Every now and then I give myself over to the HGTV daydream.
You know, having a crew of highly-trained, ultra-chic (but with a traditional flair) designers come into my home and ask me what I would like to change/renovate. I run through a list along the gamut of mildly irritating to take-a-jackhammer-please, including demolishing our second floor bathroom, taking out our backdoor and replacing it complete with a screen, replacing our aged, dangerous-to-operate, A/C and furnace, etc.
Their budget is unlimited, they don’t need us to get our hands dirty, and they’ll be completely finished with this life-changing event in just four days.
The reality is that my home will probably never be featured on one of these types of shows (doh).
But for the hundreds of homeowners who will have their homes repaired, remedied, and otherwise renovated in front of a national audience, there are financial realities you need to know.
Of course, in general it’s a huge benefit to have your home renovated or your project rescued by professionals — sometimes paid, sometimes not paid by the television studio (“CAN YOU GET HGTV TO PAY FOR YOUR HOME RENOVATIONS”)– but it’s not all roses and red velvet cupcakes.
Money Reality #1: Your Property Tax Bill Will Increase
I cringe each year when our assessed property tax statement comes out. Probably because for the last two years, we’ve seen a significant increase in what our tax collector says we owe due to raising our property’s value (by the way, you can contest your property taxes; we did and won several years ago).
Well it turns out that when a show comes in and renovates your property — raising your property’s value — your annual tax bill will increase (and if you think your tax assessor may not notice, just remember that this will be airing on national television, as well as the production crew/construction workers will be pulling permits to legally make the changes to your home).
Here are some examples from past shows:
- The Llane Family, Bergenfield, NJ: The original mortgage on their home in 2002 was for $223,706 with a tax assessed property value of $117,300 (fyi: the tax assessed value of your home is often less than the market value). In 2011, after being on a renovation reality show, the home’s tax value was assessed at $443,800. They paid $6,488 for their 2007 property taxes, which spiked to over $13,000 in 2011 (2012 taxes were even more, at $15,000).
- The Dickinson Family, Beaufort County, SC: The Dickinson’s home used to be 1,869-square-foot home was replaced with a 4,000-square-foot home. Their original home’s 2010 value was $166,223, with a property tax bill of $744.18. A county assessor estimated that the new tax bill would come to about $2,100 per year.
- The Wofford Family, Encinitas, CA: Their 31-year old home used to be 1,212 square feet with an annual property tax bill of $2,698. As of 2004, their newly renovated 4,600-square-foot-home, valued at $410,474, has an annual tax bill of almost $6,000, an increase of $3,302.
Money Reality #2: There Might Be Shoddy Work Left for You to Repair
Even though the outcome of home renovations can seem magical, when the cameras stop rolling, the light of day sometimes reveals shoddy work due to cutting costs/corners/and huge time constraints. Here’s a few examples:
- April Lunsten figures it will cost her $1500 to fix the issues when the cameras stopped rolling. Those issues include things like handmade bedding where the stitching fell apart upon the first use, paint streaks and loose moldings.
- Rochelle Kirk and Scott Waters of Covina, CA were featured on the show Catch a Contractor. They are now suing them for $2.87 million. Sewer pipes were moved during production, and one was not reconnected. Their claim is this led to 200 gallons of sewage to spill under their shower, into the walls, and under their home. The couple and their family experienced medical problems prior to figuring out what was going on. They had to move out of their home and into a hotel between August and December 2013 while their home was repaired and remediated of mold, water intrusion, and sewage.
- An anonymous reader who was on the show Designed to Sell pointed out that, “our ‘custom’ pillowcases in our bedroom were actually duct taped fabric around our pillows. Ceilings and areas of paint that wouldn’t show on camera were not finished.”
- Wendy and Cenate Pruitt have had to deal with a basement retaining wall where a downspout drains into that has kept lots of water in their basement. While the original construction crew did come back out after the cameras stopped rolling, the problem has not been fixed. So far they’ve had to rent a swimming pool pump to pump water out after a rain. He’s also had to purchase a tool shed because he can no longer store things like his lawnmower in the basement.
Money Reality #3: Your Utility Bills Will Likely Increase
Getting a much larger home than the one you started with, or allowing some really cool upgrades can spell trouble for your monthly utility bills. Two examples:
- For Victor Marrero, he had a 3,000-square-foot makeover on his home, bringing his monthly utility costs to between $700 and $1,200.
- The Byers family’s newly built, 4,000-square-foot, Eugene Oregon home took them from $150/month utility costs all the way to $600/month in utility costs.
Money Reality #4: Your Maintenance Costs Will Likely Increase
Those European-plaza-invoking fountain fixtures and landscapes straight out of museum courtyards don’t maintain themselves.
Wendy and Cenate Pruitt found this out the hard way. “Just about all the flowers they planted were dead in two or three months. They planted this fancy golf course sod in the front and it was immediately overtaken by crab grass. It got to the point where we had to hire professional lawn services to come out and maintain it…I would guess we ended up spending $1,200 to $1,500 a year hiring people to come in and clean it up.”
Money Reality #5: You Might Still have a Mortgage When All is Said and Done
Let’s say a show comes in and demolishes your old home to rebuild you a brand, spanking-new one complete with said European-plaza-invoking fountain fixture. They use volunteers and donations to fund the costs — woohoo!
Unfortunately, this doesn’t mean your old home’s mortgage is forgiven. For example, the Byers family still owes $250,000 on their old mortgage after getting a brand new home built for them.
Also, some families take out a mortgage on the new home in order to fund other things and/or fund the increased costs of living in the home. For example, one family in in Lake City, Georgia took out a $450,000 mortgage on their post-Extreme Makeover home to start a construction business. Unfortunately the business flopped and the property has dallied in and out of foreclosure.
It should be noted that during ABC’s Extreme Makeover heyday, they did sometimes collect funds to help with additional costs, such as paying off the old mortgage on the demolished home.
Money Reality #6: You’ll Probably Have to Miss Work, so There’s a Potential Decrease in Pay
When you are chosen to be on a reality television show, it goes without saying that you’ll have several days — potentially stretched out over weeks — of filming. Depending on the shooting schedule and on your employer, you may or may not be paid for the days of work you’ll be missing.
Money Reality #7: Possible Income Tax Consequences
When you’re given a financial improvement or benefit, you can generally expect to be taxed. For example, after Cenate and Wendy Pruitt’s $20,000 exterior renovation, they were issued a 1099-MISC to report the improvements as income. Some home shows suggest refinancing the new asset in order to pay what’s owed to the IRS.
One show in particular has found a loophole around this as far as home renovations are concerned: Extreme Makeover: Home Edition. According to LawProfessorBlogs.com, “[u]nder section 280(A)(g) of the Internal Revenue Code, if a taxpayer uses a dwelling as a residence and rents that dwelling to a lessee for a period of less than fifteen days, the rental payments are not included as income for tax purposes.” So this show decided to make a lease agreement with the new homeowners that lasted under those 15 days, with the home improvement costs acting as rent paid. This resulted in a tax-free transfer of value to the homeowners instead of having them get hit with a huge income tax bill.
There you have it, folks. What do you think — is it still worth it to try to get on one of these shows? If you were to do so, what would you like renovated?