Payment Schedule for Contractor

[SPDMETL]

One builder told me 10% down to order, 50% when the material hits the ground and the rest upon completion. Another's was 40% down , 50% upon delivery and 10% upon completion. Discuss, please...

 

[brownbagg]

if he want 90% of job before he drive a single nail, he trying to cover payroll on other jobs, so if he walks on you first day he has almost all your money. you give 10% deposit or you pay for material. the last day on job he should have no more than 70% of your money, the rest 30 days after punch list.

first contractor is ok, second is a crook

 

[mtwaterguy]

My suggestion would be 20% down with proof of permits, business license and insurance, 30% when 1/2 complete, 30% on completion. Balance of 20% after final inspection and proof that all supplies and subcontractors had been paid.

 

[jerseywild]

My suggestion would be 20% down with proof of permits, business license and insurance, 30% when 1/2 complete, 30% on completion. Balance of 20% after final inspection and proof that all supplies and subcontractors had been paid.

Thanks to garage journal I will check for proof that all the supplies and subs have been paid. I would have never of thought to check that before.

 

[Norcal]

Thanks to garage journal I will check for proof that all the supplies and subs have been paid. I would have never of thought to check that before.

Good thing to do there have been many people hit w/ leins after they thought everyone was paid because a GC failed to pay subs or suppliers.

 

[mtwaterguy]

The reason I include GC insurance is from personal experience. In Oregon I contracted a business acquaintance to build a pole barn. While going over plans and dicussing different option for the build, he assured me that he had business insurance. One afternoon I came home early to check on the progress and was told that one of the workers had slipped off the roof early that morning. Steel roof and moisture make for poor footing. The employee said that he was lucky in that the back side had not been brought down to grade and that he only fell about 8 feet or so. I mentioned that at least with his employers insurance he would have been coverd by workman's comp. He said "boss has no insurance". When the boss showed up later he admitted he had no insurance so I escorted him off the property and told him he was done. If that young employee had been injured, I could still be supporting him. Bottom line be sure and cover yourself and don't accept anyones word.

 

[BillGalbraith]

My garage was done by a real builder, someone that usually did houses, but he liked the garage jobs because they generally without problems that slowed things down.

DRAW #1 CONTRACT SIGNING - 5%

DRAW #2 FOOTERS/STEM WALL ROUGH PLUMBING/SLAB POURED SOIL TREATMENT/FILL -25%

DRAW #3 WALLS COMPLETE BEAMPOURD/ TRUSS STRAPS INSTALLED - 20%

DRAW #4 FRAMING/EXTERIOR DOOR ELECTRIC/WINDOWS - 20%

DRAW #5 CONTRACT COMPLETED STUCCO/GARAGE DOOR/ROOFING SOFFIT & FACIAl TRASH REMOVED - 30%

I paid for the trusses and the plans separately.

We also did the change orders at the end, which were things that we were expecting, but couldn't really price out at the beginning, like what we were doing with the driveway.

One thing that I got a little ruffled about was that he originaly priced in a portable toilet for the job, which was $200 or $250, but never got one. No one was ever here for very long, because they didn't have to be. Probably the block masons were here the longest, and I think it was only one full day. Contractor won't give me credit on that one, his reasoning being that sometimes things run over, sometimes they are under. Not a big deal when we are talking about $23K, but still, it was my money.

 

[mmhouse]

Thanks to garage journal I will check for proof that all the supplies and subs have been paid. I would have never of thought to check that before.

This is very important. The process varies state by state so check around to see how it works in yours. In our state (and at least one other I am familiar with) the contractor needs to secure a "lien release" from each supplier in order to protect the owner from future mechanics' liens on the property. When we built our house the final payment was withheld until all the lien releases were provided to us.

P.S. In our case suppliers who wanted to retain their lien rights had to file a "notice of right to lien" and send the owner a copy, this is how I knew which lien releases I needed from the contractor.

 

[ddawg16]

California has very strict laws regarding progress payments....for example, the down can not be more than 10%. Actual laws will vary by state.

It think brownbagg is right about the second guy....sounds like the first one is more realistic.

BTW....nothing wrong with asking the subs if they got paid....

And....get references......

 

[rodm1]

good information.

 

[Norcal]

California has very strict laws regarding progress payments....for example, the down can not be more than 10%. Actual laws will vary by state.

It think brownbagg is right about the second guy....sounds like the first one is more realistic.

