![]() A design-build contractor is, in basic terms, the same as a building contractor, but one who forgoes the use of an architectural company. ![]() Design-build contractors have been around for many years and are commonplace. When searching for a contractor, you may see the term design-build contractor used. However, if you're considering this arrangement, make sure to perform due diligence and make sure the architect is qualified-not just a friend of the GC. There is some value in going with an architect recommended by the contractor, as this ensures both parties are familiar with one another. While some contractors can design your addition or can work from stock building plans, in many cases it's best to hire an architect. Work With an Architect (Where Appropriate).But it's important that you're allowed to withhold a significant fee (10 to 25 percent) until you make a final walkthrough of the project to verify your satisfaction. More commonly, payment is made in two or three equal installments, keyed to important completion milestones. ![]() A contractor who wants the majority of the payment upfront may be on shaky ground financially. In fact, laws in some areas prohibit contractors from asking for a down payment of more than 1/3 of the total contract. It's often regarded as a warning sign when a general contractor insists on more than 50 percent of the total as an upfront downpayment. There is no hard-and-fast rule on how payments should be scheduled. You and the general contractor should sign a contractual agreement before work begins, including a schedule for making payments. This is the time when you might agree to tackle some of the finish work yourself in exchange for a discounted bid. The GC's profit on your project is typically 10 to 20 percent of the total bid, so you have a right to negotiate assertively. ![]() Your first meeting with prospective contractors should discuss the scale of the project, the contractor's timeframe, general design issues, and cost-saving strategies.ĭon't be afraid to ask the contractor about options for controlling costs during the early planning process. For most people, this job is too big for you to manage on your own unless you have professional experience and ample time. The importance of the contractor cannot be overestimated. If they cannot recommend a contractor, lose your shyness and knock on the doors of homes that have recently had additions completed. Get recommendations from neighbors, friends, or relatives. You will pay the GC directly in agreed-upon installments for the project, and the GC will in turn pay and supervise his own employees and the various subcontractors that work on your project.Įverything hinges on the ability to find a reputable contractor who you can work with, so take your time picking the GC. The GC may have a salaried staff of general carpenters that perform much of the work, but they also work with a variety of specialty subcontractors who will be hired for specific duties, such as plumbing, wiring, and HVAC work. Most people will find it best to hire a general contractor (GC) to complete the work on a room addition. Such borrowing should be done carefully, though, after consultation with a financial advisor. If you can't qualify for a bank loan, there are other ways to secure loan financing, such as borrowing against the value of a retirement fund or life insurance policy. Securing a loan is, of course, dependent on a homeowner that has good credit standing. For example, if your home is assessed at $500,000 and your remaining balance on the mortgage is $250,000, many banks will be willing to loan you an additional $212,000 (85 percent of $250,000) to complete a major room addition, if it promises to add a good amount of value to your home. Where a homeowner does qualify for a second mortgage or home equity loan, banks will normally extend no more than about 85 percent of whatever equity you have in the home. This usually involves obtaining a home equity loan, second mortgage, or line of credit based on the amount of equity in the home-the current real estate value of the home minus any outstanding mortgage or loan balance.īanks and other lenders are often reluctant to loan money to homeowners who still owe 80-85 percent or more of a home's assessed value, though this is not a hard and fast rule.
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