Navigating our current housing market

If you own a home, looking to buy or sell a home or even rent, you know that we are experiencing inflation of everything from groceries to raw materials, increasing interest rates and a potential housing market crash, experts predict.

RBC Economics’ newly released market forecast expects home sales and prices will continue to deepen into the fall and through next year. Home sales will drop by another 17% nationwide by early 2023 — following drops of 19% in the second quarter and 13% between the first quarter of 2021 and the first quarter of 2022.

This would lead to a 42% drop from the record-high levels experienced in early 2021, which would exceed the previous peak-to-trough declines of all four previous national downturns: a drop of 33% in 1981-1982, a drop of 33% in 1989-1990, a drop of 38% in 2008-2009, and a drop of 20% in 2016-2018.

RBC surmises that based on its forecast, a “historic correction underway” is now underway in Canada, but it emphasizes that this is not a “collapse” of the housing market. The federal government’s decision to open the flood doors to immigration and the low likelihood of overbuilding new housing supply will “keep the market from entering a death spiral.” (source: Daily Hive)

CONSTRUCTION COSTS EXPLAINED

EVERYTHING YOU NEED TO KNOW IF YOU ARE RENOVATING OR BUILDING A HOME, BUYING OR SELLING REAL ESTATE

Statistics Canada tells us that residential building construction costs increased 5.6% in the first quarter of 2022, the highest increase since the second quarter of 2021. Non-residential building construction costs were up 2.6% in the first quarter.

Rising residential construction costs were largely driven by rebounding softwood lumber prices.

Contractors attributed part of the growth in building construction costs to the rise in labour costs, and a surge in the number of vacancies for construction trades has contributed to increased wages in these occupations. In addition, amid rising fuel prices, contractors cited that a larger share of their expenses were now allocated to the transportation of their building materials.

WHAT DOES THIS MEAN FOR YOU?

Everything is more expensive, we know that. We see it in the grocery store, at the gas pump, and in our favourite clothing stores. But, that does not mean you have to put your construction or real estate plans on hold. It only means you have to be informed and make smart decisions. I have rounded up industry professionals who have offered their expert advice on everything housing related : mortgages, rising interest rates, real estate, construction costs, inflation and the best investments to make right now.

HOW TO PLAN AND BUDGET FOR CONSTRUCTION

We have seen the cost of home goods & building materials skyrocket over the last 2-3 years. Although it has levelled out in some areas recently , we are still experiencing inflation and supply chain issues throughtut the construction industry.  Labour shortages in factories and manufacturing plants, raw material shortages and high fuel and delivery costs have all contributed to increased costs to the end user - you.   People still want to renovate and build homes, so how can you still move forward with your project and maintain your budget? 

PLAN, PLAN AND PLAN SOME MORE.

Did I mention planning? You don’t wake up and decide to renovate or build a house. You’ve likely been thinking about this for a long time. Our blog on PLANNING FOR A SUCCESSFUL RENOVATION is worth another read if you have not read it already. We outline all the steps involved in planning for success, and you can download our free renovation planner and budget worksheet.

A well thought out budget is the first key step in planning any major project. But, do you know what all of the the costs are involved in a reno or new home build? You can read more on this topic here.

The scope of work goes hand in hand with yoru budget. It is easy to get carried away and planning to do absolutely everything on your wish list, but many people are not aware of the costs of a reno or new-build.

I always suggest a wish list to my clients. A list of "must haves" and "would like to haves". This will help you in narrowing down your project scope if you are dealing with budget constraints.

Using the high-low method approach is another useful tool in your planning. It allows for the mixing of high end items with inexpensive products and supplies. 

You may want to splurge on heavy use items like appliances, flooring, lighting, kitchen countertops & cabinetry to ensure good durability and longevity. You might then want save in other areas such as your backsplash tile (so many budget friendly options out there), countertops & cabinetry in your laundry room and other not so-often used rooms.

If you’re thinking of renovating or building, you can learn more about what the design process looks like here. If you need help on a project, contact me and we can discuss how I can help!

