Denver Home Buyers: Want a Fixer-Upper?

From CNN/Money - A group of lessons for those in the Denver Real Estate Market!

Getting started
Erika and Greg Tansey couldn't afford the house they really wanted in Lake Oswego, an upscale suburb of Portland, Oregon, so they opted for Plan B: buying an outdated, dilapidated Cape and remodeling it.

"The bathroom was so small that your knees hit the tub when you used the toilet. The hallways were narrow and dark. And the garage was basically falling over," says Erika.

What the house lacked in charm it made up for in location and a terrific school district.

"Originally, we didn't think it'd be that big a project," says Erika. "We ended up gutting the house."

Erika and Greg started demolition in September 2005, with more significant plans than they'd first imagined: raising the roof, putting in an addition, doubling the square footage and reconfiguring the floor plan. Erika, 34, a freelance marketing consultant, and Greg, 35, a venture capitalist, budgeted $200,000 for their extreme home makeover.

But the project took six months longer than expected, cost $80,000 more than planned and finished just as the bubble began deflating. By the time they finished this past August, they were exhausted but eager to share the lessons they'd learned.

Lesson 1
The words "under" and "budget" do not coexist
The first step is usually to hire a general contractor (G.C.) to create a budget, shop for materials and hire subcontractors. Doing this yourself is a full-time job but can save as much as 20 percent of the bill. The Tanseys, with family friend and G.C. Dave Fahlman on speed dial, dared to do it. They expected to save $50,000, which they could put back into the house.

But, says Erika, "Some of our estimates were way off." Upgrades were the biggest culprit. They budgeted $7,000 for siding but found they preferred cedar shingles, which cost five times that. They compromised on cedar siding, which still rang up at $21,000. Other last-minute upgrades, such as mahogany decking, added to budget woes.

It's crucial to have room in the budget for errors and uncertainties. Even a seasoned G.C. can't know exactly what's needed until the walls come down or know how a natural disaster will affect wood prices. "Add 10 percent to your total budget," says Carl Heldman, author of Be Your Own House Contractor. "I promise you'll spend every penny."

Lesson 2
You can get a better price
The Tanseys' diligence in pricing out subcontractors and materials saved thousands. Quoted $7,000 to cut down a tree, Erika called seven more services before she got a $4,000 bid. Interior-trim painting estimates varied from $5,000 to $15,000. She found a landscaper for $11,000 when another bid $35,000. It pays to get three quotes on any major job.

Don't, however, make money the sole basis of your decision. You want to be confident - via references and track record - that the person will get the job done right in a reasonable amount of time.

Lesson 3
Don't count on hosting New Year's Eve dinner
When the Tanseys' windows didn't make it onto the back of a delivery truck, it set off a chain reaction. Without windows, the siding couldn't be put on. Without siding, no insulation could be installed, which meant no drywall, trim, light fixtures or flooring. One snag resulted in a three-week delay.

Torrential rain flooded the basement. The framer came down with pneumonia. The flooring guy shot a nail into a pipe, triggering a leak. Because the Tanseys weren't married to deadlines they were able to cope with the delays. Although they hoped to be in by April, they had signed a month-to-month lease on the apartment they were renting.

Some delays will be beyond your control. If you're trying to have the house finished before the birth of your triplets, you're setting yourself up for a bad case of acid reflux.

Lesson 4
Even Bob Vila has his limits
Erika dealt with subcontractors, kept track of materials and cared for their infant daughter, Claire. Greg spent his weekends and evenings at the house. "The poor guy works all day then goes to work again," said Erika during construction.

You can save a lot rolling up your sleeves but there's a price to pay. "The three key elements of a remodel are cost, quality and time - and they could conflict," says G.C. and family friend Dave Fahlman. "You are constantly having to pick which is more important."

Greg helped with the demolition work, the framing and the electrical installation. He planned to tackle the tiling as well but after months of 16-hour days, he thought better of it and hired three workers. "It was the best $12,000 we've ever spent," says Erika.
The finish line
The final remodeling cost, with landscaping, came to $280,000 for a total of $726,000. "We had a crazy year but we love our house," says Erika. And they've made money, at least on paper. Based on comparables, local real estate agent Trista Nelson values the house at $980,000.

We wouldn't have been able to afford a house nearly so nice if we hadn't remodeled," says Greg. He and Erika are now planning their next project: a relaxing family vacation.