Deposit for working up quote?

[Innovate1]

I am looking at building a house and large garage and one GC is telling me they want a deposit of $5000 to work up the quote. They gave me a quote but it is just a rough one based on square footage. I realize there is a fair amount of work doing the detailed quote but haven't run into this before. They say this is becoming more common. Anyone else run into that? They said they could do one meeting with us before the deposit and that it is refundable if we don't go with them. I haven't seen the actual contract yet.

 

[ratdoggy]

Why would it be refundable if you didn't go with them?
Doesn't make sense....
I could understand a fee that would be credited towards work.
Like Lowe's or HD charging for carpet measuring

 

[NUTTSGT]

If it's refundable if you don't go with them, why a deposit ? To get 2, 3-4 quotes could cost you more than the entire project.

 

[larry_g]

It make sense to me IF it is a DETAILED quote. How many times have you heard recommended here that you go out and get 5 or more quotes? That is a lot of work for many that are not going to get the job. How many mechanics here are going to spend an hour of their own time diagnosing a problem just so you can present the owner a cost estimate for repairs?

lg
no neat sig line

 

[oledude1952]

Must be drawing up the plans also for that $5K, or its a really BIG project. JMO

 

[NUTTSGT]

Must be drawing up the plans also for that $5K, or its a really BIG project. JMO

I'd understand that, drawing up plans or a detailed quote, something that you can take to the building/permit dept.


They mention, refundable if you don't go with them. If you do go with them, is there a credit towards total cost. . . . or I wonder if it's not "worked" into the total package price.

 

[lis2323]

It make sense to me IF it is a DETAILED quote. How many times have you heard recommended here that you go out and get 5 or more quotes? That is a lot of work for many that are not going to get the job. How many mechanics here are going to spend an hour of their own time diagnosing a problem just so you can present the owner a cost estimate for repairs?

lg
no neat sig line

I have no idea if this concept is widely used or not but I LIKE it.

Even if the deposit is fully refundable the client’s money would be ******* for awhile and it shows he is a serious buyer.




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[ddawg16]

I'm calling BS. You put a deposit with him....decide not to use him.....good luck getting your money back.

 

[joey1320]

Why is a GC drawing and quoting building plans, wouldn't that be an architectural firm's job?

 

[justsam]

To me preparing a quote is a component of the business, and in effect a cost of being in that particular business. A quote is not a detailed plan, where certainly a cost is involved. There are many businesses that in effect "sink dry wells", but you calculate that into your overhead costs.

 

[Hilltopmasonry]

Yes that is typical


Builders typically will give you an approximate price for a project to see if its within your budget and if you want detailed plans with architectural stamps and blueprints then you will have to pay them for it which is refundable if you choose to go with the company.

It takes many hours of drawing up blueprints and figuring materials and getting bids from subs and contractors don’t exactly like working for free.....


There has been a lot of contractors that spent hours doing detail plans only to find the project is way out of budget for the customer. You make that mistake one time and you don’t do it again

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[Jackfre]

It takes time to develop a detailed take off and quote. Time is money. $5k seems excessive but if he is a good builder and busy he has learned not to put into a customers hands information that he can then shop to the next lower bidder and the more detailed take-off you provide the more likely it is to be shopped. The homeowner then tells the contractor, "Well, gee, I wanted to go with you but you were 20% higher than them." Them gets the job. A year later you see homeowner on the street and he stops you. "Gee, I wish I had gone with you. I'm having problems. Can you come over and look..." From there the conversation goes to FO or the palm up waiting for it to be filled with a pile of cash upfront.
I think OP situation will increase with the "better" mechanics. In the skilled crafts today for every one person entering, five are leaving. People always want something for nothing, bus business is not a hobby, a romance or a friendship.

 

[Innovate1]

This is NOT including drawing up plans for the permit. I already have plans that I paid someone else to do (not entirely happy with how that went - lots of mistakes and revisions and delays but that's another story). Maybe this GC normally does that and includes it although in my experience getting custom plans can easily reach $5000 or even double that at least in this area. I may start a thread on that subject.

