From: macrakis@osf.org (Stavros Macrakis)
Subject: Re: fixer-upper advice
Organization: OSF Research Institute
	<1992Jul22.144929.19192@porthos.cc.bellcore.com>
	<1992Jul22.173555.3937@oswego.Oswego.EDU>
	<14mm0eINN92@seven-up.East.Sun.COM>
Date: 27 Jul 92 01:48:41

In article <14mm0eINN92@seven-up.East.Sun.COM> swk@tylos.East.Sun.COM
   (Steve Klosterman - Sun BOS Hardware) writes:

   OK, what about financing renovations, rehabs, etc?  How do you work
   that into things? ...

I sent him a private response, but perhaps the answer is of more
general interest.

doshay@ursa.arc.nasa.gov (David Doshay) had said in an earlier
   article:

   You will find almost no reasonable source of funds except your
   normal income and credit cards. Banks will not lend to you to
   fix-up based upon the increased value of the final product. I think
   they know that most people quit in the middle and take a BIG loss.

I am just finishing a renovation financed by a bank.  The loan amount
was based on the increased value of the final product.  But this was
not a do-it-yourself project: I hired an architect and contractor.
Details below.

It is unlikely you could get a bank loan based on doing a
rehabalitation or renovation by yourself.  It is more likely if you
contract out to individual subcontractors.  It is even more likely if
you contract out to a general contractor, with a fixed-price contract.

This is based on their estimation of the likelihood that they will be
stuck with an incomplete house in unsalable condition, worth perhaps
LESS than what you started with.  ``Stuck with'' can mean either that
you can't pay off the loan any more, or that you spend the money and
still haven't finished the project.

In the case of a general contractor, they give the loan on condition
that the contractor sign an agreement with them (and the owner) which
says that he agrees to finish the job for the bank if the owner
defaults.  In the case of individual subs, the bank would have to go
into the general contracting business, which they are not set up for
(or hire a GC, which isn't budgeted for).  And of course in the case
of an individual doing his/her own work, they are stuck.  All this
without taking into account that the various trades (including general
contracting) require skill, which the homeowner may or may not have.
The professionals at least can be presumed to have experience, if not
competence (!).

To convince a bank to finance work on the house, you'll need to show
that:

 1) The house will be worth enough at the end of the project to fit
    their loan-to-value ratios.
 2) That you will actually finish the job.
 3) That the job will cost what you estimate.

Part (1) is done by giving a good specification of what work you'll be
doing to the bank's appraiser.  The appraiser is supposed to evaluate
the specification just like any other house, by comparing to recent
sales.  Thus, if you're adding a bedroom, s/he will compare to an
n+1-bedroom house.  If you're keeping the old plumbing, this might be
a downgrade in the `condition' column. etc.

Part (2) is done by checking your planning.  You will need a signed
contract with your contractor.  You will need to show in your
relations with the bank that you know what you're doing and are
capable of managing it.  Construction loans have a fixed period,
usually less than a year, so the work has to be done in that time.

Part (3) means that the contract has to be fixed-price.  It's no good
knowing that you'll be paying $25/hour for carpentry if there is no
way of estimating how many hours you'll need.

All three points are probably contributed to by having an architect
prepare plans.  As for (1), there is some additional confidence that
the finished house will make sense.  For (2), the better the plans
are, the more likely they can be executed properly.  For (3), not only
does it mean that the contractor's bid will be more realistic, but
also you have the architect's budget sense (if any :-) ) working for
you.

The only way I can see contributing personal labor is to have a
provision in the contract that allows you to `buy back' items if you
do them yourself, either at some fixed labor rate (e.g. you count as a
$15/hour carpenter) or by the job (but it would be tedious to
enumerate all the jobs).  The easiest but riskiest way is to count on
negotiating these give-backs one-by-one as they happen.  You had
better trust your contractor for this.

	-s

PS Let me take this opportunity to re-recommend some of my favorite
books in this field.

----------------

House buying and building

I can highly recommend a book which covers both house buying and
working with contractors.  Do not be put off by its title; I would
recommend it even if you are buying a standard house or building an
addition to your existing house.

	Everything you need to know about Building the Custom House:
		How to be your own General Contractor
	by John Folds and Roy Hoopes
	Taylor Publishing, Dallas

Although it seems to be very specific to building a new custom house,
in fact it gives excellent advice on all phases of buying a house or
lot (including evaluating it, bargaining, financing, etc.) as well as
finding contractors, negotiating with them, etc.  It assumes you are
going to be your own general contractor, but even if you are not, its
advice is pertinent and useful.

