Best tips for not getting burned by contractors

[bucolic]

If a contractor asks for a large deposit upfront it is a bad sign. It may mean they are not liquid enough to front materials or are cash only at the supply house due to bad credit. I would never give a deposit upfront but once materials are dropped on site it is reasonable to pay for those. Then if the contractor pulls a Houdini you are not out anything. My 81-year-old neighbor got scammed for 3K for a sidewalk job. Scumbag took the money and disappeared. Never pay for jobs upfront.

Of course, you should be pulling permits and scheduling inspections for any large projects so unless the inspector is in on the scam this offers a fair amount of protection. You can then place the money in an escrow account and this way the company knows funds are there but no funds will be released until the project is completed and all permit inspections signed off on. Knowing inspections will be done on the work will weed out many scammers right there and they will walk away from the job. They usually require lien waiver agreements also. If the homeowner is taking a loan for the project this is done by the bank in many cases. Here is a nice little article on it.

Construction Escrow Services

Agent Support Construction Escrow Services Construction Escrow Services are used when a lender is financing a construction project and deposits escrow funds with a title company. The title company oversees the disbursement of all construction payouts, which are made to the general contractor...

www.atgf.com

 

[MerlinsBeard]

Take the time to do the research and write out as much detail as you can, including questions. Be willing to pay more for someone who has been in the business 10-20 years, preferably someone local whose work you can see for yourself. Try to establish whether they are willing to communicate with you on the details. Avoid people who demand high % down payments. Set reasonable expectations for cost and time overruns. Provide gatorades, water, fruit, and granola or energy bar for the day, especially if the weather is hot. I typically pay a tip based on the cost, quality of the work and the number of workers, on the off chance I need something fixed after the fact. For those who like to get heavily involved in a project, know when not to over commit your own time and money to maintain spousal sentiment, doubly so if you have young kids.

There’s no guarantee that all this will prevent contractor maladies, but I’ve had pretty good luck with quality work, even if it does cost more. I’ve also had some issues where I didn’t layout exactly what I wanted and ended up having to fix things myself.

 

[ArcReactorKC]

Crazy that people think the size of a company means they pay their bills.

A multi billion dollar a year data center outfit owes me a shade over $20k. A rounding error for their accounting department. The reason they haven't paid an are 6 months past due "we just haven't got to it yet"

 

[472scout]

Thanks for all of the responses this has been great. I'm going to consolidate all of the tips into a checklist.

 

[dcg9381]

After reading about yet another member getting burned by a contractor I'm curious what people have done to protect themselves.

Maybe a better way to ask this is what are the best practices for vetting a contractor and how would you write the perfect contract?

Here it's different. There is no such thing as a "licensed general contractor". No "licensed framer".
Sure, we have licensed plumbers and electricians.
A business that gets ****** reviews, well, they just start a new business and new DBA. So watch out for businesses that are pretty new.

I find "general liability insurance" to be a good idea, but also semi-worthless at the same time. Get a copy of it? Sure. But then you need to call to see if it's valid. Need to file a claim? That's hard if the contractor claims he didn't do the work or didn't make the mistake.


Here you go:

1) Contractors will want money up front for "materials". This sounds "reasonable" but is a bad idea. Most reputable contractors have commercial accounts that are net 30 or have other "delayed" terms. If they can't get those type of accounts, that's not a great sign. If a contractor insists on money up front for materials, you pay for those materials DIRECT with the material supplier through the contractors account. (This helps you avoid liens from contractors that don't pay for their materials and pocket your $$)

2) If you are paying in stages or draws, the draw should always be BEHIND the labor and materials that have been completed. You don't pay early because Bob needs to cover his subs up front this week. And make sure the "last" draw is one of the larger draws, that way if a contractor walks, you've got more work done than you have money in.


3) Do not pay for work that is not complete. If you don't know if it's complete (ie, needs inspection) then you figure it out before paying. Keep some money "back" if there is an inspection tied to the work.

Suggestion: This day and age set a reasonable time schedule for a job to be complete and include "cannot be absent from the job site [say 10 days consecutive]". It can be "substantially reasonable" and account for things like rain days - anything that is environmental. Without a time schedule, a contractor has you under contract and if he walks off, for say a bigger "commercial" job leaving you high and dry for 60 days, you're still "under contract" with him. (We had a plumber that would do this all day long)

Last advice:
In my county, there are public records on civil court. I run the name of the business and the name of the guy that I'm dealing with through those public record searches. I want to know how many times they've been sued.. You'd be surprised what this turns up?
Have a business with a taxID? You'd be surprised how many people aren't paying their business taxes or registration of their LLCs, which is not a good sign.

 

[dcg9381]

A multi billion dollar a year data center outfit owes me a shade over $20k. A rounding error for their accounting department. The reason they haven't paid an are 6 months past due "we just haven't got to it yet"

Interesting story. I had a data center refuse to let us remove our equipment. We were paid up on the lease (100%), but they threw my crew out that was out there removing servers... Literally locked to doors on them.

