Paying The Contractor: What's "Normal" ?

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Hello:
Getting a bit ahead of myself here, but in the Spring will be having all new siding and windows installed.
What is "typical" as to how the contractor is paid ?
e.g.,
I imagine it's reasonable to pay him the amount for the window costs (but not labor) early on so he can purchase the windows beforehand. Right ?
And I guess some kind of additional deposit is also reasonable beforehand. If so, what approx % of the total price should this be ?
How about the overall payments: Would splitting it into thirds, perhaps, be typical ? Such as 1/3 of the est. cost after 1/3 of the work is done, etc. ?
Really don't know how to handle this; Don't want to be made a fool of, but also want to do what is considered normal for this.
This would be a contractor who runs his own very small business. Is some kind of "bond" normal to protect us to make sure that the job is completed, etc.? Don't want to scare him off, but If so, what and how ?
Any thoughts would be most appreciated.
Thanks, Bob
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If you want my advice don't give them a dime until the job is complete. Most contractor horror stories involve paying before the job is done, that includes partial payment. I fronted one guy $200 so he could get some front tires for his truck, he bought the cheapest ones available and he and his crew smelled of alcohol the rest of the week. I was probably lucky, at least they showed up, but some of the lines in the roof aren't as straight as they might have been. As to materials, part of the act of becoming a contractor, as opposed to a workman, is to have the resources or lines of credit to buy the materials up front.
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Eric in North TX wrote:

You fronted a guy $200 bucks so he could buy _tires_? Let me take a guess - he was low bidder, right?
Some localities stipulate what the maximum amount of down payment can be. If the contractor asks for more than that, it's a red flag.
A contractor is usually hired to build something, not finance it. Some localities, like mine, prohibit contractors from intermingling funds. The contractor can't use money from another job to pay for stuff on your house. They shouldn't have to - you shouldn't _want_ them to. Your method - don't pay anything until the job is done - will very effectively eliminate all contractors who run their companies like businesses. The contractor will simply see a greatly increased risk to them, and no benefit at all.
If you mentioned your proposed payment schedule up front, you wouldn't even get a phone call much less a bid. That would leave you dealing with people that can't come up with $200 for tires.
Pay as you go is the only way to go for both parties.
R
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Frankly as I hate paying for labor and can do most things myself, I've not had a lot of experience dealing with contractors. The ones I have dealt with have always supplied the materials. With the exception of the $200 guy where I bought everything and had it on site. He wasn't the low bidder, he was the only one who would do it my way. I insist on 30lb roofing felt, 2" drip edge, and 30 yr shingles and replacing decking where needed, and was having the worst time getting anyone interested in doing the job. I had one outfit agree to do it, I even agreed to pay $80 a sheet installed for 3/4 plywood to insure decking would be repaired. They delivered the materials and we checked them and it was all sub standard, 15lb felt, wafer board, etc. I called them and cancelled the job and he was pissed, better him than me. The $200 guy actually did a good job, except for a couple of courses that could have been straighter. That roof has been there since '97 and it still looks and works good. Having an alcohol problem and being broke don't necessarily translate into shoddy work.
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I agree with that part as long as it's a big enough job that takes a few days or more. For a job that takes 1 or 2 days, I work it out so that as soon as they are done I pay them in full in person at the job site. I have never had any problem getting reliable and reputable contractors under those terms. A few won't do that, and that's their choice. But most think that's fair and are willing to work it that way.
I never pay a deposit up front -- never, no way, no matter how big the job is. A deposit just means I am on the hook with a contractor who has my money and then I have to hope he shows up in a reasonable time or even shows up at all. Contractors want to get paid -- that's how they make their living. But, if I give a guy a $2,000 deposit and he therefore has my job locked in as his, he has no real incentive to get around to doing my job unless he is out of new work. While he's holding my deposit, when a new job comes in that he will only get paid for if and when he shows up and does it, he's going to want to do that job first ahead of mine. On the other hand, if he's holding someone else's deposit, and he can then take on a job for me in which he will get paid on the spot upon completion, he's going to want to do my job first -- because that's new money. Often, what a contractor gets in the form of an up front deposit is the same or more than his total profit will be on the job. So, actually doing the job becomes a burden because he won't make any new money by doing it.
As far as money for materials is concerned, if the contractor doesn't have the money or the trade credit with a supplier to be able to get the materials without me giving him the money, he's working too close to the edge for me to want to rely on him. But, I do understand that on some jobs the materials to be ordered are specific to my job (windows, for example) and cannot be returned. In that case, I have the contractor decide what's needed and place the order for materials in my name. Then I go and pay the supplier and make sure that the materials are being sold to me and will be delivered to me at my house -- not to the contractor. Then if the contractor fails to show up and do the work, I own the materials and haven't lost out. I even do this with small contractors who are trying to get started and truly are short of cash to order materials (I do know that people have to start somewhere, so I don't mind using someone like that). I just have them place the order in my name, with delivery to me, and then I go and pay for the materials. That's fair to everyone. I just don't give him money up front and hope he follows through.
Progress payments on larger jobs are fine for me as long as I'm not out front paying for more than was done.
I always put a mutually agreed upon completion date on the contract or estimate. Then, if that date comes and goes and is long gone, and I can't get the contractor to show up and do or complete the job, I can bail out and have someone else do it. If they miss the time frame by a little, I don't care -- stuff happens. But if too much times goes by and I find myself chasing the guy or getting promises that he never keeps, I move on to someone else.
And, I never nickel and dime the people who are going to do the work. I don't get a million estimates and try to shave a small amount of money off by using someone just because they can do it for slightly less. I usually just get a few people 93 or 4 at the most) to give me an estimate on larger jobs, then pick the one I'm going to use and do it. On smaller jobs, I don't make them all run around giving me estimates. If I have someone I think can do the job and he gives me a reasonable price I just set it up and have him do it.
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I did my own windows. Home Cheapo charged me $1200 for the windows and I put together a crew. Companies wanted $12,000. I just can't see going that route. Learn to install your own. Altogether I paid $1200 parts and $2000 labor. It took 2 guys two days. Not bad pay, $500 per day per man. The other route would have taken the same time spread over weeks in attempt to hide the true labor needed to do the job.
You save the money and get the satisfaction.
Eric in North TX wrote:

