Contractor down payments - whats normal in 2021

[Exporter]

I've never had to put more than 25% down before starting work but that was years ago. Now some of the contractors I've spoke with to build pole barn want 50% down and 25% when materials arrive. This seems very high but its been a few years.

Looking for any members experiences on what is normal in 2021. Thanks!

 

[JoeMcGov]

You need to ask them "what do you need a down payment for?" When they wine that they have to pay the concrete supplier, and the lumber yard and the ..................you tell them that you will pay the material invoices directly yourself. This DOES require that you have some understanding of the build process. But it give vastly greater control over getting ripped off.

 

[readhead]

50% down and hopefully they show up later. Keep looking.

 

[Git]

California - 10% or $1,000, whichever is less. There should also be a payment schedule based on work performed or material delivered.

https://www.cslb.ca.gov/resources/guidesandpublications/wyskpamphlet.pdf

 

[finn]

50%, especially if it’s a small contractor.

 

[dcg9381]

I contractors I've spoke with to build pole barn want 50% down and 25% when materials arrive.

Pay for the building materials directly with the supplier, that should satisfy the
"50%" and also keeps you secure knowing the supplier is paid and if the contractor no-shows, you've still got a building. People have paid contractors before for the kits, finished the job, only to find a lien with the building supplier. Many contractors can get NET 30 credit.

For these buildings, buying the kit is the down payment. Again, don't go through the contractor - that's a bad idea. All the contractor has in is labor, so that gets paid when the labor is complete.

I realize that doing stuff like this "makes it harder" in this market, but it's really the only way to do it that minimizes risk, especially in states where there is little to no regulation of "contractors" and no real zeal to prosecute white collar crime where someone willingly gave up money..

 

[jkeyser14]

MD law is 1/3 max up front.

 

[TangoFoxTrot]

I've never had to put more than 25% down before starting work but that was years ago. Now some of the contractors I've spoke with to build pole barn want 50% down and 25% when materials arrive. This seems very high but its been a few years.

Looking for any members experiences on what is normal in 2021. Thanks!

Am I understanding right, they want 75% (50%+25%) before they've even started? Absolutely no way.

I understand actual material costs, but outside that, I would have a big issue. Every time I've been screwed, its been when I paid early. Even when its "just a few things left", if I pay it all, they blow out of there and never come back. Even to pick up their garbage and debris they left.

 

[getbent4x4]

Really nothing but some require materials. If the percentage is high they are b/sing you about the material cost. Dealing with some contractors is like argueing with some idiot that walks up and down the street all day. You can really get screwed over.

 

[yeldogt]

What state .... and who?

75% seems way too high ...

I had a nutty steel guy years ago who wanted 50% and I escrowed ...

 

[ripperd]

I don't have a 2021 experience. But in 2018 with a very reputable contractor it was 33% on first day of job, 33% when it was "complete" and the remainder after it passed city inspection.

This was for a 40k deck and screenporch.

 

[dave_dj1]

As a contractor it's not in my description to finance your project.
The amount down depends on the size/scope of the project.
As far as all you saying just pay the material yourself, good luck finding a reputable contractor who is willing to do that, we like to make money and probably get better pricing than you.
We aren't charities. I understand there are "contractors" who are less than reputable but do your due diligence and get references and verify references. Be observant of their truck (is it a mess or neat etc), the way they dress, their promptness, their professionalism etc.
Don't take the lowest bid especially if it is a lot lower than the next bid. It's a two way street, we want to be sure we get paid as well.
Edit: get everything in writing!!!

 

[brownsmustang]

I asked this question to 3 friends of mine, one does sheetrock finishing in central MN, one does pole barns in sw mo, and one does remodels and complete home builds. The sheet rock guy just laughed and said only scammers are paid up front, the barn guy says that it's typically a 1/3 when he starts the rest upon them signing off on it. The contractor said it depends on the job. But rarely more than 25%.

 

[dr_clyde]

As a shop owner I have some thoughts on this. A bit different as a shop vs a contractor but similar.

If materials are over a few grand, I ask for half up front as a material deposit and to make sure I’m not gonna get stiffed.

I’m not a bank. It’s not my job to finance your project, and if you can’t afford half down, you’re not gonna pay me when my labor is finished.

I’ve been screwed by a few people who decided to just not pay and I ate materials and labor. No thanks.

Loads of big companies are only willing to pay on their terms, net 30-45 usually. That’s just the cost of doing business. But individuals or contractors? Half down please or I’m not interested.

Every time I’ve been screwed it’s been by a single person or a construction contractor. Not by a company of any size.

