What is the standard way of paying a contractor?

[Tommy2000GT]

This is for an $80k remodeling job to my house.

I know not to pay most or all of the money upfront. I haven't signed the contract with the contractor yet but he has a payment schedule. He wants $5k in 3 days after construction has begun. Then $5k after each each specific job is complete.

The thing that concerns me is the $5k after 3 days the has started. I always heard the most they can ask for is $1k.

 

[Zivic]

he is asking for 6% after he starts? if I trusted him to do the work, I would have no issue with that.

just look at the payment schedule, if YOU think it's unreasonable, then don't sign or renegotiate

 

[mizzou]

Make sure you get a printed certificate of their BOND...that way you know you can sue them if they screw you over.

I've never paid for a huge remodeling bill but typically for contract work you pay some money down first, most I've ever paid was 50% up front I think for numerous windows (I paid materials first so they could order them then I paid labor last)

 

[Charmonium]

Personally, I wouldn't pay any money up front and if they wanted me to pay in stages, I would only pay at the end of a stage and only in the proportion that stage was to the whole job. If someone doesn't have enough capital to start a job, avoid them. In most states they can put a mechanics lien on your home if you don't pay them and that gets recorded with your deed. On the other hand, if they don't finish the job or use substandard materials, do a shitty job etc, all that gets you is a cause of action which you have to pay a lawyer to prosecute.

But insuring your contractor is bonded is an important thing to do. I'd also get and check references. But honestly, if you don't already have some reputation information on them from a source like Angies List or at least some friends or relatives, I'd think twice about hiring him.

There are a lot of reliable contractors out there but also many who have no problem taking your 5k for 3 days work and then leaving you high and dry.

 

[master_shake_]

cash

 

[Greenman]

Your contractor can ask for ten percent or one thousand dollars down, whichever is less. A landmark based payment schedule is very common. I can't help you with the amounts without seeing the plans, construction documents, and contract. The bottom line is that if you don't trust him, don't hire him. Keep on mind that he might be having the exact same concerns about you if you seem unwilling to pay.

 

[edro]

$80k, damn, what are they doing?

 

[cabri]

$80k, damn, what are they doing?

Based on some of the TV shows my wife watches, gutting the house and starting over.
They show $50-200K jobs that start from the studs and rebuild the house from there. Walls, lighting, flooring, counters, cabinets, windows, doors, etc

 

[Tommy2000GT]

Personally, I wouldn't pay any money up front and if they wanted me to pay in stages, I would only pay at the end of a stage and only in the proportion that stage was to the whole job. If someone doesn't have enough capital to start a job, avoid them. In most states they can put a mechanics lien on your home if you don't pay them and that gets recorded with your deed. On the other hand, if they don't finish the job or use substandard materials, do a shitty job etc, all that gets you is a cause of action which you have to pay a lawyer to prosecute.

But insuring your contractor is bonded is an important thing to do. I'd also get and check references. But honestly, if you don't already have some reputation information on them from a source like Angies List or at least some friends or relatives, I'd think twice about hiring him.

There are a lot of reliable contractors out there but also many who have no problem taking your 5k for 3 days work and then leaving you high and dry.

Your contractor can ask for ten percent or one thousand dollars down, whichever is less. A landmark based payment schedule is very common. I can't help you with the amounts without seeing the plans, construction documents, and contract. The bottom line is that if you don't trust him, don't hire him. Keep on mind that he might be having the exact same concerns about you if you seem unwilling to pay.

The weird thing is he is not asking for $1000 down after signing the contract. I assume most contractors will ask for 10%/$1000 after signing and before construction even begins. He just wants $6000 after 3 days of construction.

I could try to negotiate with him $1000 after 3 days of work and then a payment schedule as the construction progresses.

 

[Tommy2000GT]

$80k, damn, what are they doing?

There are more things but here are major parts of it

1) Adding 250 sqft of living space to the rear of the house.
2) Putting in new kitchen, bathroom, and closet in the addition.
3) Remodeling existing part of the house with new hardwood floors, adding insulation, and removing old wood paneling / installing drywall.
4) Upgrading electrical subpanel, remove knob & tube wiring, install Romex.
5) Re-roof detached garage.
6) Install central furnace and duct work for the whole house. Right now it only has one wall furnace in the living room.

 

[cabri]

There are more things but here are major parts of it

1) Adding 250 sqft of living space to the rear of the house.
2) Putting in new kitchen, bathroom, and closet in the addition.
3) Remodeling existing part of the house with new hardwood floors, adding insulation, and removing old wood paneling / installing drywall.
4) Upgrading electrical subpanel, remove knob & tube wiring, install Romex.
5) Re-roof detached garage.
6) Install central furnace and duct work for the whole house. Right now it only has one wall furnace in the living room.

Given the list above; determine the cost for each item, 2-3 reference points and pay proportionally at each reference point and upon completion. Provide a 10% ESCROW deposit for each item to be paid out after final completion/inspection.

 

[Conroe]

Sounds resonable to me. The truth is they have already done a lot of work just in the biding.