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We ask for 1/2 down on jobs over $1000.00 up to $3000.00, after that we usually take 1/3 at a time. We don't work for guys like Eric in Texas or people that try to negotiate a lower estimate. No offense Eric but if you don't trust me don't hire me.
cm

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cm wrote:

So, you walk away on a $10K job, where the homeowner asks if you'll come down $300 to meet the competitions price? Doesn't sound like good business to me, where lots of times there is some negotiating in situations like this.

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snipped-for-privacy@optonline.net wrote:

CM didn't say he doesn't negotiate. Maybe he does and maybe he doesn't, but he didn't say anything like that so I don't understand your scenario.
The negotiating in Eric's post consisted of advising, "I'm not giving you a dime up front." How do you negotiate with someone who won't negotiate? Simple. You walk away. And that _is_ good business.
R
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RicodJour wrote:

Did you ever have one of those days? This one is starting out that way.
Ignore that first paragraph of mine. I was distracted before editing and hit send before it was done. Apologies.
R
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There may be some negotiating room, but there is so much work out there we don't need to. I walked away from a job last week were the customer wanted to split the job into 3 payments instead of 2, but was fine with the overall estimate. We have been in the remodeling/home repair business for 18 years and have not had to advertise since the first month we started. It may not be good business, but it works for us. I usually regret the job when I deviate from my normal business practices and pricing structure. Operating this way helps weeds out bad or pain in the ass customers. I also don't have to get a down payment to buy tires for my trucks.
cm
face=Arial size=2>...<BR>&gt;&gt; &gt; Hello:<BR>&gt;&gt; &gt;<BR>&gt;&gt; &gt; Getting a bit ahead of myself here, but in the Spring will be having all<BR>&gt;&gt; &gt; new siding and<BR>&gt;&gt; &gt; windows installed.<BR>&gt;&gt; &gt;<BR>&gt;&gt; &gt; What is "typical" as to how the contractor is paid ?<BR>&gt;&gt; &gt;<BR>&gt;&gt; &gt; e.g.,<BR>&gt;&gt; &gt;<BR>&gt;&gt; &gt; I imagine it's reasonable to pay him the amount for the window costs (but<BR>&gt;&gt; &gt; not labor) early on so he<BR>&gt;&gt; &gt; can purchase the windows beforehand.&nbsp; Right ?<BR>&gt;&gt; &gt;<BR>&gt;&gt; &gt; And I guess some kind of additional deposit is also reasonable beforehand.<BR>&gt;&gt; &gt; If so, what approx % of the total price should this be ?<BR>&gt;&gt; &gt;<BR>&gt;&gt; &gt; How about the overall payments:<BR>&gt;&gt; &gt; Would splitting it into thirds, perhaps, be typical ?<BR>&gt;&gt; &gt; Such as 1/3 of the est. cost after 1/3 of the work is done, etc. ?<BR>&gt;&gt; &gt;<BR>&gt;&gt; &gt; Really don't know how to handle this;<BR>&gt;&gt; &gt; Don't want to be made a fool of, but also want to do what is considered<BR>&gt;&gt; &gt; normal for this.<BR>&gt;&gt; &gt;<BR>&gt;&gt; &gt; This would be a contractor who runs his own very small business.<BR>&gt;&gt; &gt; Is some kind of "bond" normal to protect us =to make sure that the job is<BR>&gt;&gt; &gt; completed, etc.?<BR>&gt;&gt; &gt; Don't want to scare him off, but If so, what and how ?<BR>&gt;&gt; &gt;<BR>&gt;&gt; &gt; Any thoughts would be most appreciated.<BR>&gt;&gt; &gt;<BR>&gt;&gt; &gt; Thanks,<BR>&gt;&gt; &gt; Bob<BR>&gt;&gt; &gt;<BR>&gt;</FONT></BODY></HTML> ------=
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says...

