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Question DetailsAsked on 5/5/2013

Is it standard to put 50% down on a major remodelling job?

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7 Answers

Voted Best Answer
6
Votes

Herlonginc's answer stated that it is not the contractor's job to pay for materials and labor to do the job. I say baloney - a reputable, established contractor has the funds (or a business operations line of credit) to "carry" the job between interim or partial payments, each of which should be keyed to completion of distinct easily measured mileposts in the job, and for a homeowner I would say should be in not more than 20% increments for jobs exceeding a week or so. For shorter jobs, then an initial payment, 50% completion, and completion would be normal. His cost of carry funds is part of his cost of doing business, and is figured as part of his overhead.Bear in mind when he is buying materials and paying labor, his materials he typically pays for on a 10-30 day invoice, and his labor typically a week or two after they work, so he is not really "fronting" that much money if you are giving him weekly or biweekly interim payments, on a typical residential job.

If he does not have the funds to buy materials (excepting possibly deposit on special-order or luxury items, which still typically are 10-30 day invoiceable to him) and hire personnel then he is a fly-by-night operation, and he should not be bidding that size job. You should never (other than MAYBE an earnest deposit of not more than the LESSER of 10% or $5000) let the payments get ahead of the approved/inspected work progress - typically payment should be 10-20% BEHIND the progress, with at least 10% retained at the effective end of work until final inspections and completion of the final "punchlist".

That promotes rapid continuation of the work, discourages the all-too common nightmare of contractors taking on more work than they can handle so they leave your job for weeks or months to go work on someone else's job (frequently to start that someone else's new job so he can get the job), and does not leave you out a tremendous amount of cash if he does not finish and you have to hire another contractor to finish the job. Remember, if you have to hire a new contractor to finish the job, he will charge you a lot more than the original bid to finish someone else's unfinished mess.

This may seem cynical, but having started in the construction business about 50 years ago and seeing the shenanigans that a lot of contractors pull you cannot be too safe. You have to remember contractors are like any other people - I would say maybe 10% are outright crooks, another 25% or so will pull a fast one or overcharge if the opportunity presents itself, maybe 30% will do the work but not any better than they are forced to, about 25% are good conscientious reputable workmen, and the last 10% or so are really spectacular - conscientious, fair, and efficient craftsmen. This top 35% are the only ones you should have bidding in the first place. Therefore, only get bids from long-term reputable firms (so you shake out the marginal short-timers with less experience and also generally less ability to finish the job on budget and schedule), only those that have good RECENT references, and preferably with excellent word-of-mouth recommendation from people you know and trust. That way, you are starting right off with the cream of the crop, so hopefully whichever one bids low should be a good choice.

NEVER start with bids, then check the references of the low bidder - why even consider a vendor or contractor who you do not have faith in from the start ? Get references and short-list you possibles BEFORE you ask for bids.

Low bids - that is another matter - commonly the low bidder is NOT who you want, especially if he is significantly lower than several others, which might mean he is desperate for work, made a math error, or did not correctly figure the entire scope of work. You want a reasonable bid with someone you connect with and trust - that is worth a lot more in the success of the job than the absolute lowest bid.


Answered 6 years ago by LCD

3
Votes

There is no standard but a reasonable major (ie 50k) remodel job requires some faith money. I would suggest 10% is fair. Most agreements call for step payments as work progresses with 10 % held back at the end for final approval.

Jim Casper Contractor who doesnt accept deposits

ps and sends old fashioned paper bill After work is done

pps with stamped self addressed return envelope

Source: www.heartlandmastershield.com

Answered 6 years ago by jccasper

2
Votes

It depends on your definition of major. 50% is typically what I charge and is fairly common around here. However, a $20,000 job, for example, will likely be broken into 3 payments. 1/3 up front, 1/3 at some milestone in the project, and 1/3 at completion. A $40,000 job would probably be broke into 1/4 payments. It really depends on the job and where the most espense to the contractor is. A job requiring a lot of money at the start for expensive materials or specialty sub-contractors such as electricians and plumbers will require a larger deposit. A job where the bulk of those costs won't come until later will be factored in to the payment schedule at the appropriate time. Personally I prefer to order any specialty materials including finish out selections at the start of the job so I know the store won't sell out of any item or if the one they have is broke I have time to order a replacement without hindering the schedule of the job. Ordering the materials at the beginning usually takes up a majority of a 50% deposit. Don't expect the contractor to float the cost of your job completely out of his pocket. Unfortunately, the ones that do eventually learn the hard lesson from it.


Even honest customers that pay on time can have problems, including unintentional ones. No one knows what the next day holds for them with certainty. If you get sick or get in an accident while the job is in progress how will the contractor get the money when he needs it? What if you lose your job and didn't budget well, not having the money until your next expected paycheck that isn't going to come? Keeping payments up close to the progression of the job with the final payment being the largest personal risk to the contractor is the fairest and safest way to go. He can float small amounts of the job along the way but isn't going to risk his home or savings if you die in a car crash and your heir can't get the money before his payments come due on your materials, etc. Our profit comes in the final payment so if something happens to you at least we can break close to even until that payment comes through, if it does at all.


