Contractor draws during remodeling project

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Broken Man 1999
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Contractor draws during remodeling project

Post by Broken Man 1999 » Sat Dec 08, 2018 12:47 pm

DW and I are doing some remodeling consisting of a new floor in all downstairs and a new kitchen.

Just out of curiosity, I'd like to hear what others have experienced so far as the doling out of monies during a similar project as identified above.

It has been many, many years since we have done anything major to the casa. We have done smaller projects, and typically paid at the end of the project. Those type projects didn't put the tradesman at risk because the materials needed weren't all that much.

However, in our project we will have custom cabinets, and the contractor is asking for some upfront money, as if we pulled out, they would have materials purchased for our specific kitchen. I totally understand their need.

My question is what is typical for the various met scheduled dates?

Any info would be appreciated. Thanks!

]Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven than I shall not go. " -Mark Twain

stan1
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Re: Contractor draws during remodeling project

Post by stan1 » Sat Dec 08, 2018 12:57 pm

We bought our cabinets through our contractor who was also a kitchen designer. I believe it was 10% down to do a final design on the cabinets, 40% more at time of order, 40% at time of shipment, and 10% at time of install (there was about 2 weeks between delivery and install). We bought appliances, flooring, fixtures separately.

Incidental supplies were paid with labor which was phased. All of this was laid out in a contract. In general I'd say payment was lined up with progress. I wasn't paying too far in advance for labor, but the contractor also wasn't covering labor costs for more than a week or two. To be honest I would not want to work with a contractor who did business any other way. A contractor needs to manage cash flow in order to stay in business. A contractor who floats a project for more than a week or two is a sign of someone who is not very good at business. I would not want to do have $100K or more tied up with a contractor who is always at risk of going out of business.

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Blake7
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Re: Contractor draws during remodeling project

Post by Blake7 » Sat Dec 08, 2018 1:05 pm

I’d go for no more than 50% up front on the cabinets, less if they except that, and the balance once delivered. Pay everything else as it’s completed (demolition, installation, etc.). All in writing of course.

AMG79
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Re: Contractor draws during remodeling project

Post by AMG79 » Sat Dec 08, 2018 1:45 pm

We did a huge remodel a year ago involving kitchen cabinets that were purchased direct through a cabinet company. It was 50% downpayment for the cabinets and the remainder when they were installed and we were satisfied and had time to inspect them. (They set the terms of us being satisfied.) As far as the contractor goes, we had a signed contract to stick to a set budget/estimate and paid him 1/3 when he began, 1/3 halfway through after major work had been completed and the remaining 1/3 when it was complete and we had inspected it.

I will say I felt a bit of pressure with both parties to pay the remaining balance before we had adequate time to do the final walkthrough and inspection. Be wary of that as they will likely be anxious to get to their next project.

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lthenderson
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Re: Contractor draws during remodeling project

Post by lthenderson » Sat Dec 08, 2018 2:25 pm

We are just going through the same thing now. We are paying 100% of all specialty items like cabinets and windows that need to be ordered ahead of time. Once construction starts we will divide the rest into two equal payments.

mw1739
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Re: Contractor draws during remodeling project

Post by mw1739 » Sat Dec 08, 2018 2:32 pm

$75,000 remodel project - we paid $5,000 upfront and balance at completion.

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Bogle7
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Better later than earlier

Post by Bogle7 » Sat Dec 08, 2018 6:59 pm

Kitchen renovation.
50% of appliances at order time. 50% at one week prior to delivery/install.
Custom cabinets: 50% at order. 50% after installation.
GC: something each month. Final payment of 30%, 2 weeks after completion.
Electrical & Plumbing: Paid 100% upon receipt of invoice approximately 2-3 weeks after completion.
Tile: 100% upon order as it was custom.
Tile work: 100% after completion.

WJW
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Re: Contractor draws during remodeling project

Post by WJW » Sat Dec 08, 2018 7:15 pm

General Contractor here and on kitchen remodels our payment terms are 25% deposit, 25% upon approval of rough building, plumbing and electrical inspections by the town, 25% upon completion of drywall installation, 15% upon completion of cabinetry/trim installation and the final 10% upon completion and final inspections by the town...

StopIroningShirts
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Re: Contractor draws during remodeling project

Post by StopIroningShirts » Sat Dec 08, 2018 7:19 pm

Personally I would offer to buy the materials directly on behalf of the contract, but not pay the money directly to them in advance.

In full disclosure, I work in commercial banking and have twice had contractors misappropriate draws and stick a client with paying for the same thing twice.

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8foot7
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Re: Contractor draws during remodeling project

Post by 8foot7 » Sat Dec 08, 2018 8:08 pm

I have no problem paying a supplier directly in advance for the materials the contractor will need to complete the project. This shifts the only onus on the contractor to simply his labor, which I would pay in arrears in milestones based on progress.

stan1
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Re: Contractor draws during remodeling project

Post by stan1 » Sat Dec 08, 2018 8:24 pm

WJW wrote:
Sat Dec 08, 2018 7:15 pm
General Contractor here and on kitchen remodels our payment terms are 25% deposit, 25% upon approval of rough building, plumbing and electrical inspections by the town, 25% upon completion of drywall installation, 15% upon completion of cabinetry/trim installation and the final 10% upon completion and final inspections by the town...
Thanks for posting. So now I'm curious. Is this negotiable or do you decline the work if the customer won't agree to these terms? Did you negotiate on terms more in 2010 when maybe there was less work?