WHAT'S HAPPENING IN REAL ESTATE WITH LINDSAY HALL

With declining house prices and increasing interest rates, a lot of buyers have hit the pause button and are waiting to see how this will affect the market, while sellers are sitting on the fence to see if now a good time is to sell

Buyers, you now have negotiating power and the chance to take your time and choose a home that is right for your family, at a decreased price compared to February 2022 prices. In speaking with a mortgage broker, they made the analogy to “marry the house and date the rate”. What this refers to is buying the home for a lower price, riding out the higher interest rate, and refinancing when interest rates come back down again (because historically proven, they do) as opposed to waiting for the interest rates to come down and house prices to come back up – you’ll be winning in the end! 

Sellers, chances are if you are selling then you have to buy too. Selling your home at a lower price means you will also be purchasing at a lower price, which makes it all relative. In my opinion, now is not the time to “cash out” on investment properties, rather it’s the time to purchase investment properties! 

Investing in real estate is one of the best investments you can make; real estate offers cash flow opportunities, tax breaks, equity building, and a hedge against inflation. Don’t wait to buy real estate, buy real estate, and wait.

Visit Lindsay on-line to discuss your real estate needs

CHOOSING YOUR INVESTMENTS WISELY WITH KARA DAY

Kara Day - CFP, CLU, EPC

Certified Financial Planner Professional

DOWN MARKETS PRESENT GOOD BUYING OPPORTUNITY

With rising interest rates, poor earnings and a recession already priced into the markets, the next 6 months could present a great buying opportunity for investors.

Stock market corrections are common: since 1980, the S&P 500 index has fallen by 14.3%, on average, in any given calendar year. But the index has been positive 78% of those years with an average return of 10.3%.  Real money is made during down markets.

And markets have been quite resilient during, or immediately after, difficult times. Amid the global financial crisis in 2008, the S&P 500 registered a calendar year return of -38%. However, in 2009 and 2010, the index posted returns of 23% and 13%, respectively.

Now, leading economic indicators are pointing toward a possible recession in the first quarter of 2023.  Most economists believe, however, that if we get a recession, it will be mild, because strong employment rates and positive consumer spending in the U.S. and Canada could cushion the impact of a recession.

Canada’s unemployment rate was 5.4% in August, having hit its lowest level since 1976 in June. The U.S. unemployment rate in August was even lower at 3.7%.

With rising rates and more down markets likely in the months ahead, there is a prime buying opportunity for investors, especially when it comes to fixed income.  As an example, investment-grade credit has yields between 4% and 5% now, compared with 1.5% at the start of the pandemic. 

With supply chain issues, inflation, and interest rates going up, it’s been a tough year for both equity markets and fixed income.  No one has a crystal ball, but I believe that has set up the runway for the next couple of years of great returns.

Visit Kara Day on-line for help with your financial planning needs

MORTGAGE TALK WITH NICOLE TURCOTTE

WHAT THE HECK IS GOING ON ??


Mortgage rates have been on a steady rise in 2022, dramatically changing the lending environment and
trickling down to the housing market as we enter Fall. Just last week, the Governing Council of The Bank
of Canada raised its target for the overnight policy rate by 75 basis points (0.75%) to 3.25% and
signalled, quite clearly, that the policy rate would rise further. They have indicated that 3.25% is no
longer sufficiently restrictive to temper domestic demand to levels consistent with the 2% inflation
target.

WHAT DOES THIS MEAN?


Paraphrasing Bank of Canada Governor Tiff Macklem’s op-ed piece in the National Post, inflation is
simply too high and will remain that way for some time to come. “Many of the global factors that have
pushed up inflation won’t go away quickly enough — supply chain disruptions continue, geopolitical
tensions are high, and commodity prices remain volatile. And here at home, our economy has been
running too hot. As Canadians finally enjoy a fully reopened economy, they want to buy more goods and
services than our economy can produce. Businesses are having trouble keeping up with demand, and
that’s leading to delays and higher prices. The result is broad-based inflation.”

Seeing as it is the Central Banks job to control inflation, their responsibility is to cool things down. One way they are doing this is through higher interest rates. This, in turn, raises the cost of borrowing, which typically triggers consumers to borrow and spend less money, and save more. The Bank is trying to get consumers to slow down their spending to allow supply time to catch up with demand and take the wind out of the sails of inflation.

