Canada's Condominium Magazine
People use the word “nightmare” quite often when they describe some relatively unpleasant experience. It could be a traffic jam, a long line-up at a store, or a problem with some item purchased and not delivered. Occasionally the word really does apply, as in the case of a newly wed Toronto couple who bought a fixer-upper house together a few years ago then ran into an almost unbelievable, crushing series of problems as they attempted to renovate what was to be their dream home. The stress of the experience first drove the couple apart, and then the man, who was in his forties, took his own life. Such sadness should not befall people, not over a home renovation.
Home renovation is one of those areas of modern life with a very spotty, not to say downright horrid, reputation. Who hasn’t heard the stories of shoddy workmanship, fly-by-night contractors who demand payment up front then go missing in action and sometimes never show up again, sub-standard materials being used, mistakes made in wiring and plumbing, mould in the walls, leaks in the pipes, cracks in the ceilings and drafts in the windows and doors? People trying to live in a home under renovation invariably report high stress and anxiety levels. Why would anyone go through this if they could possibly avoid it?
Yet the housing market being what it is in Toronto and other parts of Canada, the home renovation industry is reportedly on the rise. Altus Group, which provides real estate data to the Toronto Real Estate Board, says that renovation spending has been rising for years, from $45 billion in 2006 to an estimated $73 billion in 2016.
An online contractor told BNN news that searches for general contractors in Canada had jumped 117 per cent so far this year, while the average spend on renovations went from $17,000 to $21,000 last year. Nancy Paterson of HomeStars said the reason seems to be that people are nervous about moving from their existing condo or house into something bigger because they fear the cost will be enormous. Renovations on condos, she said, are up 40 per cent over last year, more than double the average historical year-over-year increase.
Her data appear to be at odds with a new Conference Board of Canada (CBC) report that says the home renovation economy is beginning to show signs of weakness, as highly indebted consumers are more unwilling to take on large renovation projects. The CBC further forecasts a 0.2 per cent slowing in residential construction in 2017, a year it says will be “tough” for the industry. The CBC forecasts spending growth in the sector averaging less than 1 per cent through 2020, though non-residential construction will benefit from government infrastructure spending, growing by 3.7 per cent this year.
Every homeowner deserves to know what their project will cost and entail and to have insight into how the nature of the renovation will impact the value of their home. A successful renovation starts well before construction begins.
Whichever view is correct, for those who are prepared to dive into the sometimes murky, possibly unfamiliar world of home renovation, there is plenty of good advice to help them come out again relatively unscathed. A renovator and spokesman for the national home renovations group RenoMark™ recently gave a number of lifestyle, financial and logistical tips that consumers should consider when contemplating a renovation. Guy Solomon also spoke at the National Home Show earlier this month and said that every homeowner deserves to know what their project will cost and how it will impact the value of their home.
Here is what Solomon says consumers should look for in a renovator:
- A business licence, liability insurance and Workplace Safety and Insurance Board insurance.
- A written contract: true renovation professionals will provide a proper contract that spells out project scope (and a process for authorizing and communicating any amendments), defines roles and reporting structure, specifies construction materials and provides a complete timeline, clear payment schedule, and a detailed explanation of what’s under warranty and for how long.
- An understanding of required permits and a willingness to help you acquire them. A professional contractor will be up-to-date on provincial building codes and the municipal requirements of your area. They should be ready to work with you on creating and submitting a detailed application that includes a set of plans, drawings and other documents.
- An affiliation with a professional homebuilder’s organization like BILD (Building Industry and Land Development Association), which offers a searchable database of members and is an additional indicator of professionalism and ethical conduct.
- Experience with projects similar to yours. Always ask for at least two references.
Other experts add that consumers should never underestimate the cost of a planned renovation. Most do, however. According to TrustedPros.ca, the average Canadian under-budgets a kitchen renovation by $5,000, setting aside $14,480 for a job that typically costs over $20,000. The best way to avoid this is to get multiple quotes, and never to settle on a contractor without a detailed quote. Another trick is to add a little more, not hope it will cost less, so that surprises, like finding lead pipes in the kitchen, don’t throw the budget out the window.
Financing a renovation can be challenging as well. Lacking sufficient saved funds, homeowners can consider using a home equity line of credit (HELOC), which, depending on the value of the home, could provide more than enough for the renovation. A person with a home valued at $500,000 and a mortgage of $350,000 could qualify for a HELOC of $25,000 (Money Sense). Financial experts say it is never a good idea to finance a renovation on credit—better to refinance the home than put a reno on credit.
There are also rebates available from the government for those who qualify.
Another consideration is the return expected on the renovation if the intent is to buy and sell quickly. Some say that there is no value to be gained from spending even $100,000 on a home priced at $1.5 million in a hot market like Toronto. Most agree that there is no dollar-for-dollar correlation between renovations and returns. Better to reinsulate the attic than replace the garage door, say some. The top three reno projects in Canada in 2016 were bathrooms, basements, and decks, says TrustedPros.ca.
There are no hard and fast rules, of course, and time does play a part. A Toronto Life home of the week, for example, was recently sold for $800,000 over asking, at $2,100,131. It previously sold in 2003 for $396,000. The owners renovated the home in 2010, extending the main floor, remodeling the kitchen, and finishing the basement. The increase in price is certainly not solely attributable to the renovations, but the vendors doubtless feel the money was well spent.