The Cost Of Rebuilding After A Wildfire

The simple fact is that, after a catastrophe, no one has enough insurance to fully replace their home. There exist a wide range of factors that affect your replacement cost. Knowing this can give you a better understanding of what you need and how to deal with your insurance company.

What factors affect the replacement cost of your home?

The term “replacement cost” refers to the cost of reconstructing the unique features in the residence in today’s marketplace using materials and design of similar quality. Determining this figure accurately prepares you to rebuild your residence to the same specifications as the original home at the time of the loss.

A home’s replacement cost can include the following:

Labor and materials required to reconstruct the residence with similar quality, craftsmanship and materials
Reasonable profit for the builder and subcontractors
Overhead expenses for the duration of the project
Licensing fees, filing charges, permit and impact fees
Insurance and taxes associated with reconstruction
Architect, engineering and consulting fees
Costs associated with required code upgrades (i.e. residential
sprinkler systems, impact rated glass, non-combustible construction, reinforced foundations, etc.)
Foundation costs above and below ground
Interior decorating. Including all window treatments, decorative light fixtures, wall coverings, floor coverings and associated interior design fees
Built-in features that are often upgrades after the home was built or purchased such as cabinetry, bookcases, entertainment centers, fireplace mantels, custom closets, wet bars, appliances, etc.
Electronics, often upgrades by the homeowner, such as built-in flat screen televisions, computerized lighting systems, alarms, home theaters, smart house systems, close circuit security cameras, lightning suppression, etc.
Attached structural features, including garages, carports, decks, covered porches, pergolas, gates. etc.

Additional Considerations Which Influence Reconstruction Costs:

Time constraints

In the unfortunate event of a total loss, the homeowner may be displaced and living in temporary housing. Therefore, reconstruction often must occur in a shorter period of time than new construction. In addition, labor and material costs can go up when a general contractor needs to pull workforce from another job to work on the new project, or they may pay a premium for materials delivered immediately.

Access and staging Issues

When rebuilding or renovating a home in an established neighborhood, a general contractor may be required to adhere to a specific schedule to keep noise and construction from impacting other residences. It may be necessary to park construction vehicles and trailers far away from the jobsite. Hauling materials in established neighborhoods can be much more costly.

Availability of skilled labor

As with the demands to rebuild in a shorter time period, labor costs also can escalate due to the general contractor’s inability to find skilled labor and quality craftsmen.

Profit and overhead

A typical margin for profit and overhead for a builder is approximately 20%. General contractors sometimes reduce their profit margin for competitive reasons or during slow seasons. However, profit and overhead for reconstruction during a catastrophe often exceeds the standard margin for new construction. Even if this is more than what the contractor is currently charging, in the event of a loss 20% overhead and profit should be used by insurance companies to ensure the highest quality of work. In addition, architect, consulting and engineering fees can exceed the typical percentages charged for new construction for similar reasons. These fees are significantly higher in areas like California because homes must be built to withstand extreme events such as earthquakes and wildfires.

Foundation work

Some contractors will provide estimates that do not include foundation costs, however, during a fire spalling may occur. Spalling is a physical process of the breakdown of surface layers of masonry (typically concrete) which crumble into small pebble-like pieces in response to high temperatures and/or mechanical pressure. It is important that an engineer inspects the foundation. This can add a significant cost to the replacement of the dwelling.

Interior designer fees

These costs are often incurred after the rebuild and not included in the contractors estimate. They can include specialty interior finishes such as chandeliers, closet built-ins, window treatments, home theaters and electronic systems.

Price fluctuations

Reconstruction can be influenced by erratic price fluctuations caused by the following factors:

Supply shortages: Material expenses as a result of the recent hurricanes to include lumber costs.
Fuel costs: Rising fuel costs continue to influence shipping charges as well as the price of petroleum-based products such as plastics and asphalt.
Environmental impact: New codes in many areas impact the choice of construction materials and design of a new home, which can add to the cost to rebuild. In addition, some materials which were readily available when the home was built originally are no longer available or more expensive, due to new restrictions on harvesting wood or laws protecting endangered species

Common Issues with Home Replacement Costs

When a catastrophe on the scale of the wine country wildfires strikes there can be many delays in the rebuilding of your home and settlement of a loss. Here are some reasons this happens and what you can do to make sure your settlement moves forward.

Demand Surge: The cost of construction can increase dramatically as the result of the unusually high demand for contractors, building supplies and construction labor after a disaster. Demand surge after a disaster can increase the cost to rebuild your home significantly and delays can occur due to a of a lack in skilled labor, not enough building inspectors, a lack of engineers, infrastructure delays (ie roads blocked, power down) or updated building codes to match the catastrophe.
Lack Of Qualified Contractors: When a catastrophe strikes, local and reputable builders are booked immediately. They can only rebuild so many houses and are usually limited in their capacity. Waves of out- of -state builders usually descend on a CAT area. They may not know local building codes, may not understand the cost of materials in California compared to other areas of the country and may not have valid licenses. If you know of a good contractor try and retain him or her immediately. Your insurance carrier may also have a list of recommended contractors.
Non Competitive Environment: The cost of construction can rise because all builders know their services are at a premium. This non competitive environment can cut into your policy limits.
Skilled Labor vs. Non Skilled Labor: Your contractor can easily find non skilled labor during a catastrophe situation, however, finding skilled labor can be difficult. Non skilled laborers are able to complete tear out and clean up of the damaged property, but finding skilled labor to rebuild handcrafted cabinets or install granite counter tops can become difficult with skilled laborers charging more for their expertise.
Material Shortages: Because of Hurricane Harvey and Irma, building supplies are already in short supply with prices increasing every day to include plywood, and asphalt shingles (which are petroleum based). According to the Bureau For Labor Statistics, Prices for final demand goods rose 0.7 percent in September, the largest increase since January. Over 80 percent of the September advance can be traced to the index for final demand energy, which climbed 3.4 percent. (Higher energy prices were likely the result of reduced refining capacity in the Gulf Coast area due to Hurricane Harvey.) This can affect the cost of rebuilding your home.
Staging: When rebuilding a home in an established neighborhood, a general contractor may be required to adhere to a specific schedule to keep noise and construction from impacting other residences. It may be necessary to park construction vehicles and trailers far away from the job site. Hauling materials in established neighborhoods can be much more costly. Gated communities may have special rules and regulations.
Delays On Your Part: The most important thing you can do to expedite the rebuilding of your home is to provide everything the insurance company requests in a timely manner.

For more information on how to rebuild and prepare for the aftermath of a wildfire, seek a California wildfire victims claims lawyer today for a free no obligation consultation.