Now that's the risk with a good customer. We've all had dealings with bad customers that intend on short changing us at the end regardless. Sometimes to the point of costing us money. I can't speak for others but I don't take it too kindly when someone takes money from my kids because that's where my profit goes after bills. Just as contomers need to research and be careful with who they hire as their contractor, contractors have to do the same with customers. The trust we instill in each other is a two way street. You trust that I'll get the work done properly and safely. I trust that you will pay me on time and for the amount agreed. Therefore, a mutual agreement that ties those two things together must be formed.


Todd Shell

Todd's Home Services

San Antonio, TX

Answered 6 years ago by Todd's Home Services

2
Votes

Todd pegged the answer.


The initial response is "No" because if you never see the contractor again, what have you got? Many home loans / construction loans actually have clauses and requirements against how much can be placed as a deposit.


But keeping the payments as close to, and only slightly ahead of the work is a fair method of work; the contractor shouldn't have to put up their money to buy supplies and pay for the work, and the home owner shouldn't have to risk their funds being used on other projects or the contractor just walking away with the funds by paying too much ahead of time.


Be sure that your contract clearly states a payment schedule based upon work done (not dates), so you and the contract will know when the payments are due (IE When the foundation is poured (and passes inspection), when the framing is complete (and passes inspection), etc). It is typical to withhold a certain percentage of the total job until the job is fully complete as well - it is generally the "profit" of the job; it is paid when the contractor is never coming back, everything is cleaned up and finished and you are happy. This amount also should be clearly understood and in the contract.


Best of luck on your project!

Source: www.herlonginc.com

Answered 6 years ago by Kenny Johnson

0
Votes

Every bid we received had either 1/3 down, 1/3 half way through the job and 1/3 upon completion or 1/2 on siging contract and 1/2 upon satisfactory completion. All estimates had a insurace bonding statement and cost of permits. We had siding, gutters enlarged and all new soffits.

Answered 5 years ago by Guest_95750122

0
Votes

Caveat emptor of any contractor that can't carry the job to completion. If they don't have the credit standing to carry it and you are paying out of pocket, find someone else.


It may be common, but we just lost our 50%! We have all the paperwork to support the loss but basically going to court would be throwing good money after bad as even though we would surely obtain a judgment in our favor, collecting it is a whole other story and very unlikely.


From now on, if I have to trust a contractor's word, then they will need to trust mine. I will gladly pay in full upon completion, but not before. If good faith money is needed, I will offer 1%. I have explained our experience to other contractors and they tell me they "hear it all the time!"


*The man who stole the money was not hired through Angie's List.

Answered 5 years ago by Guest_94119873

0
Votes

Guest_94119873, Sorry you had such a bad experience. Was it because you didn't fully research your contractor before hiring? You stated he wasn't list on Angie's List. That's only one place to check. You have to also bear in mind that all sites which grade contractors are biased. They only take into account certain factors, not all. Therefore, you have to do thorough research to make sure the contractor hasn't been ripping people off.


As for refusing to provide a deposit or only giving "1% down" you'll find you just eliminated almost every legitimate business you might hire that does good work from ever touching your home. No one in their right mind is going to risk not only their business but their entire financial wellbeing on one project if it is large enough. A quick one day job is fine to expect to be paid at completion. A several thousand dollar job, not going to happen. One of the answers months ago references being billed on a 30 day invoice. Sadly, there are very few suppliers that do this these days, at least here. With the proliferation of various forms of credit it is expected that all accounts are some sort of credit account, which cost interest and affect credit scores depending on how much is out at any one time. Competing with the illegals doesn't help either since they often work for pennies, steal their tools and materials, and/or do shoddy work to get done as quickly as possible. What this means for legitimate businesses is that we can't mark up our prices another 25% to cover increased overhead costs because Customer's want to wait to pay us. No matter how you dice it there is a daily cost of running a business and it would be stupid to throw out $20,000 or more to keep the business afloat during a large job and hope the job isn't delayed or the customer pays on time. I have thousands of dollars of available credit. Enough to front the cost to build a house or complete some other large project. That doesn't mean I'm stupid enough to use all, or even a large part of it, on one project.


Anyway, research your contractors. The only ones I've seen in over 15 years work on larger jobs with no money down are either the big bix stores, or fly-by-night outfits. Neither of which you want working on your house. It's ok for the contractor to extend some of his own money or credit, but not a large amount of it. Especially at the prices most customer's are willing to pay these days. When customers quit comparing estimates between day laborers and legitimate, serious contractors that might change.

Answered 5 years ago by Todd's Home Services

0
Votes

No! If a contractor doesn't have enough capital or a large enough line of credit with his suppliers to begin a major project then he probably shouldn't be doing large jobs in the first place.


At Climate Right Construction we never ask for anything up front. We bill as we go ONLY for the material and labor provided. At the beginning of a project we listen carefully to what the customer wants, then give a reasonable estimate of how long it will take and what the cost should be. Then we agree with a handshake on how often invoices will be paid.


When doing business this way the customer is always in the driver's seat and never upside down on the money. If the customer wants to add or omit anything there will be no need to renegotiate the cost. We simply let them know how the bottom line could be impacted and do as we're instructed.


Our customers are comfortable with this relationship right from the start and then when they see the level of performance and quality we’re providing they usually expand the scope of work beyond what they originally intended.....which is great for us!

Answered 4 years ago by climateright14




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