common tactic that contractors use is to claim that they ran into an unforeseen issue that requires more work and thus more money. While these claims are sometimes legit, it may be worth receiving a second opinion to confirm the issue.
One other way that contractors try to get more money is to use different pricing structures depending on the expected wealth in a given neighborhood. For example, if you are perceived to live in a wealthy area, contractors may double their labor price. The reason for this is that a house priced at $1,300 per square foot can absorb a much higher renovation cost compared to a house that is valued at $400 per square foot.
How a Real Estate Attorney Can Help
The most important thing a real estate attorney does is to create a contract that protects your finances and property. While an attorney is essential to achieve these objectives, a homeowner can greatly assist this process. A simple way that homeowners can save time and money is to keep track of all the receipts and invoices that they receive from a contractor. The reason why one should do this is to make sure that you were charged the correct amount. This action, coupled with your attorney’s ability to create a favorable contract will allow you to ensure that your contractor is not adding any unnecessary charges.
Additionally, to avoid working with a contractor that changes their prices depending on where you live, do your research, get multiple bids, and be willing to walk away. While easy to state, a real estate attorney can do in-depth cost analysis research, evaluate contractors and their bids, and finally negotiate prices.
Ensure That a Project is Completed on Time
Contractors will sometimes state that your project is costing them money or say that they are basically working for free. Contractors use this type of language to make the homeowner feel bad. The reason for this is that they do not ask why the project is taking longer to finish. Certain projects may actually have unexpected issues that do require a longer time to complete. However, in certain cases, the contractor may have taken on additional work and feel that they can push your project to the side.
A real estate attorney will help you ensure that your project is completed quickly. They will complete this objective similarly to how they can help prevent extra or unnecessary costs. To avoid a project taking unnecessarily long, a real estate attorney can find a date or project timeline that both parties are comfortable with. After agreeing upon this date or timeline, the attorney will create a clause stating that for each day the contractor is working past the agreed date, there will be a credit or reduction in price. This clause will greatly protect your finances and get your home back to being fully useful.
Prevent Emotions from Adding Extra Costs or Extending a Project
When spending thousands of dollars renovating your home, emotions can be very dangerous. Furthermore, the more emotional you are around your contractor, the more they know they can take advantage of you. For example, say that you tell the contractor that the property you recently purchased is your dream home. In this discussion, you say that you paid an extra $50,000 to ensure that you would get the property. From this statement, your contractor may believe that you have extra money on a renovation project. Thus, in their perspective, adding $5,000 in costs will not greatly affect you but will massively improve their profit margins.
By hiring a real estate attorney, you are enlisting a third party to deal with the financials of the project. Adding a barrier between you and the contractor will keep this relationship strictly business. Additionally, you can avoid the contractor feeling as though they can add on additional expenses without proper justification. Additionally, if your contractor does add on unnecessary fees, your attorney can point this out. From this, your attorney can work with the contractor to amend their price calculations.
Offer Financial Guidance
Finally, a knowledgeable residential real estate attorney will be able to offer you key financial guidance concerning your renovation. For example, a real estate attorney can help you decide how much money you should spend on a project. For home renovation projects, you should think about your investment in terms of percentages. In most cases, unless you are significantly improving your property, you should not spend more than 10 percent of your property value on a renovation project. Thus, if your house is worth $500,000, you should keep the budget of your project at or under $50,000.
Additionally, a real estate attorney will be able to help you make smart investments in your property. In most cases where you need to replace or upgrade parts of your home, there are low-grade, middle-grade, and high-grade options. Deciding which of these options you should choose depends on the value of your home. An additional factor to consider is which tier upgrade similarly valued homes in your area have. The reason why this is so important is that if you choose a low-grade renovation for a million-dollar property, you will likely lessen the overall value of your property. Similarly, if you make a high-grade renovation on a cheaper property, you may greatly limit the number of people that will purchase your property.
A real estate attorney can assist you with all the financial issues you may encounter in a home renovation project. However, below are a few more important things that you should know before starting your home improvement project.
To ensure that your home will not sustain long-term property damages from insufficient or unfinished work, it is important that the contractor you hire can be trusted and will complete the repair properly. Once you decide what to prepare, you should start the bidding process as quickly as possible. However, don’t let your haste tempt you into accepting a lackluster offer. A rule of thumb is to receive at least three bids from different contractors before choosing one to work with. These offers must be off the bases of the description of the work necessary to upgrade your property. Another benefit of receiving at least three bids from contractors is that it lessens the risk of someone scamming you. Finally, receiving multiple bids can help you compare contractors. Additionally, you can look for companies that have the necessary license, insurance, and experience.
Contact Our DC Law Office for More Information
Finally, for more on why you should hire a real estate attorney when renovating your home, contact us at 202-803-5676. You can also directly schedule a consultation with one of our skilled attorneys. Additionally, for general information regarding real estate law, check out our blog.