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A Good Time to Remodel by Mary Lockman

I was struggling to prepare a 14-pound turkey on my tiny countertop when my younger brother surveyed the kitchen, took my hand and mumbled, “Gosh, I’m sorry.” At eight square feet, this was the only countertop in our woefully dysfunctional kitchen. Our other holiday dishes were sitting on the step stool, the microwave, on an empty stove burner and atop our covered garbage can. When I looked around at the aftermath of the meal, I felt a steel rod enter my spine. The kitchen had to go by any means necessary.

My partner and I fell in love with our Mount Baker home in May 2001 when we stood together in the living room, admiring the sunset view. The house is an Arts and Crafts/Tudor from the 1920s, and we loved the wood details, the coved ceilings and the circular floor plan. We did not love the kitchen.

Essentially a galley with a mud porch projecting to one side, the kitchen is small, poorly lit and dated. The sink and stove reside in the galley, but the refrigerator lives on the mud porch like an unruly dog, isolated from the other appliances. The limited counter space made us almost nostalgic for the kitchen in our studio apartment in New York City. It was also only eight feet square — which made sense in a 350-square foot apartment; not so much in a 2,400-square foot home. So, vowing to make it better, we shook hands on a beautiful four-bedroom home with a large yard, full basement and a tiny, dysfunctional kitchen.

Commitment Grows in Stages

In this way we joined millions of other homeowners who want to remodel but have no idea where to start. At the time this article goes to print we’ll still be a ways from actual construction (set to begin July 2010); however, we’ve already lived through nine years of enthusiasm, intimidation, denial and pure dread. We rationalized that as two adults without children we could take our time, “research” our options and, until we were ready, live with our dysfunctional kitchen (“Sure, the kitchen has problems, but look at that sunset!”). Denial alone lasted at least eight of those nine years.

Most recently, the Great Recession seemed to justify our procrastination. It was not the time to make any unnecessary purchases, we said. When we applied for a home equity line of credit in 2009, it was to strengthen our safety net should one of us lose our job. But then came that holiday dinner, the breaking point that ushered us out of denial and into grim determination. Something had to be done.

With so many unemployed and so many others still worried about layoffs, it seemed counterintuitive to commit to a remodel. But we hoped that it might just actually be a good time to bring our kitchen into the 21st century. Clutching each other for support, we set out for the 2010 Seattle Home Show in February to find out.

The Benefits of Remodeling Now

After cruising through the show, checking out kitchens and raiding candy bowls, we made our way to the Master Builders booth, a small Q & A venue staffed by local designers and contractors who answer questions and calm fears. It was here we learned that now, in fact, is an optimal time to remodel, more so than at any time in the past ten years.

We were lucky to find Joe Ratto, owner of J.A. Ratto/Builder, and Jerry Hicks, of Hicks Construction, manning the booth. Ratto serves as head of the Technical Advisory Board for Seattle Central Community College’s Wood Construction Center, and both men have many years’ experience in the field. Each answered our questions frankly about the economics of remodeling now.

“People are much more cost-conscience and contractors are aware of that,” was the hopeful launch of our conversation. As they continued, I learned that the remodeling industry is a much leaner business now, with contractors interested in just about any size project. Material costs are down, significantly lower than before the financial crisis, and labor costs, the line item contractors have the most control over when they bid for jobs, are lower as well.

“Today, the definition of success is to keep your doors open,” said Ratto, with a chuckle. For contractors, this means laying off all but their most talented and valuable team members. For homeowners, it means getting the most highly skilled workers for your job.

Almost all contractors have a “right hand”; one or two people who have been with them for years and have skills ranging from rough carpentry to fine cabinet finishing. These are the workers whom contractors will retain to the bitter end. The same is true for all of the subcontractors they bring into the job; electricians, plumbers and tile cutters, among others. Only people with long experience and versatile skills seem to still be alive in the industry. What this means for homeowners is that no one will be “learning the trade” in your house and on your dime.