BTW....nothing wrong with asking the subs if they got paid....

And....get references......

10% down or $100 which ever is less. (California)

 

[sasquach]

I was always told ( but never used a contracter so I could be wrong ) 1st 1/3 2nd 1/3 and final whats left

 

[Doc]

When I had my shop built, I paid 10% down, when the concrete was done, I paid the concrete guy ( ~35%) , when the building was erected and I was happy, I paid the builder (~30%). After the building passed final inspection, then I had to pay the final payment. This was the key for me selecting this builder. He sold me on the fact that he had significant cash assets and had the materiels already as he buys his steel in bulk. He also gave me copies of his insurance paperwork / Licences with numbers to the county to verify.

 

[brownbagg]

one more thing never pay the last 10% till contractor has completely move off site and you are happy with everything(punch list) make sure this is in writing before job begins because this is where 90% of the problems are. and people get heated.

 

[kbs2244]

Games can be played with any contract.

My BIL was a site boss for a real large drywall contractor.
The general contractors loan contract with the bank called for the second 1/3 to paid “after the drywall is installed.”

The general contractor was behind with some subs and had them do the install before the roof was on so he could get his payout from the bank.
Needless to say his contract was “cash in advance.”

The contractor understood his point of view and had the cash to cover him.

 

[denis4x4]

The last three jobs we've contracted have been time & materials. It's difficult to get a contractor to work T&M as they have difficulties understanding the concept and that, in the long term it's to their benefit. For example, if they lack estimating skills, they'll bid way more than the job is worth or come crying to you if they bid low and lost their shirts. We also used pre printed lien releases for the subs. The one exception is on steel buildings as they require prepayment before they ship. We also require a certificate of insurance showing that we are "an additional insured" on the contractor's policy. Finally, we ask for a list of at least three previous customers and we call and/or visit the jobs. The bottom line we're looking at is quality workmanship and T&M usually provides that opportunity.

 

[KYGTP]

The garage that I am building now, and almost finished, was done a little different than what I have read here.

I guess it is T & M way. I did have to put down 10% up front of what the "Bid" was. But what it came down to, was pretty much at the end of every month or so, My builder would take a "Draw". He would summit EVERY SINGLE receipt up to that point for my review of the work that was done and all of the Subs paper work as well. He took 17% cut of what that total was on the bottom line, EXCEPT on his labor. His labor rate was just that and nothing else.

All of those numbers were put into a 6 page spead sheet, so you could see where all the money was being spent, AND that 10% that I put down, goes toward each draw. So if it was, say 20K, and you had 4 draws, then at each draw, 5K came off the bottom dollar.

There are not alot of builders out there that do it like this, but you can SEE where every single dollar is going. If you go over, you know where you went over, if you came under, you know where you can under.

I hope this makes sence to you

 

[mmhouse]

The last three jobs we've contracted have been time & materials. It's difficult to get a contractor to work T&M as they have difficulties understanding the concept and that, in the long term it's to their benefit. For example, if they lack estimating skills, they'll bid way more than the job is worth or come crying to you if they bid low and lost their shirts. We also used pre printed lien releases for the subs. The one exception is on steel buildings as they require prepayment before they ship. We also require a certificate of insurance showing that we are "an additional insured" on the contractor's policy. Finally, we ask for a list of at least three previous customers and we call and/or visit the jobs. The bottom line we're looking at is quality workmanship and T&M usually provides that opportunity.

I agree with everything you say here and the "additional insured" is great stuff but probably more sophisticated than most individuals handling their own project would typically use (but still an excellent suggestion). It may also not be understood by smaller contractors.

My only concern would be that you'd better know that you have a good contractor before contracting for time and materials. There's no question it's to the benefit of the contractor (they know they'll get their desired margin on the labor but may balk at not getting any margin on the materials, unless you're building that into the contract) but on the flip side it isn't good for the consumer if the contractor does not work efficiently or if unexpected work arises (either due to unforeseen circumstances or contractor error).

I still think having a good contractor and a hard bid (selected from multiple bids for comparison) is best for the consumer but there are always trade-offs no matter which way you go. If you have a good contractor that you can trust you're probably going to be fine no matter how the bid is structured.

 

[Tom McDermott]

If you are in Texas then there are specific rules to follow. Particularly, you should withold the final 10% until 31 days after the job is complete. Get it in writing.

-- Tom