In terms of the housing market, higher mortgage costs are slowing down housing activity and moderating housing prices after seeing unsustainable growth throughout the pandemic. With hindsight, we can see that The Bank was behind the curve and that they kept mortgage rates low for far too long, triggering excess demand in the red-hot housing sector. As housing starts to slow, consumer spending on housing related goods and services, such as renovations, appliances and furniture, should also start to slow.

Why is The Bank of Canada raising rates when everything is already so expensive? Well, simply put, raising borrowing costs in the short term will bring inflation down in the long term. This will potentially put many people into an uncomfortable financial situation, but The Bank has made it very clear that eliminating high inflation is their ultimate goal and they will proceed aggressively until they return to the 2% target level.

WHAT DOES THIS MEAN FOR YOU?

As far as housing prices go, BC seems to be lagging a little bit behind other parts of the country that have seen pricing drops already.Sellers are reluctant to accept that the sky-high prices posted earlier this year are no longer. The rapid-fire turnover we experienced over the past year has been replaced with longer listing times, fewer multiple listing scenarios, and many successful buyers are now able to add a financing condition to their offers. Realtors I work with have confirmed that buyers and sellers seem to still be very far apart in their expectations. What sellers will need to realize is that it is now incredibly more expensive and difficult for purchasers to obtain financing. As rates began to rise in earnest in March 2022, we are now well outside of any potential rate holds that were still fuelling high prices.

The implications of the Bank of Canada action are considerable for the housing market. The prime rate has now quickly risen to 5.45%, increasing the variable mortgage interest rate another 75 bps. The new qualifying rate for new borrowers and current mortgage holders will likely increase to roughly 7%.

Fixed mortgage rates, tied to the 5-year government of Canada bond yield, will also rise, but not nearly as much. Expectations of an economic slowdown have muted the impact of higher short-term interest rates on longer-term bond yields. It is noteworthy that the Bank omitted the usual comment on a “soft landing in the economy” in last weeks press release. Bank economists realize that the price paid for inflation control might well be at least a mild recession. Economists are predicting another 0.75% rise in the prime rate by the end of the year, and likely higher in 2023. The Bank of Canada will hold the target policy rate at its ultimate high point – at least 2-3 rate hikes away – through much of 2023, if not beyond. A return to 2% inflation will not occur until at least 2024.

For current mortgage holders, it is important to be on top of what’s happening with your finances. As Canada’s lending prime has increased, variable rates have increased, as these are rates that are tied to the prime rate. Payments need to increase to ensure the scheduled amortization remains the same and you will still pay off your mortgage in the original amortized time. For those individuals in a fixed rate mortgage, you will not be affected by these interim changes outside of renewing your mortgage. If your mortgage is up for renewal in the coming 18 months, you will likely be renewing at a higher interest rate. If you’re six months away from renewing, it may be a good idea to look into options for early renewal to avoid getting caught up in another interest rate hike later this year.

If you’re not currently a homeowner, but were looking to get into the marketplace, it is a good idea to re-evaluate your budget and potential calculations for homeownership to ensure that your estimates are in line with the new interest rates and increased qualifying rate.

While interest rates do affect everyone, understanding the dollar value change for your situation and adjusting your budget accordingly, can help to ease the pressure from increased mortgage costs. If you have questions or are not sure what your next move should be, don’t hesitate to reach out to me. I’d be happy to review your situation and walk you through your options.

Reach out to Nicole to discuss your mortgage options

The 5 Stages of a Successful Renovation

If you’re not in the design or construction industries, you might be confused by this title. 5 stages of renovation? Well you’re not alone if you thought that a renovation consisted of a beginning, a middle, an end and nothing more. Most of my clients don’t know this either until I spend the time and break it down for them. There are 5 stages of a renovation and they flow from one to the next but only when each one is completed thoroughly. Any change or deviation can cause delays or even work disruptions. So let’s get into it and I’ll give you a complete breakdown of these stages.