We settled with them later for a fraction of the remaining lease.

 

[ArcReactorKC]

Interesting story. I had a data center refuse to let us remove our equipment. We were paid up on the lease (100%), but they threw my crew out that was out there removing servers... Literally locked to doors on them.

We settled with them later for a fraction of the remaining lease.

This is for work on their power equipment (paralleling switchgear, and UPS battery maintenance) they aren't disputing the validity of the bill, or that they owe, just they don't feel like paying yet.

I can think of a couple of times when I was employed by someone else in the industry and a large data center conglomerate tried to bully my ex-employer. It ended up in court and was very ugly, bunch of business men acting like toddlers over what in perspective was very little money or effect on any of the operations. I think sometimes it's just a flex to prove they are in control.

 

[mike1956]

Here in NY you can't even get contractors anymore. I'm 65 and have recently wanted to have some work done because my back just can't handle it anymore and forget it. Still doing everything myself.

 

[GR14]

After reading about yet another member getting burned by a contractor I'm curious what people have done to protect themselves.

Maybe a better way to ask this is what are the best practices for vetting a contractor and how would you write the perfect contract?

When I built my home, I wrote an addendum to the contract that says the GC is responsible for the subs and the quality of their work (paraphrasing). And that in the event of a dispute that goes to arbitration or court, the loser pays the legal fees of the winner.

Lots of owners don't follow through with legal action because of the threat of legal fees of the contractor they could get stuck with. The addendum saved me about $60,000.

 

[472scout]

When I built my home, I wrote an addendum to the contract that says the GC is responsible for the subs and the quality of their work (paraphrasing).... The addendum saved me about $60,000.

Wow. Great idea.




OP Here.

If anyone would care to share contracts (sanitized) that would be super helpful to the community. PDFs will upload with the "attach files" button.


.

 

[HPRifleman]

When I built my home, I wrote an addendum to the contract that says the GC is responsible for the subs and the quality of their work (paraphrasing). And that in the event of a dispute that goes to arbitration or court, the loser pays the legal fees of the winner.

Lots of owners don't follow through with legal action because of the threat of legal fees of the contractor they could get stuck with. The addendum saved me about $60,000.

What is the practical result of adding that addendum? Does the GC take more responsibilty for his subs than he normally would?

 

[vrinner]

I've done a few performance clauses. Basically saying if you finish by X date (I let them pick a reasonable date) you get our negotiated price. If you finish in X minus a week (or whatever timeframe) you get a bonus. If you finish in X plus a week I get a discount.

Keeps them on their toes and wanting to get the job done on time or early. When I had my pool resurfaced I ended up with a new kreepy krawler as part of the performance clause because they were about 8 days late (last day of school for my kids). In two other cases i've paid the extra...and gladly.

 

[FMB4]

Again, no money upfront will go a long ways towards you not getting screwed. Licensed, bonded, and insured will also do much to keep the clown crews off of your property.

 

[ddurrett896]

I always act as the GC so no experience working with one directly, but have been successful with trades paying as the job is complete.

For example, my brick layer does great work however he's not reliable. Back hurts, needs work done to truck, you name it hes said it. I ordered 14 cubs of brick and said I'll pay you by the cube. As soon as the 525 bricks are up, I'll pay out.

 

[Junkman]

This makes for an interesting read. I am rehabbing a small (1250 Sq Ft) home, and I am getting quotes from insulation contractors for high density spray foam. One quote came in at $27,000 and another came in at $17750. The fellow that quoted the $27K has done work for me in the past, and told me that the other guy ($17750) didn't even cover the cost of materials. He came back and remeasured the building, and said he would "match" the other price, but needed most of teh money up front to pay for materials. In the meantime, I had another contractor look at the job, and he came in just shy of $13,000, and he also mentioned things that needed to be done also, such as fireproofing the foam in the attic, and that foam can't be used on the fireplace. He told me that he would use rockwool instead. Also commented that the overhand of the second floor had to have the soffits removed so they could be properly sprayed, which no other insulation contractor mentioned. He checked every box for me with his knowledge. His only downside is that he just went out on his own after working in the trade for the past 8 years. It makes it difficult to gamble on an unknown quantity, but I have to think back when I was just starting out in business over 60 years ago. His contract didn't ask for any money upfront.

 

[pcmeiners]

Unless you are fully versed in the trades and know how to spec out the worked needed do not write up a contract yourself, your not qualified. Have an Architect draw up the plans, produce a detailed material list and provide all the needed specs in a contract which can be used for contractor's bids. If you do not have a detail materials list and work specification you will not get what you expect unless your exceedingly lucky.