They are called PSA's, Preconstruction or professional service agreement. I think the money is credited toward the construction but I don't have the details yet.

I am guessing this may be a regional thing and perhaps spreading. The poster that said it is typical doesn't have a location that I could see. They also assumed it included the construction plans.

Probably also tied to how busy people are. I am hearing construction locally is busy.

 

[matt_i]

In my opinion there's a yin and a yang to this. On one hand if the contractor is going to expect a downpayment every time they prepare a quote they probably aren't going to get that much business. On the other hand if they're working up detailed quotes that take hours of analysis and then having their quotes handed over to other competitors to do the actual building that's a non starter as well.

That particular contractor has probably had some experiences along the way and wants to make sure a potential buyer has some "skin in the game" and aren't flippantly using their time. Along the same lines it also is interesting from the perspective of limiting competition. Consider that a person armed with drawings wants to get 3 bids. Not everyone has $5k laying around not to mention $15k laying around to get 3 competitive bids....but at the same time we are talking a 6 figure project without any question so the 5% down on a 100k project (could easily be >1.5% down in a 300k+) with refund option isn't too bad.

 

[hedtedjr]

I can easily see the contractors point here. He is going to invest the time to work out a full materials list as well as asking his sub contractors to do the same. His time is worth something. The other way to look at something like this is simple, if he did all the work of lining everything out and you didn't use him, who should pay for that?

 

[toolmiser]

What keeps the contractor from skipping town with your money? Doesn't seem like they will have much "skin" in the game unless they care to? I've done deposits, but that was after I contracted the job, set a date, etc.

 

[ScottsGT]

Happens to us all the time with various departments on campus wanting quotes to either go hunting for money or to shop off campus vendors. It really eats up a lot of man hours putting together detailed quotes. We’ve been giving ball park quotes for those on the money hunt.
Don’t blame a contractor to cover his time.

 

[vavet]

I’ve heard of realtors doing something similar.

I understand the premise, you don’t want to waste time on a bunch of tire kickers.
In our case, we built a house a few years ago. One of the builders we spoke to wanted a deposit once we agreed on the floor plan and lot. Ok, makes sense, then we had to wait 3 days for the contract cooling off period. Ok. Then, and only then, would we be allowed to meet with the design consultant to make aLl the decisions on our house...paint colors, flooring, appliances, lighting upgrades, etc.
So it wasn’t until we had a binding contract that we could figure out how much our house would cost. Now, if this was a free market type scenario, that’d be one thing, but we were restricted to using the builder and/or their subs for all these upgrades, we couldn’t select a different oven at Lowe’s and pay the difference in the base oven and the one we wanted. If they wanted to mark it up 300%, then our choices were to take it or leave it.

I asked several time, several way, several people to be able to have that meeting with the design consultant prior to signing the contract. No way, no how. This, along with some other restrictions, drove us to choose another builder for our house. They were so protective of the time of their design consultant that they drove us away. What’s 2-3 hours with that person cost? MAYbe $200 if I’m being generous? And you’re going to save that on a potential $400k transaction? Yeesh!

 

[Big Bad Dad]

Bend over.....

 

[frankush]

Not a chance. If you have been working with an independent architect on your home design, he should be able transfer those thoughts to paper. When the plans are complete, ask your architect to put it out for bids. He should have a number of builders that could bid the build of your home. Your not asking the builder to become involved in the design stage. Let the architect handle the design. An interior designer can also convey your wants to an architect if you don't "speak construction talk".

 

[GrayFlattop]

Run away.

 

[TheLurker]

I'm not against it but for $5k, show me a contract. Need to know exactly what I'm getting, how much I get back if I don't go with you, etc

 

[DFB]

Wow that is pretty steep but don't know what it all entails.

Just to share a story why a guy would ask for a deposit, when my boss got his state grant and wanted to build a new farm store he had a local contractor come they talked and pretty much decided he do the job. This was around Christmas and the contractor spent the next few months detailing the plan. Well my boss was under the assumption (I have no opinion here ) that the job would start as soon the snow melted, (late April early May) which it did not. The guy did show in June to start. But my boss was unreasonable and told him he hire someone else.