LET’S BREAK DOWN THE 5 STAGES OF A RENOVATION

STAGE 1 – THE PLANNING STAGE

From the design perspective this is probably the most important stage. During this time we brainstorm what’s possible and what your dreams and goals are. Your primary team is called in at this stage. A renovation is always more successful when you’ve gathered the designer, the general contractor and the trades at this early stage. This is where you’ll get the most teamwork because everyone has a chance to collaborate. Need more help understanding how to plan for a renovation? Read this post.

During this period we not only look at the footprint of the space but we start to dream up the way the space will function. It may take a while if there are revisions being made but it’ll be worth it to take your time. Since so many decisions later are dependent on this phase, take the time and get your budget and plans perfected before you move on.

floor plans with tape measure

STAGE 2 - DEMOLITION STAGE

It’s going to get dirty at this point! This is where the general contractor manages the trades and your old space is removed. More than likely, you’re going to end up with a not-so-attractive dumpster living at the front of your home for a while. 

If walls are coming down you’ll also likely be removing wiring. Depending on the scope of the project you may be removing flooring, cabinetry, windows and even doors. This is exciting for most homeowners because it signals the beginning of the real work. It’s also exhausting if you’re planning to live in your home during this phase. You need to be prepared for major disruptions, early morning visits from trades and a makeshift arrangement for any of the rooms that are being demolished. 

It can quickly become a stressful situation so prepare yourself as best you can for what this will look and feel like.

woman inspecting demolition

STAGE 3 - CONSTRUCTION STAGE 

Once you’ve survived the demolition phase it’s time to get the bones of the project into place. This is the “rough in” stage and these are the elements that are contained under the floors and behind the walls. All of your HVAC, electrical and plumbing systems are installed now and you’ll likely see an inspector coming by during this period as well. 

If you’re hesitant about anything you’ve previously committed to this is the time to bring it up and resolve it. Once everything is installed and approved it will be very costly and very messy to change things. Even a small change like where your shower head is installed needs to be finalized at this time. Changes like that, although it seems insignificant, will cause a ripple effect of setbacks and delays.

man with saw cutting wood

STAGE 4 - FINISHING STAGE 

In my experience as a designer, I’d say this is where homeowners start to get past the fatigue of the renovation and actually start to enjoy it again. Now the new space is starting to materialize and it’s possible to imagine the end result.

At this point everything new is installed. Floors, cabinetry, countertops, millwork, light fixtures and on and on. Your house will be buzzing with activity during this phase because you can have multiple trades working at the same time. Cabinets can be installed in the kitchen while flooring is installed in the bedrooms for example. 

Your designer will be present during this stage to ensure that all of the installations go according to plan. Everything needs to be examined, from the countertop profile to confirming that the materials arriving on site are correct. 

Every day during this phase you’ll see something new and your updated home will start to slowly unfold before your eyes. You’re still a way from the finish line but there’s hope now.

white kitchen with black island and pendant lights

STAGE 5 - CLEANUP AND WRAP UP STAGE

At this point, most of the major work has been completed. There will be some trim and finish work but most of the trades will have finished up. During this phase you could possibly even start using some of the spaces. It’s possible to stop making those daily Starbucks trips and start brewing your own coffee at home. 

Your space should be working as intended and you’re close to the finish line.

The last part of this phase is the punch list meeting. This is where the homeowners, the designer and the general contractor meet at the space to discuss what needs to be completed and/or remedied. It’s essentially a list of things that may have been overlooked or in need of some attention. This meeting typically takes place a week or two before completion and that gives everyone a chance to get the final pieces in place.

After that you have yourself a brand new space. You may be vacuuming and sweeping thin layers of dust for a while but you have a beautiful, completed home.

dusting mirror

Did you find this breakdown helpful? Was there anything about it that surprised you? If you want to discuss how I can help you with your upcoming renovation, reach out below and book a free consultation with me. I’d love to help you create the home you’re dreaming of.

And be sure to download a copy of my free Renovation Planner. This will help you take the stress out of your upcoming project.

How to Be Prepared for a Successful Renovation

If you watch a lot of HGTV you see the happy families breeze through their renovation. Everything goes as planned, there are no shortages or delays and conflicts are minimal. Sadly, this isn’t the way things go in real life. There are rare occasions when all the pieces fall into place but usually that’s a result of a homeowner that checked all the boxes in terms of preparation. Let’s talk about how to have a successful renovation and what you can do to be prepared for the road ahead.