 

[pcmeiners]

The fellow that quoted the $27K has done work for me in the past, and told me that the other guy ($17750) didn't even cover the cost of materials

Did you look up the cost of the foam ( like a 55gallon set)? Your guys must have some really special spray foam...could the foam be mixed with gold or do they just have very large shovels?

 

[metalmagpie]

If you know a builder, ask the builder for his/her recommendation for your contractor. That's what I did and it worked out amazingly well. The contractor bent over backwards for us and always treated us like friends not just clients, because we were friends of his friend the builder you know. That's my tip.

 

[BombShelter]

I'm not totally sold on spray foams, do research and ask your insurance company if they'll insure it. Over in the UK they're banning it because it holds water in the beams destroying them. I do love mineral wool, it's very easy to work with.

All bullet points need to be in a written contract, if it's not included, word of mouth will not hold up in court. Details of how the chimney and soffits will be addressed should be drawn and written down. Thickness should be specified and any guarantee/warranty/remedies should be plainly written. A payment timeline should be in writing although a job like this should take a few short days. I would have a larger project timeline in any quote, smaller shops are notorious for not finishing and then putting customers on hold while they start new jobs.

A builder's suggestion is hit or miss, sometimes it's a great company that doesn't cause headaches for the referer or sometimes it's a BIL that charges more and does questionable work.

The spray foam guys around here usually show up with a big trailer or cube truck but I know some of the other guys are going to Menards and buying their kits, several at a time, I'd probably ask what kind of equipment they were using.

 

[hoho98925]

My 2 cents.

Contract, contract, contract!

Contract should contain exact scope of work and should be aligned with drawings.

Contract should contain Exact specifications of materials.

Excavation, spell out depth of footing, footing drains, slab prep, rough grade, final grade, slope from building, drainage.

Specs of concrete foundation/ slabs. Is it 4 sack mix, 5 sack mix, thickness, what strength do you want? Finish expectations for slab, smooth/broomed, level, sloped to door, sloped to drains? Concrete aprons, size location etc.

Specs of framing, Pole building, stick framed, stud sizes, spacing.

Specs of plumbing materials.

Specs for soil compaction.

Specs for roofing, what type, what color, what gauge if metal? Specify Manufacturer.

Specs Windows and doors. Manufacturer, R-value, glass, What type, what size, what color? Rated?

Specs for Siding, House wrap brand, taped? what material, what fasteners, what trim, what facia, Metal gauge, Fasteners, manufacturer.

Specs for Paint/Stain, Prep, Manufacturer, sheen, coats, body color, trim color.

Specs for Electrical what size service? How many circuits, outlet locations, 220 locations, lighting. Low Volt/Tv audio/security locations.

Specs for HVAC type furnace, mini splits, size of equipment, ventilation fans and ductwork?

Specs for Insulation, what type, what R-value

Specs for drywall, thickness, type, finish? Fire taped, what level finish 1-5 Texture? Primer? Paint?

Specifications for Interior Mill work, base/case and doors, manufacture, size, species?

Contract should contain exact scope of work. You will NOT get what you want unless it is clear in the contract documents.

Contract should set payment terms. Typically, they should provide a schedule of values and would be paid accordingly. Example:

Down payment Draw 1-Excavation, Underground utilities, Concrete Foundation/slab, backfill

Draw 2-Framing/windows/doors/ Roofing/Siding

Draw 3-Mechanical/Electrical/Plumbing/Insulation

Draw 4-Drywall/interior/Millwork/Cabinets/Flooring/Paint/MEP finish trim

Draw 1-Final draw on completion

Either pay subcontractors and suppliers directly or a signed Lien release at every draw. Lien releases should consist of 2 per subcontractor or supplier per draw. First is a Conditional Waiver used when they bill before payment. Then an Unconditional when payment received and cleared. I cannot stress enough the importance of these waivers! Without them you could pay twice for this work. At the end of the Job you need a final release from all subcontractors and suppliers.

Contract should contain Schedule, Start of work Completion dates.

Additionally, any and all changes to the project should require approval by the owner, ahead of work being done.

If the above issues concern you, I strongly advise you to reach out to a third-party Project manager to oversee the contract and build. If you find a good PM they will save your *** and wallet.

 

[Prospecter]

1. Be a good customer. Be pleasant, don't nitpick. I ALWAYS have my checkbook ready the day they finish.
2. I always ask around to see who has had good experiences with contractors.

I've never had a problem.

 

[nadogail]

I carefully consider who recommended a contractor, if it is someone who I know and trust and has personal experience with the contractor; that is a great positive.

 

[CDPLUCKER]

I was the general contractor for my house build and i did not have a single contract for any of my subs, some subs i didn't even have a firm fixed price when they started work. I had very few problem or conflicts, most even said they liked working for me better than their regular contractors because i payed them with a check as soon as they were done ! i found the key was if i liked them personally, it would be good , the only guys i had a problem with were the ones i did not " click" with.

I found them all thru friends and other contractors.