Some of the discussions of contracts and payment schedules may seem a
bit nit-picky, but you ought to read "The Home Remodeler's Combat
Manual" to show why it can be necessary.

I find it much better than Bob Vila's book on house buying, and also
better than House Buying Step-by-Step (which was the best among the
other books I found at the bookstore).

It's unfortunate that its title makes its scope seem so narrow.

----------------

House renovation

The undisputed `standard' in this field is

	Renovation
	by Litchfield

It is not perfect, but after looking at a LOT of other books, I find
that it is by far the best.  This is addressed to major renovation and
rehabilitation, not minor redecorating.  It has an appendix on
financing but as it says itself, it is out of date and incomplete.
Folds and Hoopes might help some, but basically you need to contact A
LOT of lenders to find one that can handle renovation loans.

----------------

Contractors -- cautionary tales

A lot of things can go wrong when working with a contractor, whether
for a small redecorating project or a large renovation.  Even
redecorating can be a disaster: painting one room can result in wet
paint tracked into carpets in other rooms, stolen silver, and a
treasured family heirloom used to level a ladder's feet.  As soon as
you cut into a wall, things can get much worse....

If you want to be ready for the worst case, and get some funny but
cynical advice, you want to read:

	The Home Remodeler's Combat Manual
	(author TBD)

Unfortunately, the author dwells a little too much on the horror
stories, and doesn't discuss enough how to avoid them.  I'd read this
book together with the Folds and Hoopes one: this one to tell you what
to worry about (and make it vivid!), Folds and Hoopes to tell you how
to avoid it.

----------------

Building Materials

Whether you are renovating yourself or having a contractor do it, it
is useful to know how a house is put together and what the right
materials are for different jobs.

I can recommend a book on the subject:

	The Visual Handbook of Building and Remodeling
	Charlie Wing
	Rodale Press

It seems to have the right level of detail for me.  It is much more
complete and reliable than Bob Vila's book on materials and methods.
There is a lot of overlap with the Litchfield book.  Litchfield covers
planning and methods of construction in more detail (how to lay out a
plumbing system), while Wing covers materials in more detail (how to
choose a kind of caulk)


----------------

Design

	The Timeless Way of Building
	A Pattern Language

	Christopher Alexander
	(Oxford University Press).

Alexander is on the margin of architectural practice, but has many
important ideas.  His thesis is that there are many `patterns' which
over the centuries we have discovered work well, and others which work
poorly.  Patterns can be shapes, relationships, design rules of thumb,
or principles.  He doesn't care where the patterns come from-- they
could be architects' ideas or vernacular ideas-- what he cares about
is how they work.  He is strongly against flashy, trendy, superficial
design which looks wonderful but works poorly.  There is a
counter-culture flavor to his work, but it is valid well beyond that.

To use his advice properly takes a lot of thought and a lot of time.
Alexander intends his books to be used as much by laymen as by
architects; in fact, he'd rather they be used by laymen.  If you use
his method, you should get an original and comfortable house that
works well, but it does require some concerted effort.  And you will
probably still need an architect or engineer to translate your plans
into something a contractor could bid on.

The intent is not to help design a standard suburban house, but the
books will give you some guidance in proportioning rooms, deciding on
sizes and relationships, making sure you're not doing things stupidly,
etc.

They may help you evaluate someone else's plans.  You will be able to
pick out details, ask important questions, and begin to answer them
(e.g. ``will I feel comfortable sitting and chatting in that neat
breakfast nook?'').

They also give almost zero practical advice about building (as opposed
to design) -- they're not intended to.

----------------

Kitchen Cabinets

If you want to know how kitchen cabinets are put together, or want to
build them yourself, there is an excellent book on the subject:

	Building your own kitchen cabinets
	Paul Levine

Levine works within a particular system, the frameless 32mm system.
The 32mm system is designed for efficient production and efficient
results.  Although it was originally designed for capital-intensive
mass production, with machines that can drill a dozen holes at a time,
etc., 32mm is also very effective for the home shop.  Levine shows how.

----------------

By the way, all of the above books should be available in a
well-stocked public library, if not their own collection, then by
inter-library loan.  I have no affiliation with any of the authors or
publishers.

----------------
Copyright 1992 by Stavros Macrakis
Newsgroups: misc.consumers.house