Question for you contractors..

[tomsmith]

Hey,

When starting a job like a basement renovation/finishing, do you ask for some payment up front and what kind of rule of thumb do you use?

I'm getting my basement done (4 year old home) and I've done quite a bit of reading and the consensus from homeowners and advisers seem to be:

1. Pay a maximum of 10% up front OR
2. Pay nothing up front and pay on a 'work done' basis. E.g. one payment with framing complete, another payment when electrical is complete
3. Buy the materials yourself and fore go the volume discount your contractor might have gotten. If your contractor asks you for the cost of material up front, it means he/she doesn't have credit and that in itself is a warning sign OR
4. Pay for the materials only when they are delivered to your house.

I've had 3 quotes this week. One guy wanted to buy the materials and said I would pay for them on delivery and he wanted an additional $1,200 up front before he started work. That would cover framing and electrical. Water would be the week after. Total cost of framing, electrical, water, drywall is $6500 (not inc. material)

The next guy said he is OK with me buying the material based on a list he would give me. I would need to budget another $500 for 'misc' costs that may crop up during the work which I'm fine with. He wants $500 up front, before he does work and that will cover framing. Total cost of framing, electrical, water, drywall is $8000 (not inc. material)

The last guy also is fine with me buying material and paying him on delivery. He wants me to pay him at the end of the day in cash. The amount would be figured on a schedule beforehand. Total cost of framing, electrical, water, drywall is $6000 (not inc. material)

I accidentally mentioned the first quote to the last guy - I was hoping not to let them know of each quotes because I don't want a bidding war. I just want them to let me know based on their experience and estimate but the last guy kinda pondered and then said $6k and I got the impression he was gonna give me a higher one so that puts him out of the running unfortunately - just got a bad feeling.

From the 3 contractors so far, I haven't 'clicked' with any of them so far. I think it's because I've read enough horror stories that I'm just paranoid about being ripped off so when someone is overly friendly, it makes me think they are not genuine. Messed up, I know on my part

I let all three know that my preference is to purchase the materials myself (or pay them only once it's delivered) and pay after each piece of work is done. With the exception of the 3rd guy, none of them liked that plan. They both said, "Well what if we do the work and you don't pay? I'm out of pocket".

I get it from their perspective, but at the same time, they know where I live - I'm not going anywhere. I could pay them $500 / $1200 and never see them again. In the grand scheme of things, maybe $500 would not be the end of the world but $1200 would surely hurt and yet even the principle of losing $500 would hurt.

What I haven't read/heard is from the contractors perspective so I'd be interested in knowing your thoughts on all this.

 

[JVB]

Most quote sheets I have seen through our company include us paying for all materials as we get a big discount dealing straight through the manufacturer and stocking our warehouse.

They require 3 payments throughout a basement job.

after framing is complete , after drywall is complete, and when the job is finished and the client is satisfied with the work.

You have to be careful with some contractors, I would look into a reputable contractor in the area and please do get references of prior work by them

 

[Hpozzuoli]

My buddy is a contractor. He asks for 2 payments. One at the beginning. Basically a small payment to retain him to do the work and start the permit process etc. Then they pay the rest upon completion. He insists any reputable contractor only needs a percentage up front to make the deal official. Any good contractor should be able to buy all the material etc without getting the "materials" payment. This is homeowner scale jobs and not commercial.

 

[jrsulo]

Im doing a basement right now.....half up front covers all the supplies and labor until the rock is up.....then the other half in two payments....all supplies are on site and paid for.

 

[bczygan]

The contractors protection is the written contract and the lien he can put on the property.

 

[firecracker]

I've never asked for upfront payment, if it was a bigish job of say 100k the customer would pay an interim at 2months, and then again on a monthly basis till the job was complete. That's in over 40years as a building contractor.

 

[Scott H in Wheaton]

Big picture/small picture.
You are trusting this contractor to work IN YOUR HOME on your most expensive asset.
Quibbling over $500 or $1200 is silly compared to the potential amount of damage you could incur.

You should be more focued on his insurance, his reputation for completing projects, and the quality of the work.