WHAT DOES IT TAKE TO HAVE A SUCCESSFUL RENOVATION?

We’ve probably all heard that Covid has affected timelines and availability of every aspect of design but even without that there are a lot of things that homeowners aren’t prepared for when they begin. A successful renovation begins months (or years) before the crew arrives to start demolition.

It begins with planning. You don’t wake up and decide to renovate. You’ve likely been thinking about this for a long time. Every morning when you walk into the kitchen you’re dreaming about how it will be more efficient when you renovate. The fridge should be over there and the sink definitely needs to be a double sink next time. You need a bigger pantry and so on.  

4 STEPS TO PREPARE FOR A SUCCESSFUL RENOVATION

1/ PLAN EARLY –

You need to go beyond dreaming about your future kitchen. Put pen to paper and start writing down the list you’re creating every day in your mind. Eventually you’ll have a wish list created and you can get a clear understanding of what your goals are.

If you wait until the day you meet your designer or contractor you’ll be overwhelmed with the process and things will be forgotten.

Once the renovation wheels are in motion it’s hard (and costly) to go backwards and include things that you’ve left off the wish list. It’s better to have a wish list that needs to be modified and scaled back than to have nothing.

2/ UNDERSTAND YOUR BUDGET –

In terms of importance this one ranks very high. If I arrive for a consultation with you and you show me your wish list but have no budget we’re already stuck.

The world of design is immense. The selections I make for a client must be narrowed down by style, accessibility and budget. Without a budget I’ll be left to guess what you can afford. I’ll show you materials you fall in love with only to later discover that you can’t afford them. This is where disappointment sets in with homeowners during a renovation.

Start the process of budgeting before you ever arrange a meeting with your designer or contractor. Figure out what’s reasonably affordable but don’t hold back. If you present a budget, know that your team is working hard to get you the best quality products. We’re managing your budget to make it work overtime for you.

Want more information about planning your budget? I’ve highlighted the important factors in this post.

3/ UNDERSTAND YOUR TIMELINE –

This is another area where homeowners become disillusioned with the renovation process. Renovations take time. The clock doesn’t start ticking the day you meet with your contractor. Your first meeting with your designer and contractor is to discuss the project. It’s extremely likely that both will be booked for months in advance. Having the initial meeting with your team might be the first step but it may be 6 months or more before your project is scheduled to begin.

Then there’s the issue of permits. The wait for permits is immense and this is something that usually takes homeowners by surprise. You can’t proceed with any work on the home until permits have been obtained.

You’ll be engaged with your team as they create permit documentation but then the wait begins. There are areas that I can help a client with (time permitting) before the permits are delivered but it’s hard to proceed until you’ve been approved for the work. You don’t want to plan too far ahead in case changes are required.

So in other words, don’t call your team together and assume that you’ll begin your project next week. Be patient and use this time to collect your thoughts and get ready for the big day.

4/ CALL YOUR DESIGNER EARLY-

One of the unfortunate mistakes I see is that the homeowners called a contractor and have that team in place. Things start to move along and they’re bombarded with questions about design related issues that they hadn’t considered. These are often technical questions that a homeowner can’t (and shouldn’t) answer without fully understanding the brevity of the decision.

If you want a successful renovation you need to understand from the beginning that your entire team should be assembled at the same time.

It’s very difficult for a designer to walk into a project that is underway. Designs take time to come together. If your trades require answers yesterday that will be difficult for any designer to assess the first day on site.

The most successful renovation has their entire team working together from the beginning. There is so much harmony on a job site that is difficult to achieve when one part of the team joins late.

This should be an exciting time for you and your family. It’s important to learn how to prepare in a way that leaves you set up for success

Renovations are stressful because you’re displaced from your home. If you decide to live in your home during the work phase you’ll be subjected to early mornings, a lot of mess and a space that doesn’t function well for periods of time. These are things that can’t be avoided.

You don’t need to add the additional stress of things that could be avoided through careful planning and a lot of preparation. A successful renovation IS possible if you’re prepared and know what’s required.

If you’re considering a renovation, I can help.

