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Open House

Homebuilders Look At Latest In Design, Construction, Materials; Cut Energy Bills And Boost Tax Return; Worthwhile Home Updates; Contractor Builds Disastrous Home

Aired January 14, 2006 - 09:30   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

TONY HARRIS, CNN ANCHOR: A new development out of Pakistan this hour, conflicting information on whether Osama bin Laden's right-hand man was killed in Friday's airstrike. Pakistani sources now tell CNN that Ayman al-Zawahiri was not among the 18 people killed in a recent missile strike. Earlier, U.S. sources told CNN that al-Zawahiri was the target of an air strike in a remote Pakistani village and may have been among those killed.
Iranian president Mahmoud Ahmadinejad insists his country has the right to conduct nuclear research. He's threatened to not allow surprise inspections by the United Nations if the country's nuclear program is referred to the Security Council. The U.S. fears Iran will develop nuclear weapons. Iran insists its program is peaceful, intended only to produce electricity.

Strong storms and wind are on tap for the eastern part of the nation. Severe weather whipped through southern states and continues to move up the coast. These are the first pictures out of South Carolina this morning, where at least nine people were injured in a possible tornado that tore through a mobile home park last night.

Those are the headlines.

"OPEN HOUSE" starts right now.

GERRI WILLIS, CNN ANCHOR: I've got a new home, and I'm dreaming about what kinds of improvements I can make this year. Are you?

Good morning, I'm Gerri Willis.

Now is really the time to start setting a budget for that reno you dreamed of last year but just didn't get to.

Today on OPEN HOUSE, we'll look at what makes sense in terms of energy efficiency, trends in getting a contractor that won't break the bank.

But first off, a house that's built for right now.

(BEGIN VIDEOTAPE)

WILLIS (voice-over): This is the 2006 New American Home, the showplace of the International Builders Convention, meeting today in Orlando, Florida. Thousands of homebuilders are looking at the latest in design, construction, and materials. And one of their members, Alex Hannigan, took on the task of incorporating it all into this home.

ALEX HANNIGAN, PRESIDENT, HANNIGAN HOMES: We decided we would design for the baby-boomer generation. It's an important group of people that have been -- that is an ever-expanding group of people. And we really decided we would put every amenity into this home that you can possibly think of.

WILLIS: And it has all the amenities. Two outdoor living areas, flat TVs in almost every room, a home theater, a home office, a library, a game room, a cappuccino machine in the dressing room, even a waterfall.

HANNIGAN: It is for the very active baby boomer. It's kind of all about me, but it is all about me with a conscience. And it is a nice place to share with your family or an old friend.

WILLIS: Sharing it will cost you. Hannigan's price tag is $5 million.

But for baby-boomers that can afford it, they'll never have to move. The big-trend theme here is accessibility.

HANNIGAN: It has an elevator. All the openings are wide enough to get a wheelchair-bound person in the event that you are. You know, that is something that -- who knows where they'll go, but we're trying to provide those things for them in the event that they do get there.

They don't have to -- a ton of money to change it. And right now is the time to do it. It's the most, the least expensive you'll ever pay for ADA compliance.

WILLIS: Hannigan is most proud of another feature, one not to easy to see, energy efficiency. At almost 10,000 square feet, this is a large house, but it uses the same amount of energy as a home one- third its size, coming with climate-control zones, sealed windows, and instant-on water heaters. And though they're expensive, they can pay for themselves.

HANNIGAN: I think it is extremely cost-effective if you plan to stay in the home for any length of time. There is a going-in price that you'll have to pay, and that is definitely more than a home that doesn't have the features that we have. But the payback ratio is so great.

(END VIDEOTAPE)

WILLIS: OK, maybe you can't afford to spend an arm and a leg on all the latest energy-efficient home technology. But there are things you can do to cut your bills and boost your tax return.

Joining us is Jennifer Thorne Amann from the American Council for an Energy Efficiency Economy.

Welcome. JENNIFER THORNE AMANN, ENERGY EFFICIENCY EXPERT: Thanks, Gerri.

WILLIS: Good to have you here.