If its the right guy you should have no reservations about paying 100% up front...not that you would ever do that...but you have to have that level of trust. So what if a guy bids $6000 to do your basement? What if he does $20,000 of damage to your home?

Focus on the big picture of allowing this guy to work in your home. The payments are the least of your worries.

 

[6768rogues]

The cash guy might not have insurance and might go to jail for tax evasion half way through the project.

 

[readhead]

First, don't ever pay ahead. I know there are a lot of honest contractors who will take an up front
payment and will do a great job but there are some you will never see again.
The problem with you buying the material is you are responsible for it. If you buy the wrong stuff are you going to pay the contractor to take it back and get the right stuff? The contractor has no responsibility to warranty the material if it fails.
I do not take any money up front and spell out the payment terms in the contract. That is good incentive for me to get going and get done.
Where are you getting names? Ask friends and when you start hearing the same names those are the guys you want to talk to. Stop by job sites in your neighborhood and ask the owner if they are satisfied with the work and look at it yourself. Check the local home builders association if you have one for names.
As mentioned above require liability and vehicle insurance from everybody the comes on the job.

 

[Dustball]

This is what I've done for a basement finish-

On signing 10%
After substantial framing and prior to rough-in of plumbing/electrical/HVAC/Insulation 25%
After completion of rough-in and prior to start of sheetrock 25%
After completion of sheetrock and prior to start of trim 15%
After completion of trim and substantial completion 10%
Remaining balance on final walkthrough including any change-orders.

 

[frankush]

Are you signing a contract for the work? Any contractor that has a signed contract in his pocket, has the power of placing a lien on your property if you do not pay for his services. Have him provide a contract with the payment terms spelled out in writing. Payments are made upon completion of an approved inspection. The 10% up front is common in my area. Make sure you're comfortable dealing with whomever you choose. If the job goes sour, you'll have to deal with him then too.

Readhead's post above is dead on. If there is any problem with any of the material you supply, it's on you. Bad shower valve? You pay to remove and replace, as well as all patching. The contractor takes the same risk when he supplies the material. That's why it costs more for him to provide it.

 

[rslaback]

I grew up working for my self-employed father in construction. A couple things to consider:

• He was very good at what he did. From the day he hung up his own shingle until the day he retired he never had to place a single ad.
  
• As a one (or two when I was helping) man crew, projects would no surprise take longer than a 3 or 4 man crew.
  
• His discount on material was 10% if paid within 30 days. This often meant that he had paid for your materials out of pocket long before you paid him for them.
  
• His business was not profitable enough to keep non-reimbursed materials payments on the books for months at a time.
  
• While the ability to file a lien is nice, he didn't need a judgement that said you owed him money. He needed the actual money.
  
• Down payments and monthly statements kept his suppliers paid and food on our table.
  
• The client's ability to write a check for a down payment was usually a good indicator of their overall ability to timely pay for the job.
  

I wouldn't shy away from a builder based on their payment schedule. Personally I don't really care when I would pay for the job and I am very sensitive to the concern a contractor might have that I may never pay for that job.

 

[Average_Joe]

This is what I've done for a basement finish-

On signing 10%
After substantial framing and prior to rough-in of plumbing/electrical/HVAC/Insulation 25%
After completion of rough-in and prior to start of sheetrock 25%
After completion of sheetrock and prior to start of trim 15%
After completion of trim and substantial completion 10%
Remaining balance on final walkthrough including any change-orders.

This.

 

[WQ59B]

I'm out of the norm here; I don't take deposits. Most of my clients are word-of-mouth (I also have never advertised), or I am easily able to get a 'read' on them WRT reliability. I buy job materials more as-I-go and on my CC (where I get 3% cash back). Even on a $30K custom deck job I didn't take a deposit. I'm not against them (I'm about to take 10% on a $450K job), but for small stuff I never found it to be necessary. I agree that having that sort of financial flexibility goes a long way to making things easier for me and more trust-worthy for the client.

I like that above quoted payment breakdown tho!