Long story short the guy took him to court and got a judgment for all that time he spent working on the project design

Guess some people have money to burn

 

[Hilltopmasonry]

When the plans are complete, ask your architect to put it out for bids. He should have a number of builders that could bid the build of your home. Your not asking the builder to become involved in the design stage. Let the architect handle the design. An interior designer can also convey your wants to an architect if you don't "speak construction talk".

I think this is where we are getting confused in this post because a lot of construction firms or what you would call builders also has a designer and architect side that will draw up the plans...

that is probably why they want the five grand

If he already has prints then he could give it to a builder for the builder to give him a price and it wouldn’t cost five grand to bid the prints, most contractors would charge a couple hundred bucks which would be applied towards the work to estimate a larger project.

$5,000 Is about how much it cost to design and draw plans for a new build from scratch



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[Innovate1]

The plans have already been submitted to the AHJ with a building permit application and sent to this GC.

 

[rayra]

I'd refuse. I'd put this in the same category as having money demanded up front with no progress payment schedule.

This pricing out a quote on plans you provided is time he should be embedding in his overhead costs.
If you've already got your stamped plans and applied for permits, that's proof enough of your commitment to the build. At this point of the game the GC should be trying to win your business, not billing you up front.
Most importantly your money sitting in his bank account for this quote period - without a contract or surety of its return - is a huge risk on your part and is a situation rife for his using your money to float his cash flow issues or 'rob Peter to pay Paul'. And if your deal falls thru and you demand your refund he'll probably be giving you somebody else's $5k up-front money, because yours will be already spent on something else.

 

[rharman]

Nope. When we remodeled our house (2nd story add-on), we had 4-5 contractors that got the plans, had a site walk with the architects, and then submitted bids - broken down as spec'd by the architects who were managing the project for us.

None of them got a dime for doing the bids.

 

[firebirdparts]

I don't see how it can be refundable if they lose the business. That makes no sense at all. I could believe it's refundable if you do go with them.

 

[frank001]

I'm calling BS. You put a deposit with him....decide not to use him.....good luck getting your money back.

^^^^This would be my thought also^^^^

 

[larry_g]

Nope. When we remodeled our house (2nd story add-on), we had 4-5 contractors that got the plans, had a site walk with the architects, and then submitted bids - broken down as spec'd by the architects who were managing the project for us.

None of them got a dime for doing the bids.

Can I ask what year this was?

lg
no neat sig line

 

[Vintage Veloce]

Get some other quotes first and see if they ask for anything. I'd never consider paying a deposit like that... And it likely isn't even legal in California

 

[James E]

No.

I am in this business (I make loans to residential building companies) and none of my clients charges for a quote. They will charge for plans, but by that point, the buyers are usually under contract. Working up a rough estimate is a cost of doing business. None here requires payment until a contract is drawn up.

The caveats to this are (1) there is a lot of regional differentiation in the building business. Your area may be completely different than mine, and (2) situations where the builder gets some sense that a person is blowing smoke up their butts and/or is getting several estimates and isn't serious about a build. In that case, all bets are off and they may make an unreasonable request for a deposit to run them off.

I had a close friend burned by a contractor on a garage job. He paid her a large deposit and then after a long period of time, she told him she could not get a permit for his garage. He was over the impermeable surface limits. She refused to return his deposit even though she had assured him it was refundable, claiming she had done a bunch of pre-work (even though one of the first things she would have done was to check the impermeable limits). He took her to small claims court and lost.

Looky-Lous and tire-kickers are a fact of life in that business. I can see why a builder would want to be reimbursed for his time, but that's not a thing here. $5k up front scares me.

 

[Capt Crash]

I am looking to have a home built and have all of the design work done. I have put it out to bid for contractors, and nobody has asked me for a deposit. There were plenty who wouldn't even look at the plans because I will be doing some work myself, and they only wanted to do turnkey for $200+ sf.
Brian

 

[blkhonda1991]

i would run away from that...i have never see anyone pay for a quote and as others have mentioned providing quotes in the construction industry is part of the cost of doing business and should be factored into their overhead costs. Sounds like this builder wants to lock you in to a contract. Put the plans out to bid to a few others and tell the current builder if he wants the job hes got to bid it like everyone else without a desposit.