You know, no matter what those salespeople say, the more you spend on energy efficient gobbledygook doesn't necessarily mean you'll have more in energy savings, right?

AMANN: You know, it really depends. I think, you know, you don't want to replace equipment that doesn't need to be replaced yet. But there are lots of smaller steps that you can take in the house. And if it is time to replace your larger equipment, going with the highest-efficiency products can certainly save you money in the long run.

WILLIS: So the basic stuff to replace, you say, is the insulation, maybe the windows. And my husband and I are having this same debate in our new house. The windows seem to be leaky, but we also don't have insulation in the walls. What should you do first?

AMANN: Right. You know, fixing up that insulation, that's a pretty low-cost measure. And that'll qualify, 10 percent of the cost of insulation is eligible under the tax credits that were recently passed by Congress. So that's a place where you don't spend a lot of money. You can get a bit of a tax break, and you can save a lot.

WILLIS: Let's talk about that tax break. How much money can you get with a tax credit?

AMANN: The tax credit's a maximum of $500 for measures installed over -- during 2006 and 2007. So the maximum is $500. There are different caps for different portions of that.

WILLIS: OK.

AMANN: For instance, windows are capped at a $200 tax credit. But if you take part of the credit in 2006, you can take the remainder if you do -- if you, say, replace your heating system in 2007.

WILLIS: All right, so obviously the tax credit isn't enough reason alone to do the upgrade, but it does help a little bit.

AMANN: Yes, you know, it really -- I think what Congress wanted to do was sweeten the pot, give people an added incentive to go out and do things that they may need to do in their homes, you know, seal up the leaks, boost your insulation.

WILLIS: Right.

AMANN: If you're in the market for a heating system, go ahead and get the most efficient unit, you know, out there. That way, it'll offset some of that extra incremental cost--

WILLIS: Right.

AMANN: ... shorten the payback, and, you know, encourage manufacturers to lower the costs on those products down the road for all of us.

WILLIS: Well, amen to that, Jennifer. We love to see lower prices.

But let's talk a little bit about prioritizing, because once you do the easy stuff, you put in the weather-stripping, you put in the insulation, where should you go next? Because I think a lot of people have already done those first steps.

AMANN: Well, you really want to assess. You know, there are a couple of things.

First, are there easy things you can do yourself that'll make a difference? Install a programmable thermostat and program it so that it really does cut back the temperature when you're asleep and when you're away from home. That'll make a big difference.

You know, so start with those small things. Look around at your appliances. Are there things that you can do there?

And I think people should, you know, want to make sure and remember, as you boost your efficiency through weather sealing, through insulation, and those steps, down the road, when you're ready to replace your heating or cooling system, you may be able to downsize that system a bit. And that'll save you money.

WILLIS: Those programmable thermostats really work. I've used them myself, and big savings there.

Let's talk about some real-world stuff, though. People talk about energy efficiency and savings, and yet sometimes you hear about these so-called greenhouses. They're 7,000 square feet. Isn't part of the answer to the question actually downsizing?

AMANN: Yes. You know, I think people need to take a look, you know, holistically. If you build a really large house, even if you put the most efficient appliances in there, that's a lot of space to heat, a lot of space to cool.

WILLIS: Right.

AMANN: And a lot of energy just to build the home. So, you know, I think we like to encourage people, to the extent possible, to think a little bit more about what they need to meet their needs. You know, we don't want to deny people some of the luxuries that bring us a lot of pleasure in life.

But, you know, maybe think twice, and, you know, a well-designed home, you may be able to get away with less space and yet live in it, you know, just in the same luxury you would a much larger home.

WILLIS: Jennifer, the devil's in the details. Thanks so much for being with us today.

AMANN: Yes, thanks, Gerri. WILLIS: Later on OPEN HOUSE, your worst nightmare, the contractor who moves in and stays. Well, seriously, we'll show you how to find a contractor who gets the job done on time and on a budget.

And making it hot. We look at the renovations likely to add value to your home in 2006.

But first, your tip of the day.

(BEGIN VIDEO CLIP)

WILLIS: Planning a remodeling project? When working out your budget, set aside 10 to 20 percent of the total cost for any unexpected expenses. Know the retail prices of items like lighting fixtures, faucets, and knobs. And if you can buy them on your own for less, the contractor will often agree to just the installation.