 

[Garage Customz]

First off, the idea of a big contractor discount is a myth. There are very few building materials that are bought cheaper than homeowners can buy at the box stores. HVAC, electrical and plumbing a little bit, but actual lumber and such is just the same as you can buy.

On an $8000 job, we would not take anything up front. The only time we take $ upfront is if you are talking about something over $20k. We will take a 1/3 typically to defray some of the labor and material costs to get started, with balance due on completion.

Before you sign or decide on anyone, make sure to get the contractors worker comp certificate as well as have their insurance company send you a copy of their insurance certificate. DO NOT have work done at your house by someone who has workers on the job if they don't have workers comp. One of his guys gets hurt, you are responsible for their medical care, something most homeowners don't think about.

 

[Big Bad Dad]

When I was in business I never requested money up front for anything but special order, non refundable items like custom sized replacement windows, etc. The Contractor should set up a system of payment draws when work reaches certain stages of completion.
Anybody that wants payment up front isn't in a secure enough position to do the work, IMHO. The Contractor is licensed and can put a lien on a person's property that he has a written contract with and does not recieve payment from.

I closed down and got into inspections about 10 years ago. My neighbor asked me about building a $25K addition on to her house. I had to decline, and I repeatedly advised her to NOT pay a Contractor any money up front before the job started. Well, a slick talking "jackleg" talked this elderly lady out of a $4000 down payment anyway. She never saw him again......

 

[gregtwojeeps]

As a homeowner that worked construction for many years and have done all my own work on my home renovations except the roofs, I see Redhead said it best....

To me, the HO trying to save a few bucks by furnishing the materials just overly complicates the project and slows it down. No one can anticipate EVERY piece of material needed for the days work....

Lets say the plumber is running the water lines and he finds he needs a 1/2 x 1/2 x 3/4 copper tee that is not in the materials stocked. He has to stop his work, go get one, save the cash ticket, get reimbursed. Ridiculous....

Go find references from neighbors that have had work done on their homes is the best way. Look at their projects workmanship to your own satisfaction and they will be glad to tell you all the BAD things that went on.. Anyone can drive up in a nice truck with clipboard and Smartphone ringing and talk a top story about how good they are. You NEED to see it and hear from previous customers. Hire a Pro, most of the time you will get what you pay for. good luck jmo

 

[Garage Customz]

Something else to think of when you furnish material, who warrants the material? Also, is your time worth anything? You are going to have to compile a material list, go to the box store and physically pick it and pay for the material, schedule delivery or pick it up yourself, and then deal with any mistakes or bad product.

This takes more time than alot of folks realize. As a contractor, if someone wants to furnish material, that typically tells me they are more of a "tire kicker" than I want to deal with...so I would walk from a job like that.

 

[CTyankee]

as a homeowner that worked construction for many years and have done all my own work on my home renovations except the roofs, i see redhead said it best....

To me, the ho trying to save a few bucks by furnishing the materials just overly complicates the project and slows it down. No one can anticipate every piece of material needed for the days work....

Lets say the plumber is running the water lines and he finds he needs a 1/2 x 1/2 x 3/4 copper tee that is not in the materials stocked. He has to stop his work, go get one, save the cash ticket, get reimbursed. Ridiculous....

Go find references from neighbors that have had work done on their homes is the best way. Look at their projects workmanship to your own satisfaction and they will be glad to tell you all the bad things that went on.. Anyone can drive up in a nice truck with clipboard and smartphone ringing and talk a top story about how good they are. You need to see it and hear from previous customers. Hire a pro, most of the time you will get what you pay for. Good luck jmo

x 2....

 

[Norcal]

In California it is illegal for a contractor to ask for, or accept a down payment of more than 10 percent of the total home improvement contract price or $1,000, whichever is less.

The laws of the State the OP lives in would dictate the down payment, if there are any....

 

[Tim The Tool Man]

Well I'm going to go against the general consensus here. I am a self-employed general contractor. I stay very busy doing home remodels and I don't advertise. I employee a few laborers and am fully insured and do everything legit.

