Payments to a contractor in advance

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  #1  
Old 02-22-09, 09:46 PM
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Payments to a contractor in advance

I don't know which caegory to put this in but I am having my kitchen redone and part of it includes having the cabinets refaced. The contractor's payment terms are:

50% down payment
30% on delivery
20% on completion

I feel this is too much up front - 80% before any work is done and makes me wonder if the contractor may be running too close financially and might be why he is asking for so much.

Am I off base on this or am I realistic on raising an eyebrow?

Another contractor that would be doing the same work plus countertops and flooring is asking for:

10% down payment
30% on measure
20% on start
40% on completion

What is reasonable? Thanks.
P
 
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  #2  
Old 02-22-09, 10:06 PM
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Wink

Id go for the last one BUT. Not his way


10% down payment
30% on measure
20% on start
40% on completion

TO 10% down
50% on materal to the job site
50% on completion





















5
 
  #3  
Old 02-23-09, 04:19 AM
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And before final payment insist on copies of all materials receipts showing they are paid. More than one homeowner has had a supplier come back with a lien against the property for a contractor's unpaid bills.
 
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Old 02-23-09, 04:56 AM
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I never thought of that. Aside from asking for confirmation that materials are paid for, is there a best way to convey that I am not comfortable with the payment terms without causing friction?
This is probably a "duh" but should I be more cautious about a firm that does not have a physical showroom, most likely keeping overhead lower?
The lower overhead firm plans on refacing over painted cabinets without significant sanding and I am wondering about that too.
 
  #5  
Old 02-23-09, 06:00 AM
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It is hard to say which contractor might be better based soley on a show room or lack of. Whenever hiring a contractor it is best to get 3 or more estimates [helps to weed out the over or under priced] You should also get and check references!

Up front payments are often dictated by local practice but you should never need to give a contractor money before the materials are delivered. If he has no credit to get materials - you might want to look elsewhere..... or maybe go with him and pay for the materials yourself.
 
  #6  
Old 02-23-09, 06:34 AM
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I will be getting 3-5 estimates most likely and will check with the BBB, verify state contractor's licence and bond, and plan to check references to see work done by the contractor(s).
Can the payment terms be negotiated? Part of my decision will be based on that as it is not in my "comfort zone" to have 80% of the job paid at start date.
The second firm, the larger one, wants 10% down and ends up being 60% by starting day. At least the holding of 40% until the jobs end would be more comfortable eslecially when we are talking a 15-22k job.
 
  #7  
Old 02-23-09, 06:40 AM
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Sometimes putting some of the money in an escrow account with proper stipulations will satisfy both parties. If he insists upon having the money in hand, then that confirms your suspicion that he may be short on cash.

Bud
 
  #8  
Old 02-23-09, 06:46 AM
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What marksr said, plus a note. In todays credit market don't rely too strongly on traditional arrangements, but use good sense during negotiations and business transactions. After all, if many banks have lousy or no credit then neither do producers, suppliers, and contractors.

Recently we (the company) prepaid thousands of dollars on an order so the manufacturer could meet the weeks payroll and we could obtain the supplies. Things are not black and white anymore.
 
  #9  
Old 02-23-09, 08:49 AM
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My method of charging was a bit different. I encountered some customers who had paid in advance only to be left with an incomplete or never started job so I never asked for advanced payment. Instead I asked for payment of materials after delivery to the site and 30% after 5 days work. Remainder on completion or another 30% after 2 weeks, which ever came first. Of course I specialized in small jobs so they seldom lasted even a week but I did take the occasional longer job..

Not saying this is standard but I think it is fair to all.
 
  #10  
Old 02-23-09, 09:10 AM
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All of your thought validate my concerns. The project as mentioned includes cabinet refacing, new counter tops, tiled backspash and new vinyl foor.
My first bid (the 10% down one) would do all of the work. The second bid consisted of different contractors for counters, refacing (50% down), tile backspash and flooring. I was concerned as to whether it would go smoother having one company or several.
Now that the first two bids are in, i will be getting more to compare prices and payment plans.
 
  #11  
Old 02-23-09, 09:18 AM
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No Pro...but wow....$15-22K....for basically just a facelift? Hope its a real big kitchen...that just seems like a lot of money.

As I said...no Pro, so no idea if thats a good price or not.
 
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Old 02-23-09, 11:59 AM
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My thoughts, too, but of course I don't do it for a living. Given the housing and construction market down here lately you could get an awful lot of work done for that kind of money.
 
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Old 02-23-09, 12:15 PM
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Sounds like you may be getting it the wrong way. My boss does stuff like this on a small scale basis like he did the roof on my house, my roommate (homeowner) paid for the materials, labor was paid for when the job was done.
 
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Old 02-23-09, 12:45 PM
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I don't understand. If you don't get a downpayment, then order all your material, pay for shipping etc, then the customer decides they can get a better price somewhere else or runs out of money or just changes their mind, then what?
Personally, I have only taken a deposit once because it was from someone out of province. Many customers offer to give me something as its standard practice here but I know most people in town and I can usually re-sell what I have ordered.

Sometimes I tell them "make sure you dont' change your mind or die on me as I'm going to order your stuff this week". ONly had one person back out which really PO'd me. Another threatened to back out if I did not give him 10% off. Hate people that negotiate after the work is done. I gave him some accessories to keep him happy and it worked out.
 
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Old 02-23-09, 12:56 PM
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I like the way Ray does it. I wouldn't like paying for material through a second party until it was in my possession. And instead of a time thing..it shouldn't be that big a deal to set milestones. I mean if it really turns out to be that much money.

Something like....

material cost upon delivery, 30% of remainder upon completion of cabinet work, 50% upon completion of tile/counter work, remainder upon project completion.