And no last-minute changes or additions. That will add to the total cost and put your project behind schedule.

Plan wisely, educate yourself, and stick to your original plan.

And that's your tip of the day.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

WILLIS: OK, we spent almost $150 billion last year on home renovations. That's according to Harvard's Joint Center for Housing Studies. But with trends coming and going so quickly, how do you know which upgrades are worth it and which ones aren't?

Architect Duo Dickinson is here with us with hopefully some answers too.

Well, I'm looking forward to hearing what you have to say about this. How do you know what's a trend and what's a fad?

DUO DICKINSON, ARCHITECT: That's the big issue. On your own Web site, you got a great little calculator for determining what will get you the most money empirically. But the truth of the matter is that over the last couple decades,. people have opted for avocado-green shag rugs, the classic '80s, you know, white kitchen.

WILLIS: Right.

DICKINSON: They've all gone out of style, because essentially, they were bought with the same attitude as buying a fashionable piece of clothing. But the problem is, these renovations cost so much more than a piece of clothing.

WILLIS: Oh, absolutely. So how do you know, then, the things that are going to last over time? Does it have to do with color, utility, cost? How do I (CROSSTALK)

DICKINSON: Well, the biggest -- there's two tracks. The first track is, this is your house, it's not somebody else's house. You have to search your heart for what you really believe in.

Second thing is, you have to pull back and say, What do people want? And what do I hear people complaining that their houses don't have? And if your house doesn't have that, chances are people are going to want it.

I mean, there are several real paradigms here. One is that houses have been grown way out of control in the last 10 years. And some of these very, very large spaces are also very noisy spaces, they're tall, they've got hard surfaces.

WILLIS: Right.

DICKINSON: People are trying to now find places to nest, and they're really -- as a rule now it's a getaway space.

WILLIS: Well, that's one of my questions for you, is, people have overbought. They're buying these massively huge houses. They're impossible to maintain. Do you think people are going to be opting for smaller and smaller?

DICKINSON: That's been the -- that has always been the nature, is that when money is cheap, when there's an impetus to build and buy, houses expand. When money gets more expensive or people freak out a little bit about the value of their home, the house get a little bit smaller.

But the reality is, what goes up during those times of getting smaller are renovations and additions, because people can't move. They feel locked into their home.

WILLIS: Wow.

DICKINSON: So they...

WILLIS: That makes a lot of sense. I think that's a really good insight. And, of course, we're going to see the cost of money going up this year. Interest rates are expected to rise much higher.

Let's talk about some of the issues people face day to day in their household, and how they try to solve them. I think so many people control -- complain about controlling the chaos. You know, I got some have the mud boots, and I got the -- I've got the coats at the front of the house, and the gloves and the mufflers, everything sort of out of control. What do I do about that?

DICKINSON: Well, 90 percent of Americans drive cars into their homes. They have their garages. They drive into their cars. And so, and 90 percent Americans' first stop is the kitchen.

So if you got a garage and a kitchen, and you don't have an incredibly well-designed dense-packed space that can enable you to detox the kids or yourself...

WILLIS: What do you mean, a dense-packed space? What's this now?

DICKINSON: Well, we often think of these in plan, two- dimensionally. But dense packing is thinking three-dimensionally. So there's always layers that you can store stuff in in tight quarters. It actually allows to be more accessible, where you can at reach at several levels instead of just out in front of you at the countertop level.

So I encourage clients to think when I'm -- as an architect, try to encourage them to think about all the space that's available to them. And the reality is, people think of mud rooms as just being for, you know, people with kids.

WILLIS: Right.

DICKINSON: The reality is, people are hobbying their brains out. They've got gardening, they've got all sorts of things going on.

WILLIS: And you need that space, absolutely.

Now we get to talk about my favorite room, the kitchen. OK, the big deal here is that people have been expanding, expanding. I need roller skates just to get to the refrigerator. What's a better idea, a better way to design your kitchen?