I would never even consider taking any job without receiving a deposit that covers the first week or two's worth of materials and enough to cover my laborer's expected pay.

I take $50 to put the job on my schedule then the day I start work I take the first draw. Then I have one or two more draws as the job progresses to pay for additional materials and to cover my employees labor. I don't pay myself until the final payment but I don't want to have to pay my employees as well if the home owner decides to screw me.

I do work with customers who want to buy their own materials. It really doesn't bother me but I cannot warrant them like I do with materials that I buy - and I explain that to the client.

To the O.P. I would question (run from!) any contractor that wants cash at the end of each work day. I would ask for proof of liability insurance, a clearly written contract, and I would not allow any work to progress without it being properly permitted and inspected.

I will also say that you will turn off most reputable contractors if you push non-payment until job completion. To us that usually screams; "I'm going to screw you once the work is done!" I am busy enough as it is and I don't need to get in that kind of mess.

 

[Regnar]

I agree with everyone here on the down payment. It shouldn't be needed on smaller projects. I would also caution that when ever your about to make a payment you will need a release of lean for the material and labor you are paying for! Nothing like getting called or having a worker show up asking for their money when the Contractor skips town.

 

[jake00]

We do hardwood flooring.

Custom orders are pid 100% up from, 1/2 the labor the day we start 1/2 wgn complete.

If the material portion is "stock". Then the delivery is COD

Occasionally we install flooring the cust procured themselves, but we'll charge a little more because we don't know what problems we'll encounter w the product.

 

[rharman]

In California it is illegal for a contractor to ask for, or accept a down payment of more than 10 percent of the total home improvement contract price or $1,000, whichever is less.

The laws of the State the OP lives in would dictate the down payment, if there are any....

Beat me to it......

 

[dreamingmuscle]

License and Insurance first. Don't even let them look at the job until then. If that is up to date 10% up front isn't unreasonable to expect.

You can also search their name and company name on most States court systems. That will tell you if they have ever been sued and what the judgement was.

Glen

 

[nolimits76]

Just curious -- but why do you want to purchase the materials separately? Unless you have a special discount, the contractors will likely get a better discount on them because they buy more overall volume than you.

A few years back I built a custom home and hired a general contractor to handle the day to day for me. At the time I was pretty set on trying to buy all the materials myself primarily because my company owned a lumber company and I was getting a substantial discount. Most builders hated this idea and refused to do it. The guy I ended up going with wasn't fond of it but agreeable. As we discussed the details, it turns out he used the same lumber company. So I simply let him handle the purchase, and then collected a check directly from the lumber company for the difference of what the contractor paid vs what my discount was. But that's a very rare situation.

If you are worried about the contractor marking up the materials on you, this can be handled a different way. For major materials, you can have an agreement to let the contractor submit a "stored materials request for payment". This basically means the contractor submits the original material invoices along with necessary material certifications, proof of insurance and liability statement signed by contractor indicating he is responsible for damage, theft, etc of materials. On a normal job, the contractor is allowed to submit payment requests every 30 days on a certain day of the month, and the owner pays within 14 days upon receipt/approval of the pay request.

 

[BFBOB]

There's good and bad on both sides. I've never asked for payment before completion, but I may have to on a current big job because a previous big job hasn't been paid for after 5 months.

 

[nolimits76]

In regards to completed work, keeping to a monthly pay schedule is the most fair to both parties. Whatever portion of work the contractor completes that month, he gets paid for that portion minus some retainage. Retainage varies, but is typically 5-10% depending on the size of the job. In a periodic payment system, retainage is paid after work is complete, and the contractor provides lien releases, delivers warranties, etc -- basically the job is 100% closed out.

 

[nolimits76]

There's good and bad on both sides. I've never asked for payment before completion, but I may have to on a current big job because a previous big job hasn't been paid for after 5 months.

You know best how to run your business, but I think asking for periodic payments is reasonable on any job as long as you and the client can agree on the payments ($ x % work completed).

The sad part is that the new owner is only being asked to pay because the previous owner failed you.