These could be adjusted to the relative length and cost of each stage. Gives the Contractor incentive to start and finish expeditiously.

This is from a non-pro remember, but I would want some specs and milestones for a project that cost this much.
 
  #16  
Old 02-23-09, 02:01 PM
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I am at work right now but will post some figures this evening.
 
  #17  
Old 02-23-09, 02:35 PM
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Smile

The first thing I would do is ask for the last three people he did work for and get references. If they/you are not satified with the work and materials, it doesn't matter what the arangement is. Remember you usually get what you pay for. I never asked for an advance, but I was lucky and never had a problem. The part about getting "PAID FOR RECEIPTS" is right on!! You surely don't want to pay for the materials twice!! Good luck.
 
  #18  
Old 02-23-09, 05:14 PM
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I am proceeding carefully and will be checking references. One contractor for the countertops plus sink (16 lineal feet of Hanstone Quartz) is approximately $4300 without tax. Their recommended contractor for refacing (including new drawer boxes and slides and a single cabinet modification) is approximately $8600 including tax. I have not got the bid from their recommended person for full tile back splash and vinyl flooring.
The other contractor bid to include black granite counter tops, refaced cabinets with new drawer boxes/slides and mod to one cabinet, vinyl flooring, full tile back splash is just over 21k.
I will be getting additional bids over the next couple of weeks so the costs should be easier to compare.
 
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Old 02-23-09, 05:28 PM
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Just another 2 cent's worth. I'll go with Ray on his method. I get the materials or have them delivered with paid receipts. The customer pays me for the materials. That clears my accounts for the next job's materials purchase. If it is a large project, then we divvy up on the labor costs in increments, allowing them to hold the lion's share until completion.
I had one customer who had been ripped by some hack who left the world, apparently, with her money. She called me in to finish his work, and after I told her how much it would be, she asked "do you want me to pay you now?". You didn't learn the first time???
Even some of our Florida summer residents insist on paying ahead on small projects over the winter. I give the check to my wife to hide until I finish the project. I don't even want the temptation.
 
  #20  
Old 02-23-09, 09:15 PM
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Originally Posted by Ed Imeduc View Post
Id go for the last one BUT. Not his way


10% down payment
30% on measure
20% on start
40% on completion

TO 10% down
50% on materal to the job site
50% on completion
But I only wanted to pay 100%
 
  #21  
Old 02-25-09, 08:41 PM
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Yes, only paying 100% is better then 110%

Being as you caught that typo, why did you question your original instinct?
"I feel this is too much up front - 80% before any work is done and makes me wonder if the contractor may be running too close financially and might be why he is asking for so much.

Am I off base on this or am I realistic on raising an eyebrow?
No and Yes.
I would suggest finding another contractor.
On smaller jobs 15k or less I tell the client, Give me half of the estimate when half the work is done.
When it goes above 15k I let them know that the day we show up and start I need some money.

Bottom line is if the contractor is good, you as the client will always be ahead on the money. If you can find a contractor to do that then you know you have someone that is interested in completing your project to your satisfaction.
 
  #22  
Old 02-25-09, 09:02 PM
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Whoops. Sorry for interupting. Can't cancel a reply.
 
  #23  
Old 03-01-09, 09:11 PM
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mjd, what was that lame reply? If you would have left off the "Can't cancel a reply." and followed up with it, it might have been believable.

Like I said," Bottom line is if the contractor is good, you as the client will always be ahead on the money. If you can find a contractor to do that then you know you have someone that is interested in completing your project to your satisfaction."
 
  #24  
Old 03-01-09, 10:00 PM
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Hi, back again. I visited another contractor's office to see their displays and discussed our project. The company does refacing and countertops and has been in business for 30+ years. We like the first impression and their product. It is interesting to see additional variables... types of sinks and types of drawer slides. So many things to consider that it will make it a job to compare. This company comes out on Saturday to give us a bid. Narrowing it down, we have picked a door style and composition, cabinet refacing material and countertop color on quartz. They have two drawer slide types that have a big difference in cost (a few bucks per new drawer box to 30+ buck per).

To date, we have:

one bid for reface/countertops/flooring/backsplash (we were not impressed with the salesperson/designer... so much so that we have already eliminated them),

one bid for countertops (zero down - 100% at completion, we like them very much but could not find an acceptable color in their two lines of quartz),

one bid for reface ( the one that wanted 50% down, 30% start, 20% finish)

Another full service contractor comes out on Monday the 9th.

We continue on...
 
  #25  
Old 03-02-09, 10:02 AM
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[QUOTE=Desert Eagle;1531049]mjd, what was that lame reply? If you would have left off the "Can't cancel a reply." and followed up with it, it might have been believable."

Mr Desert Buzzard , I was doing a reply then realized someone else had already posted the same so I tried to cancel the reply but don't know how to do that
 
  #26  
Old 03-04-09, 06:45 PM
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mjd, no worries, I don't know how to edit a post either. The little box thing says I can.

modelsforu, sounds like your shopping around, which is a good thing when looking for a full service contractor.

Maybe you know this and don't care, but I will tell you anyway. Using a full service contractor adds about 25-40% onto the cost of a kitchen remodel.

Good luck with your project!
 
  #27  
Old 03-05-09, 09:30 PM
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Why does a full service contractor cost 25-40% more?


We are still shopping. We have a cabinet reface/countertop estimate Saturday morning then go to a kitchen place that will be coming out the following Monday for the full meal deal eface/countertops/backsplash/vinyl... the same day we get a bid for a new deck.
 
  #28  
Old 03-06-09, 04:56 AM
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Assuming a full service contractor is like a general contractor, the reason it costs more is because the GC hires and pays all the subs and is responsible for materials, insurance, permits, etc. When you deal directly with the subs and suppliers, you don't have to pay someone to do that for you.
 
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