You may also find that fixed bids are more competitive than in past years, since contractors are eager for work. And contractors who haven’t felt the need to lower their hourly rates are probably carrying fewer simultaneous jobs. This means more attention can be paid to the most critical aspects of your remodel: quality, time and money. Subcontractors are also more available and you are more likely to get the most talented in their field.

Turnaround times for off-site projects like cabinets and countertops have also been seriously reduced. In some cases, kitchen cabinets can be delivered in a record four to five weeks, depending on the builder. For the homeowner, this means fewer cost overruns, a faster timeline to completion and all that talent concentrating on your job; very real advantages when living in a house under reconstruction, especially if it means living for a while without a kitchen.
Permits also seem to be moving at a brisk pace, at least here in Seattle. Ratto spoke admiringly of a three-week turnaround on a permit to build a second floor on a Seattle home, very different from a friend of ours whose permit took two months for the same type of project not that long ago. If your remodel does not change the foundation or the roofline of your home, then permits become front-desk procedures that can be completed as quickly as the same day.

The story may not be the same in surrounding areas, however. Hicks warned that Snohomish County recently laid off three-fourths of its permit office staff due to budget cuts. Redmond laid off building inspectors for the same reason, so both areas are suffering slowdowns in the permitting process. Check your local permit office to see what the average turnaround time is for your type of project, and be sure to inquire about the speed of front-desk permits as well.

Finding the Cash

As we all know, borrowing money is not as easy as it used to be. In our post-financial meltdown world it is especially important to secure financing before you begin your remodel, as your financing will determine the scope of your project and how quickly you can get started.

“An excellent first step in this process is to do a full mortgage evaluation,” says Maryanne Coffman of Golf Savings Bank. Each mortgage and each project is different enough to warrant this kind of individual attention. Once the evaluation is complete, your loan officer can help you strategize between several options.

If your credit is great, your home equity is intact and you are still employed, it may take two weeks to a month to sign the final papers for a home equity line of credit. This is the least expensive way to finance your remodel. For larger projects, a cash-out refinance of your home mortgage is still a good option, with interest rates hovering at around five percent for the past year. Construction loans are the most expensive and most restrictive method for funding, but they can be very handy for really large projects.

If you are using a home equity line of credit for your project, then Coffman’s advice is to move your remodeling budget from the home equity line into a high-interest savings account as soon as possible. In the past two years many lenders reduced or eliminated home equity lines, even for good customers, in order to decrease their risk. Even if your credit rating is good, banks can and will do this without warning to their customers. By pulling your equity now, you will prevent being caught, halfway through the remodel, with substantially less available credit than you thought you had.

Loan amounts, which once were awarded for as much as 100 percent of the equity in your home, are now at 80-90 percent, tops. Income verification is a more formal process, very different from the days before the mortgage crisis when banks commonly worked off of your stated income. You will need income tax statements and employer verifications, and the size of your loan will be limited to the potential debt that the bank determines your income can support.

Think Outside the Bank

Every loan that banks write is strictly based on credit ratings and has been for the past several years. This means that any debt that goes into collection, even if it is paid off, will be a serious detriment to your qualifying for a loan. Unfortunately, the current economy has impacted a record number of credit ratings, causing more than a few debts to go into collection due to lack of income. If you are still carrying the burden of a negative credit rating, then one alternative to a bank lender might be your local credit union.

I called on Robert L. Coleman, founder and president of the Northwest Baptist Federal Credit Union, to get a little advice. He began our conversation with a recent story of how he awarded a loan to someone, despite a history of debt going into collections, because the customer had mitigated his collections (renegotiated his debts), had a good track record with the credit union and his wife had a good credit history.

Federally chartered credit unions have a limited field of membership. This makes them more interested in helping the members they do attract, and your relationship with that very personable organization can carry you through a tough credit rating once you are back on your feet.

“We can afford to do some things that other institutions cannot do because we can assess track records and we can assess current financial status. Consequently, we are in a better position to assess character and to assist our credit union members,” states Mr. Coleman, whose credit union is celebrating its 52nd anniversary.