DICKINSON: Well, what's happened, what happened, really, in the '90s was, with all the rest of the excess, the most excessive room became the kitchen, because the kitchen became the trophy room. It became the room you bragged about. Everybody, come into the kitchen, have some wine while I cook some eggs.

And the reality is that that just grew like Topsy, and features happened, you know, special faucets to fill up pots for lobsters, special insta-hot things, several different places to cook, several different places to prep.

The reality is, the kitchens are the most intimate space in the bathroom -- in the house, except for the bathroom. You have your own way of cooking. When you're looking at this beginning-to-fall-apart mid-90s kitchen, many people are opting to get rid of some cabinets, maybe make a space to eat, maybe make a walk-in pantry that'll allow you not to have upper cabinets.

WILLIS: So save a lot of space, make it smaller, make it more useful.

Duo, thank you for being with me.

DICKINSON: Any time.

WILLIS: I really appreciate it.

And now, a real-life story about how things can go really wrong. Jeff and Liz Christian are still trying to collect more than $930,000 from their contractor, Mark Tracey (ph). A New Jersey judge awarded the money in October after the Christians sued Tracey. They had hired him to build a house on the New Jersey shore. But when J.J. Ramberg first met the couple in March, they said what Tracey built was a disaster area.

(BEGIN VIDEOTAPE)

J.J. RAMBERG, CNN CORRESPONDENT (voice-over): Jeff and Liz Christian are claiming he turned their dream home into a nightmare.

JEFF CHRISTIAN, HOMEOWNER: He claimed to have ordered materials, you know, tens of thousands of dollars' worth of materials. Never ordered, out-and-out lies.

LIZ CHRISTIAN, HOMEOWNER: We didn't have our tile floors, you know, the wood floors. He didn't have any of the windows on the third floor. The siding was done improperly.

RAMBERG: And, they say, the work that was done on this 3,600- square-foot home was done poorly.

JEFF CHRISTIAN: You know, the heating and air conditioning system was totally deficient, would never have operated. In fact, he ran ductwork that went nowhere. It was just for show.

RAMBERG: They're also liable to the subcontractors who the contractor never paid.

JEFF CHRISTIAN: Now we have the subcontractors coming out of the woodwork, no pun intended. For example, the guy that did the sheetrock is owed $15,000. The mason is owed money. The plumbers are owed money. The painter wasn't paid.

RAMBERG (on camera): The list of complaints goes on and on. But Jeff and Liz admit they're also partly to blame. They didn't stay on top of the work schedule. They didn't visit the house often to see the progress. And they didn't check the contractor's references.

(voice-over): Had they done so, they would have found out that he's not a member of the National Association of Home Builders, as his business card states.

As for Jeff and Liz, they could have cut down their risk. They say they let the contractor talk them into a home equity loan, rather than a construction loan. With construction loans, banks make inspections. And they kept doling out cash.

JEFF CHRISTIAN: We continued to make payments that we shouldn't have made, again, because there was this either implicit or explicit threat that work wouldn't continue if they didn't -- if there wasn't additional payment made. So that was, you know, that, frankly, was really stupid.

RAMBERG: Their biggest mistake... JEFF CHRISTIAN: Not listening to our gut. You know, there was a point at which our -- both of our guts said, This guy's wrong.

RAMBERG: For OPEN HOUSE, J.J. Ramberg, CNN, Belmar, New Jersey.

(END VIDEOTAPE)

WILLIS: A new contractor completed the home in September. That's 18 months behind the original schedule, and about $300,000 over budget. OPEN HOUSE tried to contact the original contractor by telephone, but our messages went unanswered.

Of course, the best thing to do is get it right in the first place. Next, we'll walk you through the questions you need to ask yourself before you even call a contractor.

Here's the mortgage snapshot.

(COMMERCIAL BREAK)

WILLIS: With so much time and money going into home renovations, you want to sit down, think it through, and make sure there are no cracks in your plan's foundations.

(BEGIN VIDEOTAPE)

WILLIS (voice-over): Home improvements can be daunting.

ALAN J. HEAVENS, HOME IMPROVEMENT AUTHOR: Remodeling and renovation is an emotional a process as buying your first house.

