Question: I recently applied for $100,000 revolving...

Question: I recently applied for $100,000 revolving credit line against my home. The lender told me that I would have to wait several weeks to get the funds. Why?

Answer: Several lenders recently have been caught short. It seems that some individuals have sold their homes, put them in escrow and then applied for a revolving second mortgage on their homes. If the second mortgage had not yet been recorded when escrow closed, the lender was bilked out of its funds and its ability to have a lien on the property.

Q: I am looking for a publication which can inform me on the pitfalls of home-improvement contracting.

A: One of the best booklets available is published by the Contractors State License Board. It is called "Blueprint For Building Quality." You can obtain a copy by writing to the board at 3132 Bradshaw Road, Sacramento, Calif. 95827.

Q: My neighbor told me that before having a home-improvement project done on my home, I should insist that the contractor be bonded. When I spoke to a contractor, he told me that all contractors were bonded. Is this true?

A: In California, all licensed contractors, whether they be sub-contractors or specialty contractors, are required to carry a $5,000 license bond. Swimming pool contractors are required to have a $10,000 bond. However, this license bond generally only covers wages to employees, fringe benefits, materials that have been paid for by the homeowner that have been delivered to the job site and fraud. This offers little or no protection to you in case the job goes under.

You can, however, require your contractor to furnish you with a performance and payment bond. The cost for these bonds is usually between 1 1/2% to 3% of the total cost of the project. This guarantees that the work will be done for the specific amount and the terms and conditions of the agreement.

Many small contractors, however, have difficulty in obtaining performance bonds. Most large bonding companies are not interested in writing small bonds, but about a half a dozen smaller bonding companies in the state have expertise. You might have to negotiate with more than one contractor before you find one that is bondable.

Another way to go which usually will do the job is to place the funds for the job in an escrow account and disburse them upon completion of the work done, substantiated by invoices.

Fontaine is president of the Western Regional Master Builders Assn. and a director of the American Building Contractors Assn. He will answer questions concerning home improvements. Phone 213/653-4084 or write him at 6404 Wilshire Blvd., Suite 850, Los Angeles 90048-5510.

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