Yeah - I guess I really don't geddit. If I were smart and savvy, I'm supposed to make payment an all-or-nothing thing, and demand to hold off payment until the end, until the last little detail, 'cause I don't trust the person I hired, but he's supposed to sign on to that because - apparently - he's supposed to wholly and completely trust *me*? And have some huuuuge hung of change to risk upfront where he can order my windows, AND January's next customer's kitchen cabinets (since that needs like a six week lead time), AND all the lumber for who knows what else for the customer after me?
Does anyone step back and turn situations around in their minds and consider what the other guy's position is in things anymore? Or is that just quaintly old fasioned.
You know what it is? People don't trust *themselves* to vet the people they hire to work for them. What a way to go through life. Maybe they piss people off so bad they never build any relationships to base anyting on.
Banty (who just paid the first half for a big window job, what a chump I must be...)
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Can't speak for cm, but I'd walk. If you choose to deal with me over the low bidder, it is probably because I'm doing something better. Doing better can cost money.
I've also found that the guy looking for the lowest price will nickel and dime you during the entire job. He's going to want this and that thrown in along the way for free. He becomes a real PITA. Also, knowing I'm working cheap makes me want to cut corners, especially if something is questionable.
When you are spending thousands of dollars on a project, $300 is not going to make or break either of us, but can sure make for poor relations. Sorry, I'll pass. Price fair, buy fair, work fair. Everyone wins.
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On 16 Nov 2006 08:25:38 -0800, snipped-for-privacy@optonline.net wrote:

I can only speak for myself -- although I suspect I'm not alone.
My experience is that 20 percent of my clients give me 80% of my problems. Someone who wants to negotiate the price ... or doesn't want to put any money on the table .. is sure to be in that 20 percent requiring high maintainance.
I used to bend over backwards to help people out ... I found that it doesn't pay. Every time I change the way I do business to accomodate someone, it comes back to haunt me. Goes for clients and subs alike.
So ... no, I wouldn't come down 300 dollars on a ten thousand dollar job -- and I wouldn't work for anyone who asked me to.
I'm not nasty about it, at least I don't think I am. But I am firm.
Ken
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cm wrote:

in dealing with contractors, but the little I have has made me wary. At this point, if I had a big job to do, I'd be the contractor and sub out the parts I wasn't comfortable with. I do have another factor creeping up on me, that being; age. As I get older, I'm finding being 30' up on an extension ladder juggling work and tools isn't all that it used to be. I find crawling around in a crawl space a little troubling. I found this discussion enlightening, and I apologize if I hurt anyone's feelings.
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North TX says...