WILLIS: But author Alan Heavens says you can make it all easier.

HEAVENS: That's why planning is important. That's why finding the right contractor and getting everything down on paper and finding out what you need is important.

WILLIS: That means creating the right checklist of questions in the right order. To renovate an existing room...

HEAVENS: You have to pretty much determine what you want and how much that will eventually bring you back when you sell the house.

WILLIS: And for an addition to the house, ask yourself...

HEAVENS: Whether you should add on to that house, or if you've outgrown it, you should move on and buy something else. I mean, so, you know, even before you even think about spending any money, you should see whether you really want to stay where you are.

WILLIS: If you're adding space, the next step is to determine where.

HEAVENS: Well, you have to think about location. And you have to think about what you have to do to that space to get it ready to build. Often people put -- you know, begin projects without knowing what's behind the walls.

WILLIS: That's why your first call should be to an architect.

If it's a renovation you're taking on, contact a designer to help you with the details. Next, research materials for your project.

HEAVENS: What I would do is, I would use a wonderful little tool called the Internet. You could find bathroom sites or kitchen sites or all -- you know, and look to see what people are building, and what kinds of things people are using in those particular -- what kind of materials.

WILLIS: Once you have that down, begin your search for a contractor. And experts agree, the best way to find one is by word of mouth.

Next comes option for financing the project.

HEAVENS: Well, you ask yourself how you want to pay for this. Do you need to see exactly, realistically, how much money that you're willing to spend, how much you will get back over time. And then you're going to have to say, Well, how much can I afford? You could take out a home equity loan, which is actually a second mortgage. You can refinance your current mortgage and take money out. You can save up for it.

WILLIS: Money in hand, create a payment schedule with your contractor before the work begins.

HEAVENS: My favorite, favorite situation is finding a contractor who is, A, willing to have you pay for the work done at the end of whatever period, whether it's -- you know, I'll pay for the work if it's an addition, for example, I'll pay for the work, every bit of work done, write you a check on Friday for the work done in the previous five days.

Or, you know, after, you know, if it's a two-month project, you know, this is how much you'll give us after two weeks. This is how much you'll give us. Set up a payment schedule so you know exactly what you're paying.

WILLIS: And finally, think about whether you should play general contractor yourself.

HEAVENS: I think you should participate to the best of your ability. You have to be there for a point of information, negotiation. If things need to be changed, you need to be there, and you need to get any, you know, any change process contractually in the contract.

WILLIS: Follow this checklist of questions, and...

HEAVENS: By planning and by, you know, talking and by finding the right people, and by, you know, making sure you don't have that, as I said, have the house own you instead of you own the house once this is all done, that'll reduce your stress level like you wouldn't believe.

(END VIDEOTAPE)

WILLIS: Being organized will save you time and money. I'll have more money-saving tips right after this.

(COMMERCIAL BREAK)

WILLIS: We talked a lot about saving money heating your home this year.

But what you also need to know is this. The government says it's doing its part to help you save money. You can claim a tax credit of up to $500 by making energy-saving home improvements.

Now, these include new windows, improving insulation, and buying energy-efficient heat pumps or water heaters.

Now, granted, $500 isn't a lot, but at least it's something.

Take a home energy test at EnergyStar.gov to see what you need.

Another way to save, the energy-efficient mortgage, especially if you have an older home. That will roll the cost of improvements into your loan, but they shouldn't exceed 15 percent of your home's value.

For more, check out the Department of Housing and Urban Development's Web site at hud.gov.

And finally, a Southern California couple came home to this, this week. Look at this picture. Yes, their roof was removed by a contracting crew. It seems the contractor was supposed to be doing the job one block over. He says, quote, "My guys made a mistake."

Then he actually told the couple they'd have to pay to have it fixed.

Don't worry, the authorities have stepped in. Talk about hitting the roof.

We want to hear from you. Send us your comments, your questions to openhouse@cnn.com. And you'll find more on today's guests and topics on our Web site, cnnmoney.com/openhouse.

Thanks for watching OPEN HOUSE. We'll see you here next week.

The day's top stories are next on "CNN SATURDAY."

Have a great weekend.

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