 

[tomsmith]

Update: I phoned all three back and asked for license and insurance. The first guy says he has insurance but not a license but he can get a license if I absolutely need it. That makes me nervous - one would hope a license takes more than a few days to get otherwise it seems anyone could get one.

The second guy has both license and insurance but said if I want to see them, he's going to have to work 'on the books' which means adding another $3k to the job. I'm glad he's got insurance and a license, but the fact he's willing to work outside of them makes me wonder.

The last guy has neither but says he has got plenty of references and pictures of his previous work.

I also had someone else come out yesterday to give a quote. Armed with the suggestions from the folks here, I asked for the license, insurance, references up front and made it clear I'd want a written contract. The quote? $15k.

He will purchase all materials and I will pay him once it's delivered to my place. We also work off a 'work done' schedule that he had already prepared - he said it's his standard schedule that he uses with all customers. He does the framing and dry walling himself but he contracts the electrical and water out to a trusted sub-contractor. He said he can start in 2 weeks but that it won't be everyday as he has another job starting at the same time It will be alternate days.

I'm going to shop around for other quotes but it looks like I need to revise my earlier budget of $10k. It looks like $15k - $20k might be more realistic.

For the record, the house is 3,000sq ft. The basement is completely empty and I want a bathroom (already roughed in), gym, home theater and kids playroom. I've already put down the subfloor (dimpled plastic with 3/4" tongue and groove OSB on top).

 

[rslaback]

I wouldn't worry too much about the license side of that. Not all states or municipalities license their construction contractors. If yours is one of those, take a look at previous work and references. Those are going to tell you more than a license would anyway.

 

[Dustball]

I'm going to shop around for other quotes but it looks like I need to revise my earlier budget of $10k. It looks like $15k - $20k might be more realistic.

For the record, the house is 3,000sq ft. The basement is completely empty and I want a bathroom (already roughed in), gym, home theater and kids playroom. I've already put down the subfloor (dimpled plastic with 3/4" tongue and groove OSB on top).

I'd budget at least $15-25k for a basic well-done basement finish.

 

[Capt Chrysler]

I will never AGAIN pay a large amount up front, at home or for work at the manufacturing plant I work at. I will pay a small amount to cover the labor to get the project paper work started.

A good friend of mine paid the contractor for $8000.00 worth of concrete work. Well the contractor skipped town and my buddy gets a call from the concrete company wanting payment. After going to court, my friend writes another check for the concrete.



Capt. Chrysler

 

[Holedgr]

The contractors protection is the written contract and the lien he can put on the property.

Sorry Brian...

In Michigan....this is B.S. and not worth even mentioning as a tool for the contractor to get paid. The fund is bankrupt...The system is painful and expensive...Even if a ruling is granted in contractor's favor...He still has to COLLECT which has its own set of crazy rules and procedures....



As for the OP....10% after first full day...subs are paid upon completion...lien waivers a MUST...materials ARE NOT that much cheaper when a contractor buys them...then payment upon completion. If they finish early and on budget (quote), a tip is in order....If they are slow and finish late, full payment and a promise of no recommendation.


-T

 

[readhead]

We no longer have lien rights on single and two family buildings in Colorado.

 

[themiller]

I'd budget at least $15-25k for a basic well-done basement finish.

I got 5 quotes for mine - Chicago area - 900ish sq. feet I wanted finished.

Ranged from 22k with no permits and lots of homeowner supplied stuff (fixtures, cabinets, lighting, etc...) and no English - to just under 50k with lots of allowances included for necessary items, tile in the bathroom, everything permitted and inspected, insured, etc.

 

[onewheat]

I paid my guys when they were finished - not a penny beforehand.

 

[dreamingmuscle]

The second guy has both license and insurance but said if I want to see them, he's going to have to work 'on the books' which means adding another $3k to the job. I'm glad he's got insurance and a license, but the fact he's willing to work outside of them makes me wonder.

Total utter BS.

The people who issued his license and insurance couldn't care less what job he is on.

It's not like he has to report to them each time he takes a job or what he gets paid for it.

Glen