And be sure to download your free Renovation Checklist. Just enter your email address and it will be delivered straight to your inbox.

Happy planning, Stephanie

"Do I need an Interior Designer?"

The short answer is yes. The long answer is to follow. With the internet and home inspiration websites like Pinterest and Houzz, more and more homeowners are attempting to tackle their renovation or new-build on their own. What they don't often realize is how much an Interior Designer does before those beautiful photos are produced. Before anything is built, we are space planning, examining human factors, researching building and fire code and city bylaw requirements, creating your budget and schedule and ensuring all aspects of your project are feasible and depending on the scope of work preparing your building permit drawings. I cannot tell you how many times I have been given a Pinterest photo and asked to "design" it. Firstly, this is not design, this is replicating someone else's design. Secondly, if a client wants an identical reproduction of an inspo image, they do not need a designer, they just need someone to build it for them. Designers are highly creative people, we want to produce a design that is uniquely you so your home stands out.

What is Interior Design?

Many people use the terms “interior design” and “interior decorating” interchangeably, but these professions differ in critical ways.

Interior design is the art and science of understanding people’s behavior to create functional spaces within a building. Decoration is the furnishing or adorning of a space with fashionable or beautiful things. In short, interior designers may decorate, but decorators do not design.

Interior designers apply creative and technical solutions within a structure that are functional, attractive and beneficial to the occupants’ quality of life and culture. Designs respond to and coordinate with the building shell and acknowledge the physical location and social context of the project. Designs must adhere to code and regulatory requirements and encourage the principles of environmental sustainability.

Interior Design is defined by CIDQ as "a distinct profession with specialized knowledge applied to the planning and design of interior environments that promote health, safety, and welfare while supporting and enhancing the human experience. Founded upon design and human behavior theories and research, interior designers apply evidence-based methodologies to identify, analyze, and synthesize information in generating holistic, technical, creative, and contextually-appropriate design solutions. Interior designers contribute to the interior environment with knowledge and skills about space planning; interior building materials and finishes; casework, furniture, furnishings, and equipment; lighting; acoustics; wayfinding; ergonomics and anthropometrics; and human environmental behavior. Interior designers analyze, plan, design, document, and manage interior non-structural/non-seismic construction and alteration projects in compliance with applicable building design and construction, fire, life-safety, and energy codes, standards, regulations, and guidelines for the purpose of obtaining a building permit, as allowed by law. "

Budgets and documentation

Every homeowner wants to know how much their project is going to cost. Without a full design package, it's nearly impossible to put a number on it. The only way to get a firm grasp on your budget and project cost is to have it designed, and sent out for pricing to all trades and suppliers required by the project. You can learn more job costing HERE.

Drawings and specification packages are one of the most important part of a designers job. It communicates the design intent and all of it's details to the contractor, suppliers and trades people. Without them, there is no way for them to know what to build or what things are going to cost. So many details are captured in our drawings such as tile pattern, grout thickness, flooring direction, cabinet door style material and finish, shower valve height, outlet/switches locations & types, cabinet hardware placement, light fixture placement, flooring transitions, cabinetry door and drawer sizes, door swing...the list is endless.

An interior designer should be able to produce the following drawings & documentation:

Interior design is becoming more of a requirement in construction, rather than a luxury; no different than a plumber or electrician. Someone needs to make all of the decisions required, and your builder is not going to do it for you! Designers ultimately save you time, money and costly mistakes and delays on your project.

Still have questions? Please reach out, we are always happy to chat anything design!

"How much will my renovation cost?"

This is a great question, and one that we hear daily. The answer to that question: not that simple, but let us explain. As an interior designer and contractor, we are professionals and are well equipped to provide our expertise and general "ballpark" costs for all aspects of a project, but we are not mind readers and these are guidelines only based on previous projects and industry knowledge. Until you have gone through the full design process, the budget is a constant moving target.

There are SO many variables that go into a renovation and a construction budget, and they range drastically in cost. A faucet can range from $300-$3,000 (and up believe it or not!), custom kitchen cabinetry $15,000-$150,000 (or more depending on materials - wood vs. MDF, stain, paint or vinyl wrapped, interior fittings, drawers vs. doors, customization, square footage), even electrical outlets factor into costs ie. standard white Decora outlets LeGrande pop-out outlets. These are just a few examples of how a complete design determines your renovation cost.

