Remodeling contracts: 7 guidelines for homeowners

Posted by Jeffrey Anderson ~ January 7, 2013

You've probably heard it a hundred times: always have a written contract when you hire a contractor to work on your home. But what if the company doesn't provide one -- is there a place where the documents are available? What should be in a home remodeling contract, and how should the price of the job be specified?

If your contractor doesn't use an official contract, checking their references might be in order if you haven't already done so. Just about any reputable home remodeling company should have legal documents if for no other reason than their own protection.

However, if for some reason they don't, the American Institute of Architects website is a good source of contracts for just about any type of project. The documents aren't free, but they can pay for themselves many times over if you have a problem.

What should be in your home remodeling contract?

Most contract forms have spaces where most of the important information concerning the project can be entered. A typical form might ask you to fill in these items:

  • Start date
  • Finish date or time required to complete the project
  • Total cost of the job
  • How payments are to be made -- at the completion of the project or as each phase is finished
  • Whether there will be any retainer and if so, how much and for how long
  • Customer allowances, if applicable
  • Anything the homeowner is expected to provide

There will normally be a space provided for the scope of work to be described in detail. If there isn't enough room, feel free to add an attachment as this is one of the most important parts of your contract. Describing exactly what is to be accomplished during the project can eliminate possible misunderstandings and ensure that you and the contractor are working toward the same goal.

If you add an attachment, specify that there is another document on the primary form. The contractor and you should both sign the attached scope of work.

Types of contracts

There are many different types of contracts used in the construction and remodeling industries. Here are two of the simplest and, therefore, most popular:

  • Fixed sum -- This is where there is an agreed upon cost before the project starts. The advantage of this type of contract is that you don't have any unpleasant surprises when the job is finished. The disadvantage is that the remodeling company comes out ahead if the costs are less than estimated.
  • Cost of the work plus a fee -- These contracts are set up for the homeowner to pay for the contractor's labor, any materials used during the project, and a fee that is usually based on a percentage of the total job cost. This can be a good type of arrangement if you're using a reputable remodeling company that has their labor costs under control. An "amount not to exceed" should also be specified as you don't want your contractor thinking they just hit the lottery.

It's always a good idea to have an attorney check your contracts prior to signing on the dotted line -- especially if the remodeling company makes a lot of changes to the document.

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