10 things you need to know about home renovation

10 Things You Need To KnowAbout Home Renovation

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10 Things You Need To Know About Home Renovation A publication from MyReno411.ca 2

MyReno411.ca is becoming the one-stop shop to inspire and enable the home design and renovation experience, serving the $70 billion home renovation industry in Canada and the 2.4 million homeowners hiring contractors.

This means answering the “what”, the “how” and the “who” for home renovation. • Photographs or design ideas will be a source of inspiration, the “what” of home renovation. • Articles and eBooks will inform homeowners on the “how” of a home renovation. • Lists of contractors, with reviews and ratings will connect homeowners with reliable contractors, the “who” of home renovation.

Equally, contractors are encouraged to advertise their services, to differentiate themselves from their competitors. We intend to build an online community of homeowners and contractors, helping both, so that they can help each other.

MyReno411. A Better Home Renovation.


About the Author

Alex Beraskow, a Professional Engineer (P.Eng.), founded MyReno411 and continues as President & CEO. He built his own home, acting as the General Contractor and so dealt with many home renovation issues – management and trade – first hand.

As a management consultant over a span of 3 decades he managed a wide variety of businesses. He started his career with IBM and has consulted in the Information Technology domain throughout that period. During that period, he managed 5 different professional services firms.

In 1992 he founded IT/net, a consulting company in management and technology that became Canada’s most award winning consulting firm (Company of the Year, 50 Best Managed in Canada, and Best Workplaces in Canada). In 2010, he was a recognized as Business Person of the Year by the Greater Ottawa Chamber of Commerce. He sold IT/net to KPMG in 2010 and then stayed through a transition period.

He is now committed to building the best web service in North America, to help homeowners in the end to end process of design and build, while providing a platform for contractors to advertise their service. Alex Beraskow

Title: President & CEO, MyReno411.ca

Best Renovation Tip: Home design and renovation is an investment- emotional and financial. Commit to the pro-cess. Expect to spend time, to be involved. Work together.


Objective

Given that a home renovation is an investment – financial as well as emotional – homeowners should know some of the basics. The following is a foundation piece, one that presents the context for any home renovation.

Homeowners doing a home design and renovation, for the most part are not aware of how complex and expensive a process it all is.

Is a foundation piece, this should provide some background information to the homeowner that they go in with “eyes wide open.”

Our Research Shows: • 80% of home renovation caused stress in home life

• 30% of home renovations run over budget

• 35% of home renovations run over schedule

• 46% of homeowners found it difficult to find a reliable contractor


Take a deep breath

The home renovation industry is huge

Not all contractors are the same You are not alone

Using print directories is old fashioned

Contractors are not skilled in all things

Who is the general contractor?

Is it a job or a series of jobs? How will you pay for the work?

Murphy is alive and well

THE 10 THINGS 1

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Canada USAIndustry size > $70 B > $300 B

Numbers of contractors > 100,000 > 1,000,000

Average job cost > $12,000 > $3,500

Homeownership 67% 69%

Affected homeowners > 20% > 20%

Big box stores > 80% > 80%

Take a deep breathHousehold renovations have both great reward and risk. Every homeownerwants to improve their home whether it is to improve the resale value, carry out routine maintenance and refurbishment, or to make improve-ments for better living and comfort. The excitement is often coupled with inexperience and lack of knowledge of the process, as well as simply not knowing reliable contractors. Faith is then placed in the referrals generat-ed by family and friends – often blindly – without second guessing, simply hoping that it will all turn out right.

There are plenty of success stories and frustration about home renovation. Mike Holmes states: “On readersdigest.ca when asked what percentage of contractors are doing good, honest work. “I call it the good,the bad and the ugly; 20, 70 and ten per cent, respectively.” Our researchshows that more than 25 per cent of projects go sour: 30 per cent runover budget of money, 35 per cent over budget of time. That researchalso shows that 80 per cent of home renovations caused stress inhome life.

Keep your expectations real. Be involved, vigilant and manage the risks.There are rewards.

The home renovation industry is hugeThe home renovation industry is a cottage industry with many and variedproviders. Regulation varies across jurisdictions; more often then not,there is little government oversight.

As such, work standards – quality, project and contract management –also vary. Many contractors are sole proprietors that work out of theirhome, doing physical work by day, and administration by night.

It can be a jungle for the homeowner, trying to find out who is reliable,and how best to manage the entire process.

Not all contractors are the sameWhile there is some dissatisfaction with the home renovation industry,demand continues to be high for reliable contractors.

Home renovation can mean maintenance and repair, mainly small jobs, through to large improvements. Contractors typically fall into one of two categories: design and build firms, or trades.

Typically the latter are individuals or small teams of individuals. Installa-tions including equipment, cabinetry etc, are typically done by stores.

Unfortunately, the quality standards can be uneven for most work. Some,such as electrical, are regulated because of safety concerns, but most are not. Most projects require several different trades. Consequently, many contractors hire others, called subcontractors, to do work on one job or project. It is important to have one person to deal with and not get caught up in managing the myriad of contractors and subcontractors.

Many trades, act as subcontractors or freelancers, meaning they depend on the contractor to find them business and pay them. Most trades, and certainly larger firms are multi-tasking, working on several jobs at the same time (while waiting for materials to arrive, for decisions to be made, and for work to set in place, etc).

