home equity

4 steps to prevent a remodel gone wrong

2. Document everything

Once you select a contractor, work with him or her to craft a written timeline for completion, including milestones to be met along the way, says Bob Gullo, president of Electronics Design Group, a technology systems contractor in Piscataway, N.J.

"Document whether or not they are coming to work on the days they're scheduled to come, and if not, if they are calling to let you know beforehand," he says. "If you leave them a message, note how long it takes them to return your call. If they're not very responsive, it should be an immediate red flag."

Make sure they're using products they promised to use and that they're not cutting corners. Homeowners also should regularly review the cost of materials, Higgins says.

"Look out for cost overruns, so that you're not unpleasantly surprised when the final bill comes in," she says.

3. Raise concerns immediately

If you discover problems, promptly bring documented concerns to the attention of the supervisor or general contractor on site, says Higgins.

"Use your notes for reference and say to them, 'I'm not happy with this work and here's why,'" she says.

It's possible a problem could arise that's beyond the contractor's control. For example, he or she may find unexpected structural damage that must be addressed before the project can move forward. If that's the case, it's probably up to the homeowner to take ownership of the problem, Higgins says.

However, promptly address the issue if regular work seems to be delayed without a good reason, or the work doesn't look like it's going according to plan. Whatever makes your project take longer to get done right is going to cost you money, she warns.

"Give the contractor a chance to respond, but keep it within a short window -- about 24 to 48 hours," Higgins says. "Set the expectation that you're giving them a certain amount of time to fix the problem, but you won't let it go unresolved."

4. Escalate if necessary

If the work problem hasn't been adequately resolved in a reasonable time or the contractor is unreachable, the next step may be legal action. Review your contract to determine how to proceed.

"Many contracts will state that before a party can file suit, the homeowner must try to solve the conflict through mediation," Cavasinni says. "This is when all parties involved meet with an independent third party for the sole purpose of trying to resolve the claim."

Usually the homeowner starts the process by making a formal demand for mediation with the contractor, according to the terms of the agreement, says Cavasinni. Then, during mediation, each party makes its case. The mediator goes back and forth to try to get both parties to settle the claim.

"If everyone agrees to resolve the issue, then great, there's no need for one party or the other to file a lawsuit," he says.

However, "the mediator does not make a binding decision about who wins or loses," says Cavasinni. If the parties are unable to settle their differences, the next action could be arbitration or even a lawsuit.

The homeowner's signed contract will often indicate whether they can file a lawsuit in state court, or if they agree to file a claim in arbitration instead, using an entity such as the American Arbitration Association, Cavasinni says.

"Arbitration is probably best thought of as a private trial," Cavasinni says. "Instead of trying a case and having the jury decide who wins and who loses, and how much money is owed (as with a regular lawsuit), arbitration typically involves a three-member panel of arbitrators."

An arbitration panel's decision is binding on the parties, Cavasinni says.

Going through arbitration or a lawsuit may only be worthwhile if a large amount of money is involved, because attorneys' fees may not be recoverable, even if the homeowner wins, Cavasinni says.

And according to Cavasinni, the cost of a lawsuit could reach up to $30,000 or $40,000, with the case taking up to two years or longer to be resolved.

"I tell my clients that if there's a way to fairly and reasonably resolve the claim without resorting to litigation, I would do that," he says. "Once you get into litigation, in large part the only ones who win are the attorneys."


Show Bankrate's community sharing policy
          Connect with us

Ask Dr. Don

HELOC vs. reverse mortgage?

Dear Senior Living Adviser, If you have a home equity line of credit , or HELOC, for $150,000 with no balance on it, should you use it instead of a reverse mortgage? Which is a better way to save the assets if there is... Read more

Connect with us