Heck no - I'm not a contractor, and I basically disagree with you on this, but I love it when folks speak up and say what they really mean. You weren't uncivil about it, and you have a point. There's two sides to the coin.
As to the original question - I find that for big jobs it goes 1/3 up front, 1/3 at some determined point, 1/3 at the end. If a lot of materials are involved, though, it's more like 1/2 up front and 1/2 at the end, unless you provide the materials.
BTW, age isn't creeping up on me - um, *quite* yet, but no way no how I go up on roofs or into crawlspaces na-uh.
Get references from friends and neighbors whose judgement you trust (and aren't the types to throw some favor to some ne'er-do-well brother in law 'cause they owes him something, and send you to him). That's the place to start.
Banty
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Normal has quite a few variations.
While this group often discusses contractors cheating customers, plenty of customers wil cheat the contractor too. getting an up fron deposit is not a bad thing. Maximum is usually 1/3 on large jobs, 1/2 on small jobs.
Larger contractors can buy the materials and pay for the labor, but many smaller, honest, reliable contractors just don' thave the resources, or will have to pay a bank for money. In the end, the customer ually pays more in a case like that.
I just got three bids on a job from seemingly reputable contractors. There terms are: #1 1/3 at signing 1/3 at half completion 1/3 at completion #2 1/3 at signing 1/3 at start 1/3 at competion #3 no deposit total due at completion
Very long and involved jobs often require payments along the way. If so, they should be spelled out and agreed to up front. They may be broken down to a payment at: signing, delivery of certain materical, completion of a certan stage, delivery of more material, etc.
In no case should you pay the full amount before completion.
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Eric,
Ya didn't hurt my feelings. I know what your saying about ladder heights and such. I am backing off from certain jobs as I age.
I had a best friend for 15 years, a good Christian - said so right on his business card right next to his contractors license number. I watched him cheat people out of money a few times. I miss him but I won't hang out with cheats. Maybe that's why I don't have many friends????
A lot of my business practices are in place to attract a certain clientele that I enjoy working for. I have worked hard most of my life to avoid getting a real job.
cm

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My understanding is that progress payments are very common for construction work, and less common for repair and maintenance work, but still not unheard of. If you own an apartment building, for example, and hire a plumber to do work that will take a couple of weeks or more, you should expect to make progress payments, as the plumber has weekly payrolls to make and probably does not have the liquid assets to make those payments without some income.
It seems a lot of people posting here suggest acting as your own general contractor, but I suspect they haven't given this a lot of thought. When you act as a general contractor, you have to be very very careful that your subs and the labor you hire cannot be considered your employees, or if they can be considered employees, that you have covered insurance and taxes. If, for example, you just buy some windows and bring in a couple of laborers to install them, they are most likely going to be considered employees, and if one is injured, you are on the hook for costs of treatment, rehabilitation, and possibly continued costs for permanent disability. My guess is that your homeowners' insurance will deny coverage, leaving you alone to bear all those costs. Further, if you haven't withheld and paid items like income taxes and socalled security, you face the prospects of becoming familiar with a criminal lawyer. And even years later, when those employees decide they want social security, guess who is on the hook for not having paid it? Too many people don't realize that a contractor's cost for labor is far more than the hourly wage his employees draw. My son lives in California, where it is apparently common practice for homeowners to pick up a few off-the-books workers for a project. Apparently, it is not uncommon for those workers to have the skill to do the work, but I would be surprised if they new the codes involved. I always advise him to get a licensed insured contractor or do the work himself, just because of the liability issue.
I do a little work around my home, but for many things, hiring a good contractor is an excellent idea in terms of getting skill and knowledge, and saving time. On the other hand, knowing that I don't sweat joints well, I hired a man to put in some fairly complicated new water lines; he assembled everything before starting the sweating (a good idea, it seems to me), but because there were so many connections, he forgot one (not a good idea). When he turned on the water, I got my money's worth in amusement, and learned quite a few new words, too.
Eric in North TX wrote:

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Hi Bob,
I have seen some very interesting comments here. As a contractor, I do require a deposit (usually upon starting). In the case of windows, if they are custom made to size, they sometimes can take a long time to order. Some suppliers require 50% payment up front to order them and the balance before shipping. In this situation I would be out of pocket a fair sum before starting your job. I like to protect my clients and myself. In the case above, I would rather setup with the client to make those payments with thier money. They are thier windows. This protects them and myself. They are assured that the money is going to thier project and not fixing my truck tires.
As a contractor we have just as much problems collecting money. They saying goes "If hard to sign expect to have a hard time collecting". The person who refused to give a deposit would simply be removed from our schedule. We would not care to do work with them and they could get someone else. We've been in business for 25+ years with very few complaints from any clients (never about workmanship). We have finished every job that we have started. FWIW.
In our area, the maximum deposit for a job is 1/3. The rest is agreeded upon by the two parties. I would have to agree with all the comments about not paying up front for work that has not been completed. I always write contracts with payments setup in completion form. In your case, xxx upon installation of windows, xxx completion of siding and balance upon final walk thru.
-Lee
Robert11 wrote:

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