Many projects are done on a cash basis. The contractor may avoid payingtaxes as it goes unrecorded. The homeowner may not have a formal record either, for warranty purposes.

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You are not aloneObviously, the renovation contractor is far more experienced than atypical homeowner in the home renovation process.

While one in five homeowners carry out a home renovation every year,for the most part a homeowner may do only one or two projects every10 years. As such they are inexperienced in all aspects of the process:management of quality, project, contract, etc.

A homeowner typically does not know who is a reliable contractor and,who is not. Typically, it can be argued that homeowners rely on friendsand family for referrals and trust those referrals. However, the personproviding the reference might not have the same work standards including quality, time and money, as you do. It is important to know who is reliable, who is good, as it is to know who to avoid.

Using print directories is old fashionedPeople and firms move on, change names, addresses, etc. Printdirectories, for the most part, do not have email addresses, andcertainly never references of completed projects or homeowners.

It is difficult to tell whether the contractor is a sole proprietor. Oftenthere is not a complete description of services offered.

Because these directories cannot be updated in real time they may notbe accurate and print directories do not offer comprehensive searchcapabilities like Google; searching across a range of criteria is impossible.

Finally, no rating data is available on contractor quality.

Contractors are not skilled in all thingsA home renovation contractor needs a blend of business, technical skills,as well as knowing the law.

Who is the general contractor?The general contractor assumes responsibility for the deliverable, includingquality, costs, and the schedule. They control the process: What getsdone, how it gets done and when it gets done.

The general contractor takes the risks, as things do go awry, and there isa cost, with both time and money, associated with that.

More often than not homeowners do not have the skills or interest in thatmanagement function. The general contractor role can represent 15 percent of the overall home renovation budget so deserves some thoughtand scrutiny. Moreover, many successful general contractors will allow afurther 10-15 per cent as a contingency for all those items that go awry.

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Trade skills Management Skills ContextMore than 50 trade skillsSome regulated, most notPrimary skills as well assecondary/supportingskillsLicensingCertificationSkill level (apprentice –master)

Contract managementProject managementCost ControlProcurementLegalIssues managementClient ManagementQuality management

Building codesBylawsNeighboursAuthorities


Is it a job or a project?For the most part, firms have projects while individuals have jobs/tasks. A jobconsists of a series of tasks, typically small in scope. A project consists of aseries of jobs and should have a definite start and finish date.

How will you pay for the work?Any job or project can be contracted as either a fixed price or on a time andmaterials basis. In broad terms, a fixed price implies fixed terms – scope,assumptions, etc. - and should not change unless the scope changes. Theoriginal quote could have been too high or too low. Regardless, the pricestays the same.

With time and materials, the contractor gets paid for time and attendancebased on an hourly rate, going at his/her pace.

With a fixed price, the contractor has incentive to finish the project early,may be even earlier than originally estimated. However, that can incent thecontractor to take shortcuts or even skimp on project quality especially if theproject was underestimated. For the homeowner it provides cost certainty.It can lead to unpleasant discussions about the scope of work, for example,what was assumed and what was the reality. It maybe somewhat inflexibleif changes are made to the scope of work throughout the process.

Under a time and materials basis, the contractor could work at a slower paceas there is no real incentive to work at top speed. While this basis providesflexibility to make changes on the fly it can lead to cost uncertainty. Costs canescalate as the scope of work changes. In turn, that means the completiondate can also become uncertain.

Many contractors prefer to work on a fixed price basis so that they can controltheir projects and crew better. Homeowners typically want the best of bothworlds – cost certainty along with flexibility which can lead to serious projectand contracting issues.

Murphy is alive and wellAll work estimates including time and money, are based on assumptions, aswell as on the people doing the work. Document them so that you have aclear record. Skill levels vary in all work. A master should be able to completea task much faster than an apprentice. Know who is doing the work and thecalibre of contractor. Estimating continues to be an art based on experienceand knowledge and not an exact science. It is very difficult, if not impossible,to be 100 per cent accurate on an estimate. Things go wrong, things break,mistakes happen. Expect it. Every job and project is unique. Rarely are twojobs the same, that the same estimates apply to both, equally. Contractingstaff, such as trades and business folks, are effected by personal issues atwork just like homeowners are.

Finally, know the cost driversMaterials, regardless of whether the project is being done on a fixed price ortime and materials basis, often make up more than 50 per cent of the overallproject cost. Moreover high end materials can often double or triple the price.

Labour rates vary, based on skill – master versus apprentice. Moreover,licenses, insurance requirements, and certifications all cost money. Overheadrates also impact the overall price. For example, some larger firms maintainshowrooms for the convenience of homeowners.

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Jobs/Tasks Projects• Primary skill and possible secondary skill• Done in one continuous process, without much waiting• One or two people• $5,000 - $25,000 project value• While it should be managed as a project, it is not as complex• Less than a dozen tasks• Less than month to complete

• Design and Build• Use multiple skills, multiple trades• Multiple jobs/tasks, with wait periods• Team of several people• Greater than $20,000 in project value• Greater than one month to complete• Complex


In this SeriesIn this Series

1 10 Best Practices For Homeowners Doing A Home Renovation

2 10 Things You Need To Know About Home Renovation


Alex Beraskow, P.Eng., MBAPresidentwww.MyReno411.ca1-855-247-1494613-763-0060 (ext 103)

[email protected]

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10 things you need to know about home renovation

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