 

[Greenman]

There are more things but here are major parts of it

1) Adding 250 sqft of living space to the rear of the house.
2) Putting in new kitchen, bathroom, and closet in the addition.
3) Remodeling existing part of the house with new hardwood floors, adding insulation, and removing old wood paneling / installing drywall.
4) Upgrading electrical subpanel, remove knob & tube wiring, install Romex.
5) Re-roof detached garage.
6) Install central furnace and duct work for the whole house. Right now it only has one wall furnace in the living room.

80k is a fair deal just for the addition. If the guy has a license, insurance, comp, and good references, don't chisel him. You can't increase egg production by strangling the chicken.

 

[turtile]

As landscaper, I don't see how this is unreasonable. If I have to put out $5,000 in materials to start a project and pay labor within 3 days, I'm not putting out more if the customer doesn't pay. It's just that simple.

You can have the money but do you realize how hard it will be to recover the funds if they don't pay? Just simple business.

 

[3chordcharlie]

As landscaper, I don't see how this is unreasonable. If I have to put out $5,000 in materials to start a project and pay labor within 3 days, I'm not putting out more if the customer doesn't pay. It's just that simple.

You can have the money but do you realize how hard it will be to recover the funds if they don't pay? Just simple business.

Also a landscaper. Generally $5k has been spent within 3 days for most projects.

We normally take 50% up front and the rest on completion. For more complex jobs (over maybe $20k) we would have a few milestones to be paid.

It is reasonable as a customer to have a significant amount under your control until the job is completed to your satisfaction. It is not reasonable to expect your contractor to play banker and offer an interest-free loan on the cost of your work.

 

[Greenman]

Also a landscaper. Generally $5k has been spent within 3 days for most projects.

We normally take 50% up front and the rest on completion. For more complex jobs (over maybe $20k) we would have a few milestones to be paid.

It is reasonable as a customer to have a significant amount under your control until the job is completed to your satisfaction. It is not reasonable to expect your contractor to play banker and offer an interest-free loan on the cost of your work.

Not legal in CA where Tommy lives. 10% or $1000 whichever is less. You also can't Bill for labor or material that isn't incorporated into the project.

 

[3chordcharlie]

Not legal in CA where Tommy lives. 10% or $1000 whichever is less. You also can't Bill for labor or material that isn't incorporated into the project.

Then, of course, we would work within the law. I would imagine a rule like that means either a lot of escrow money, or a lot of unpaid bills and bankrupt contractors!

I'm not entirely sure what you mean by the second part of your statement. We use a signed change-order if something needs to be different from the original quote.

 

[shortylickens]

Cash, grass, or ass.

Thats always good.

But if for some strange reason they want to pay taxes or something equally ridiculous then they probably like checks.

 

[mazeroth]

80k is a fair deal just for the addition.

80k for a 250 ft2 addition? That's $320/ft2.

Are you sure it's only a 250 ft2 addition? You say he's adding a kitchen, bathroom and closet space in that area. I can't imagine a kitchen and bathroom in a space that small.

 

[3chordcharlie]

80k for a 250 ft2 addition? That's $320/ft2.

Are you sure it's only a 250 ft2 addition? You say he's adding a kitchen, bathroom and closet space in that area. I can't imagine a kitchen and bathroom in a space that small.

The rest of the laundry list posted by Tommy is potentially a great deal of work and money.

I have no opinion on the cost, especially without knowing the style of building and foundation requirements. I've briefly ball-parked adding about the same space to the back of my little bungalow, and I come up with 50-80K, with no new kitchen in the mix.

 

[Greenman]

80k for a 250 ft2 addition? That's $320/ft2.

Are you sure it's only a 250 ft2 addition? You say he's adding a kitchen, bathroom and closet space in that area. I can't imagine a kitchen and bathroom in a space that small.

$320 a foot is a good deal anywhere in the Bay Area, and a steal in SF. $400 to $450 a square foot is common around here.

 

[skyking]

My granite fabricator wants 50% to start, but a significant portion of the job is granite cost. To me that seems reasonable.

 

[Tommy2000GT]

Given the list above; determine the cost for each item, 2-3 reference points and pay proportionally at each reference point and upon completion. Provide a 10% ESCROW deposit for each item to be paid out after final completion/inspection.

His payment schedule seem reasonable according to the work performed. It's just the first payment I have a problem with.

However he is now willing to accept $1000 after 3 days, and amortize $4k with the balance of the payment schedule.

 

[Tommy2000GT]

80k is a fair deal just for the addition. If the guy has a license, insurance, comp, and good references, don't chisel him. You can't increase egg production by strangling the chicken.

I checked out his current remodeling job that is not finished yet. I could not see anything that would raise concerns. He even uses thicker 'L' pipe vs the typical 'M' pipe for the plumbing.

I also checked out another house that has been finished. The finish work also look good.

 

[Tommy2000GT]

80k for a 250 ft2 addition? That's $320/ft2.

Are you sure it's only a 250 ft2 addition? You say he's adding a kitchen, bathroom and closet space in that area. I can't imagine a kitchen and bathroom in a space that small.

The new kitchen, bath, and closet in the addition overlaps with the current space. But most of it is still in the addition part.

The $80k also includes central furnace, re-roofing garage, electrical, and drywall in the existing part of the house.