Designed by: Stephanie Hilton Design // Built by: Westerncraft Contracting // Photography: Snowchimp Creative

I love analogies. I use this one when it comes to construction and when asked what a "typical" renovation will cost:

Let's say you are car shopping, but you don't know what make or model you want (Honda or Mercedes), or what options you like (A/C/ GPS, heated seats, remote start), interest rates or financing options haven't been discussed, but you want to know what a car is going to cost. It's impossible! A renovation is no different. You must go through the design process to define all of the materials, fixtures, equipment, furniture, and trades people required for your specific project.

First of all, there is no such thing as a typical renovation. Secondly and most importantly, it's important to understand all of the pieces that make up a renovation.

"What factors will determine my budget?"

"How are renovations budgeted and priced? "

Another great question. There are a few common types of construction budgets and contracts we will dive into next. Reno's are always full of surprises that cannot be predicted. Once we get into demo, we may discover you have outdated electrical that needs to be upgraded to current code, that there are structural deficiencies behind your drywall which needs to be addressed, or your plumbing is Polybutylene (commonly known as Poly-B) and needs to be upgraded to PVC or PEX.

COST PLUS CONTRACT

Cost plus is the most common type of budget and contract in residential construction. Simply put, it is the cost to your contractor for materials, fixtures, and sub-trades plus a percentage (management fee) to mange the project, which is typically between 15-40%. Contractor or PM time on site is also billed on an hourly basis. Usually, a design is required so that all of the materials and trades can be accurately priced by suppliers and required trades, and accounted for in the budget. It is ideal to have a complete design package so that nothing is overlooked in your budget and you are provided with a detailed cost breakdown of your renovation. This also provides the opportunity to scale back on certain design elements if it exceeds your budget, or revisit your budget to allow for the proposed design. A good interior designer will help you create a working budget, or if a budget has already been established by your builder, we request the budget from them so that we can design accordingly and within your anticipated budget.

ALLOWANCE BASED BUDGET

An allowance based budget is typically used when there has been no design and no pricing, so you are given allowances for each area of your project from fixtures & finishes, to framing and painting.

Whether you stay within those allowances, or exceed them, is ultimately up to you, similar to a cost plus contract. You use your budget the way you would like to, and the costs are billed to you.

For example, you are given a $15,000 flooring allowance, which would give you a nice luxury vinyl plank, but you decide you MUST have white oak engineered hardwood floors that come in at $25,000, your budget would have an overage of $10,000, but you might offset that by changing your plumbing and lighting fixtures to chrome instead of matte black which is a more costly finish, thus reducing your overall budget.

FIXED FEE

A fixed fee contract appeals to many homeowners because they feel comfortable owing they are getting "X" for "X" amount of dollars. There are a few things to consider before signing a fixed fee contract.

  1. The scope must be very clearly defined. Anything outside of your scope of work will be billable and not included in your fixed fee contract. For example, you have beenquoted for $5 subway tile, but decide to change it to marble, this is not going to be the same cost to you, you will be charged for the difference. Or, your stud's are rotted behind your shower and needs to be re-framed, you will be charged for that. Fixed fee does not mean unlimited!

2. A "buffer" is always added when working on a fixed fee to cover the contractor for any unexpected or missed items on the scope of work. But, if their cost comes in lower than your quoted amount, they will still charge you the fixed amount, so it may end up costing you more than a cost plus agreement. On the flip side, if you were given a price of $7500 for painting, but the painter that quoted the job is no longer available and a different more expensive painter has to be used and costs more, the contractor will have to eat that cost. Typically, 10-25% will be added to the anticipated costs, regardless of the actual cost. This is to ensure the contractor does not lose money

The bottom-line is, whatever type of construction contract you get into, make sure you know the differences and find room in your budget to hire a designer. We don't say this because we are designers, we are also project managers and wear both hats here, and know the importance of good design and preparing a proper budget. Hiring an Interior Designer may seem like an extravagant expense, however it is not. Interior designers save you valuable time, money and costly delays.