 

[ch612T]

Paid 33% when the contract was signed. Then all but a $1,000 of the balance paid when the material is delivered. The $1,000 that is left is paid to the foreman when the job is finished.

Good company as they have built pole buildings for my neighbors (3), brother, daughter and business partner.

My building starts May 21st and I really do not have any reservations.

 

[Viper98912]

I wish my employer paid me 25, 50, 33, whatever percent you want to call it, before I showed up to work on Monday mornings. And with my lunchbox in hand (my materials).

Interesting how different some industries are. If it were me, there'd be a significant number of multiple paypoints; every time materials are delivered, every week when the guys show up to work and hit a certain milestone (don't come work on my job this week? you're not getting paid by me then this week). I know small payments are a PITA, but that's how many other industries get paid - every week or every other week, if you showed up and logged hours, you got paid for those hours, etc. There's too much money being "floated" around and too much risk for the consumer. On the flip side, can be just as much equal risk for a good contractor and a con-job consumer.

 

[TobeyA]

My pole barn is about half finished; it should be complete next week. Minus electrical, which my brother-in-law is doing. I paid 25% up front. The rest due on completion.

 

[nadogail]

If you make a big "Down Payment" your contractor can start the job with a Brand New Pickup.

 

[HPRifleman]

I'm in the process of having a stick-built garage built. I had the payouts listed in the contract along with the project completion status that would trigger that payout.

This is the payout schedule for my project. I changed the dollar amounts to percentages of total cost.

Draw--Amount----Payable upon:
1------3%--------Contract signing
2------23%-------Completion of foundation and confirmation of location by civil engineer and backfill.
3------21%-------Completion of rough framing inspection, roofing & window install.
4------39%-------Completion of concrete slabs, rough electrical, rough mechanicals, rough inspection, all exterior work, and making all spaces weather-tight.
5------14%-------Village approval of final inspection and completion of job.

I felt this was both fair to the contractor and I wasn't paying out far ahead of the work being completed.

 

[Gila Monster]

My experience, it's the losers and scammers that need some massive upfront payment like that before they've even started. Not the successful, professional operations.

 

[SamuraiJack]

I'd assume all the good contractors have 30+ day payment terms with their material suppliers. There is not much need to pay upfront other then financing the contractors operations. HPRfileman has it right with the payment schedule so neither party gets to far behind on payment. In the commercial world contractors that need payment upfront get bonded or work awarded to someone else.

 

[TangoFoxTrot]

If you make a big "Down Payment" your contractor can start the job with a Brand New Pickup.

I knew a guy that literally had that happen. He had a massive landscaping project, wrote like a $50,000 check upfront at the contractor's insistence, and the owner came to his house on the first day in a brand new truck and said "look at what your downpayment just bought!"

It did not go down well. And yea, the guy was a total screw up and the project of course went sideways.

 

[gnpenning]

As a contractor it's not in my description to finance your project.
The amount down depends on the size/scope of the project.
As far as all you saying just pay the material yourself, good luck finding a reputable contractor who is willing to do that, we like to make money and probably get better pricing than you.
We aren't charities. I understand there are "contractors" who are less than reputable but do your due diligence and get references and verify references. Be observant of their promptness, their professionalism etc.
Don't take the lowest bid especially if it is a lot lower than the next bid. It's a two way street, we want to be sure we get paid as well.
Edit: get everything in writing!!!

Agreed, with one minor change . Hard to keep a truck clean with muddy job sites.

There has been many threads as why people in here never hear back from a contractor or why the bid is so high. This thread is another example of why.

Do your do diligence and have everything in writing with signed lien releases.

 

[dcg9381]

> As far as all you saying just pay the material yourself, good luck finding a reputable contractor who is willing to do that, we like to make money and probably get better pricing than you.

To me, that's fine. If I accepted the bid price and there is a behind-the-scenes mark up on the material, yea, that's going to get found out - but who cares. I'm still paying the supplier through that account directly. If the consumer accepted that bid and the contractor isn't being "honest" about pricing of the material - both are kinda doing it wrong.

It's really a bad idea to not pay for materials directly. No home builder here does it that way with money up front. As mentioned, contractors getting NET30 have been known to not pay their suppliers. The suppliers go after the home owner, not the contractor..

 

[purplezr2]

My contractor charged nothing to quote the job. Charged for the concrete which was subbed out when it was finished. He then asked for 1000 retainer, I believe mostly due to the concrete was poured in Sept, and the building was done in April. Concrete sat all winter.

 

[f121]

Down payment? Hah. It's hard enough getting contractors to show up, let alone if you pay them before theyve done any work.