Building an Addition? Here’s How to Avoid Disaster

I consider myself knowledgeable about real estate and renovations. I’ve purchased two homes; renovated one house entirely and built the other one from the ground up. So, when we had water damage throughout our house, instead of just repairing it, we decided to also do an addition. Given my previous experience overseeing construction projects, I thought I was prepared. And building an addition seemed like it would be less work than undertaking an entirely new structure from the ground up. But boy was I wrong—I made all the blunders that a novice possibly could have.

Take your time with the contract

Since we were dealing with water damage, we wanted to complete the addition of larger bedrooms and an additional bathroom as soon as possible. But two years later as of this writing, the project is still not finished. "The excitement to do an update has people rush forward too quickly," says Blake Sutton, the president of Est Est Inc. Interior Design in Arizona. A lot of the problems we experienced are directly related to not fully understanding all the legalese in the contract we signed when we hired a contractor.  

"You want to get someone who is called an owner’s rep to read the contract," says Elizabeth Vergara, founder and lead designer of Vergara Homes in New York. An owner’s representative is someone who’s in construction management and works on the behalf of the homeowner. You could hire them to only read the contract or they could also oversee the entire project.

If you don’t want to hire someone to read the contract for you, Evros Kavazis, director of business development at BR Construction Group, Inc. in New York suggests using The American Institute of Architects (AIA) contract. "It’s a contract that safeguards the rights of the owner, entity and the contractor," he says.

You also don’t want to spend more money on the project than the home will be worth when you end up selling it. "I always recommend people consult with a realtor before they do an addition or remodel to their home," says Sutton.

Another way to make sure you know what you’re getting into is to prepare a list of questions to ask before you hire the builder. In addition, "The American Institute of Architects has a list of questions on their website that clients can ask when they’re interviewing contractors or architects," says Diana Melichar, the president of Melichar Architects in Illinois.

Hire an architect or designer to detail your project costs

 Even though we’d previously renovated smaller projects, we didn’t account for how quickly costs would add up or how much prices had increased due to Covid. "The majority of prices have gone up," says Vergara. "Once the high prices got up there, they stayed there."

The experts suggest that you first hire an architect and then take those plans to at least three different contractors to receive a total cost of the project. Having this design plan will allow you to have comparable prices since they’re all bidding on the same detailed project. If you don’t have the plans first, then the prices you receive from contractors may not be comparable. (Note that a lot of this information would apply to any general renovation, and isn't necessarily specific to an addition.)

The contractor we hired had a design-build team. But there were also a lot of questions they didn’t ask, from whether or not we wanted ceiling fans to how large the shower should be to how many lights or outlets the space should have—basically nothing that spoke to how we intended to use the space.

"I highly recommend that people hire an independent architect, an independent builder and an independent designer," says Sutton. "When the builder and the architect are under the same roof, there’s not an incentive to question the architect, from the builder’s perspective, because the incentive is to make sure that they’re being profitable." In other words, the builder might rush the process to receive the plans so they can start the project.

Also there might not be as much transparency during construction. "If there’s an issue that comes up then who does the architect have allegiance with?" says Melichar. "That’s the guy who’s paying him and he’s not going to bite the hand that feeds him."

Include a timeline in the contract

In our contract, there wasn’t a timeline for when the project would be complete or when specific types of construction would occur. Kavazis explains that if you use the AIA contract, there is a timeline section. "If [the project] is going to be six months, then this has to be specifically said [in the contract]," he says. He also suggests adding a clause called, "liquidated or delay damages." If the contractor doesn’t adhere to the timeline in the contract, then they need to pay fees. Adding this clause ensures that your project is done in a timely manner and will allow you to give a reasonable delivery timeline to vendors for important finishes like tile, countertops, and cabinets.

Pay on a smaller and more frequent payment schedule

With our project, the contractors have received 90 percent of the total cost already—30 percent for demolition, 30 percent for framing, and 30 percent upon signing of the contract. The framing was finished in May, and after they received this payment, progress on the house slowed down significantly, leaving many essential tasks that need to be finished, from HVAC to flooring to closing up the walls.

Some contractors may require large payments upfront due to how they run their business. "There’s instances where [contractors] may be rolling a lot of the financials for that project from other projects, which is not the way business should be done," says Vergara. To avoid paying large sums of money upfront you could pay smaller amounts based on the work completed. "It’s better for the contractor because they get those little spurts," she says. "It’s like an encouragement for them to finish each phase."

Specify the frequency of communication regarding updates or other issues

In addition to the timeline, you can also discuss how you will communicate with the builder and the frequency. If your project is going to take a year to complete, then that means you will probably need to communicate with them often. During the interview, pay attention to their communication style. Are they abrasive? Or evasive?

"You want to make sure that that chemistry is really good between you, your builder and your architect," says Melichar. "This is something that you should feel really excited about and should be fun." If you are arguing with your contractor or dreading speaking to them due to their abrasive nature then you won’t enjoy the experience. Plus, mistakes can happen when there is a lack of communication.

Clearly, our addition has been extremely challenging. After speaking with the experts I now realize that I shouldn’t have rushed into hiring a contractor and I should’ve hired someone who would have asked me detailed questions about how I planned to use the space. I also would’ve requested a total cost of everything including windows and doors. Learn from my mistakes: Don’t rush into hiring a contractor just because you want to get the job done quickly, and make sure you know how much money you’re spending and where every cent is going.

Illustration by Elaine Knox

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