Remodeling on a Budget

Once your financing is set, the next step is to make sure you maximize your options with the money you have. At the Seattle Home Show, the most oft-quoted advice for creating a great kitchen on a limited budget was to work with a good designer.

Most construction delays and cost overruns are caused by clients who change their minds on a design that has not been fully fleshed out. Remodeling on a budget, however, is a front-loaded process. By spending as much as 80 percent of your effort in the design phase, you can ensure that the project comes in on time and on budget. Time with a designer eliminates the unexpected expenses and emotional meltdowns that need not be an inevitable part of remodeling. Jerry Hicks summed up the value of a good designer in one pithy question, “I can either erase that pencil line or tear out that wall; which is cheaper?”

The designer we chose quickly demonstrated her value to us. When I casually mentioned how authentic farmhouse sinks look in old homes, she agreed, but then described the ergonomic nightmare of a farmhouse sink for anyone over five feet five inches tall. Though my partner perked up (she is five feet three), I learned with dismay that at five feet nine inches with back troubles, a farmhouse sink wouldn’t work for me.

Needless to say, she did not recommend the sink. With years of experience and training under her belt, she already knows the unintended consequences of installing farmhouse sinks, exotic wood countertops and other less functional choices. Aesthetics are only a part of the decision process, and we were delighted to draw from her wealth of knowledge rather than from our own arbitrary ideas.

It’s All About Trust

Both Hicks and Ratto characterized remodeling as a partnership: homeowner, designer and contractor must all work together to achieve a common goal. Both men have turned down jobs, even in this economy, when they felt that a true partnership with their customers was just not there. Experienced designers and contractors already approach new projects with this in mind. You can get a jump on the process by approaching them in the same way, viewing your relationship together as the most critical tool for success.

How to find that relationship is through the tried-and-true method of networking. There are a lot of salespeople out there, and the best way to separate the salespeople from the professionals is by talking to your network. Tap your community of friends, family, neighbors and coworkers. The Master Builders Association is also a great resource. The more you talk about your project, the more good names will surface.

Once you have a few candidates, interview both designers and contractors before you sign with a team. Don’t go overboard on this; interviewing three good candidates should give you what you need to make your decision. To find out what to ask our candidates, I looked up Dave Borgatti, who teaches at Seattle Central Community College in the Wood Construction Center. Borgatti suggests interviewing former clients as well as designers and contractors.

Three excellent questions to ask former clients include “How did the contractor protect your property during the remodel?”; “Did the contractor arrive on time and stay consistent to the established schedule?” and “Did the contractor come in on budget?”

Once you know this, you can zero in on questions that only the designers and contractors can respond to, such as “How long have your employees and your subcontractors worked for you?”; “Are your subcontractors registered with the state of Washington?” and “Will all the work done in the home go through the permitting process?”

The last two questions are important for the purposes of insurance coverage during the project, inspections after the project is completed and the resale value of your home. Make sure everyone is registered and everything is permitted before you begin. Given some of the horror stories he shared, it’s just not worth it to overlook these simple procedures.

For those who live in antique houses, an important, deal-breaking question is “Do you have experience working on older homes?” Our contractor works exclusively on old homes, an important consideration for our 1928 house which is complete with knob and tube wiring. Our designer, also a lover of old homes, toured every room looking for ways to imbue the new kitchen with old-house charm. Under her watchful gaze, our color palette, lighting, hardware, flooring and other details will reflect the classic style of our house so that the kitchen won’t stand out as a new millennium add-on.

Let the Work Begin

With all of this research under our belts, we believe we made the right decision to start our project this year. We’ve met three times with our designer and contractor and they have measured every possible nook and cranny. We are shopping for a counter-depth refrigerator to fit the small footprint of our kitchen and deciding between Marmoleum patterns for our new flooring. We are delighted with our remodeling family and excited about the next holiday meal, a ribbon cutting for our new kitchen. We can’t wait!

Mary Lockman is a college administrator at Seattle Central Community College and is looking forward to having a functional kitchen.

©Copyright 2010, Caliope Publishing Company