 

[pcmeiners]

I'm calling BS. You put a deposit with him....decide not to use him.....good luck getting your money back.

I was a contractor, sound flakey to me also, no less thousands of dollars *******. On the other hand I have spent days on a contract proposal and did not even get a thank you. If I had a GC business now, I would charge $500 no refundable fee for a finished proposal, part of the price if the contract is signed..

That said, I believe anyone going to build should have an Architect draw up the plans, a materials list, and a spec list, that should be given to a GC. Personally I would not trust a GC to draw up plans/spec sheet, it will be in his favor not yours. Think an Architect is not needed, only an added cost...see what happens to your building costs/expectations if you don't use one.

 

[rharman]

Nope. When we remodeled our house (2nd story add-on), we had 4-5 contractors that got the plans, had a site walk with the architects, and then submitted bids - broken down as spec'd by the architects who were managing the project for us.

None of them got a dime for doing the bids.

Can I ask what year this was?

lg
no neat sig line

1993. But, I'd take the same approach today.

A big job and contractors know it's going to be a competition of sorts. Architects handled it really well for us. Well worth their fee. Contractor started on time, workers were there every day, and job was done on time. Was it a perfect relationship? No. But, overall, I'd say the project went better than most and I give the architects a lot of credit.

We didn't go with the highest guy and we didn't go with the lowest guy. Price was not the sole decision maker.

 

[bradysdad]

I would agree to find another contractor. Quotes and bids are the cost of doing business. I am in sales and if I were compensated for every quote, proposal and RFP I responded to, I would never have to sell anything...just live off of the fees.

In my opinion, when someone has thousands of your dollars prior to delivering anything, you as a consumer, are at a great disadvantage, and might end up accepting something which you normally would never consider. There is also a sense of arrogance with this sort of deal. Contractors need to earn business and prove why they deliver a better product than the guy down the road. The mere notion that “you have to pay me before I waste my time” just doesn’t sit well.

Good luck!!

 

[finn]

We are looking into adding a new entrance, bathroom, ans small garage to our house.

Contractor came over to rough out the layout, then did a “conceptual layout “ on CAD for review.

He also did a very rough ballpark estimate.

We agreed that he won’t do a detailed estimate until I digest the verbal budgetary quote.

If I am ok with the budgetary number, which I am not, he’ll do more design work and give me a quote.

I will probably talk to one more contractor and request the same budgetary quote before I ask for either to do any real hard number crunching.

To me, this is part of the business of being in the general contracting business. You win or lose the customers business based on reputation and cost.

I don’t put down upfront cash when buying a car or negotiating on a refrigerator, and that carries over on a building.

 

[Bdgjr215]

I was a contractor, sound flakey to me also, no less thousands of dollars *******. On the other hand I have spent days on a contract proposal and did not even get a thank you. If I had a GC business now, I would charge $500 no refundable fee for a finished proposal, part of the price if the contract is signed..

That said, I believe anyone going to build should have an Architect draw up the plans, a materials list, and a spec list, that should be given to a GC. Personally I would not trust a GC to draw up plans/spec sheet, it will be in his favor not yours. Think an Architect is not needed, only an added cost...see what happens to your building costs/expectations if you don't use one.

100% agree with this^^^^^

 

[CTyankee]

I don't see how it can be refundable if they lose the business. That makes no sense at all. I could believe it's refundable if you do go with them.

Yeah, besides the price...something here just doesn't make sense.

I was a contractor, sound flakey to me also, no less thousands of dollars *******. On the other hand I have spent days on a contract proposal and did not even get a thank you. If I had a GC business now, I would charge $500 no refundable fee for a finished proposal, part of the price if the contract is signed..

This, from what I've seen today is a normal practice. How involved/detailed the quote is would determine a price. It's the cost for providing a service(quoting the job) and non-refundable unless acted upon.

OTOH..If a quote is written for a fee, the HO is entitled to a complete copy of it, to do with as he/she sees fit.