Scrapr
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Re: Contractor draws during remodeling project

Post by Scrapr » Sat Dec 08, 2018 10:52 pm

StopIroningShirts wrote:
Sat Dec 08, 2018 7:19 pm
Personally I would offer to buy the materials directly on behalf of the contract, but not pay the money directly to them in advance.

In full disclosure, I work in commercial banking and have twice had contractors misappropriate draws and stick a client with paying for the same thing twice.
That is what Lien releases are for. It protects the HO from paying twice. We just had that come up as a subcontractor with a GC & HO. HO fired the GC. He was slow in getting his payment out to us. So the HO wanted to move forward with us continuing to do work on the house. We declined until we were paid on our outstanding invoice. We sent out a Right to Lien to HO. Eventually the GC paid the remaining invoice. The HO would have been on the hook for the payment if the GC had not paid

As a HO always get a Lien release with every draw

also many GC will not warranty items paid directly to suppliers. They have not applied a markup (that pays for the warranty among other things)

WJW
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Re: Contractor draws during remodeling project

Post by WJW » Sun Dec 09, 2018 8:15 am

stan1 wrote:
Sat Dec 08, 2018 8:24 pm
WJW wrote:
Sat Dec 08, 2018 7:15 pm
General Contractor here and on kitchen remodels our payment terms are 25% deposit, 25% upon approval of rough building, plumbing and electrical inspections by the town, 25% upon completion of drywall installation, 15% upon completion of cabinetry/trim installation and the final 10% upon completion and final inspections by the town...
Thanks for posting. So now I'm curious. Is this negotiable or do you decline the work if the customer won't agree to these terms? Did you negotiate on terms more in 2010 when maybe there was less work?
Everything is negotiable but the flip side is his perspective of you not wanting to pay him in full... I have a good reputation and a small low overhead business and will walk away if a client seems to have too much distrust in me or I just get a gut feeling that they are not the right clients for me. More importantly is checking the references/reviews/referrals of your contractor, looking at some of their past work and talking to their past clients. Also, make sure they are licensed, secure all permits and are fully insured, including general liability/workers comp. NEVER release the final payment of at least 10% until all the work is done to your satisfaction and all permits have final approval from the town. And if you don't have confidence in them, then perhaps they are not the right contractor.

NextMil
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Re: Contractor draws during remodeling project

Post by NextMil » Sun Dec 09, 2018 8:35 am

Last remodel the guy wanted 25% at regular intervals with the last 50% due on completion. I gave him 50% up front. Paid the balance on completion. My view is I don't want to lose my shirt, but I also don't want to be a painful client that results in delays, because the worst part of remodeling is living through it.

staythecourse
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Re: Contractor draws during remodeling project

Post by staythecourse » Sun Dec 09, 2018 9:05 am

Blake7 wrote:
Sat Dec 08, 2018 1:05 pm
I’d go for no more than 50% up front on the cabinets, less if they except that, and the balance once delivered. Pay everything else as it’s completed (demolition, installation, etc.). All in writing of course.
I think this is reasonable. What does your contract say? Mine was 1/3 of the project upfront, 1/3 half way through, and 1/3 after completion. This was for a full remodel of master bath on our old place.

The key is to hire a contractor that has a long and strong reputation. The premium placed on this is so there is less fear of them "running away" with your money. Anyone can write anything in the contracts, but hard to get that money back even in court if they fold up and disappear. Folks who have been around for awhile have their reputations on the line and are not fly by night companies.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

xerxes101
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Re: Contractor draws during remodeling project

Post by xerxes101 » Sun Dec 09, 2018 10:00 am

In my opinion, this should have been spelled out in the initial contract you signed with him before he got started.

Broken Man 1999
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Re: Contractor draws during remodeling project

Post by Broken Man 1999 » Sun Dec 09, 2018 10:18 am

Thanks for all the replies!

It seems we are right in the ballpark with a 40% initial draw. Our remodel will be around $50,000, counting appliances. I have declared 2019 as the Year of the House aka Year of Empty Pockets, as we will be doing a bunch of projects. Fencing, larger gutters, replacing tile on front stoop, possible new front door, possible new roof, who knows what else.

We already purchased the appliances direct, as the builder's prices were higher, even going through their "preferred" suppliers. As well, we bought at Black Friday prices with a delivery in February 2019 or so. At the time Samsung had two 10% rebates active, and we are good for both. So I am pleasantly surprised for that portion. The contract specifies builder installation for appliances, garbage disposal, sink, faucet, and fixtures, supplied by us.

I am dreading this project, not from the standpoint of spending the $$$, just the typical angst of having an entire floor under construction at the same time. But, I suppose it will overall be better than having repeated construction activities over several months.

When we shopped around, I was kinda surprised at the big box prices, Loews and Home Depot were higher, plus you never know who is going to appear at your doorstep to do the work. I shopped them mainly for a sanity check. We redid two bathrooms several years ago, and HD did a very good job, and gave us a good price as well. Only issue is they cut the counter-top wrong in one bathroom, pretty pricey as it was a very long surface. They promptly got another slab and finished the job. No hassles at all.

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven than I shall not go. " -Mark Twain

Broken Man 1999
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Re: Contractor draws during remodeling project

Post by Broken Man 1999 » Sun Dec 09, 2018 10:25 am

xerxes101 wrote:
Sun Dec 09, 2018 10:00 am
In my opinion, this should have been spelled out in the initial contract you signed with him before he got started.
All draws are included in the contract. We just received the final pricing last week. I know what the draws are, I was just seeking a sanity check since we haven't done this since 2001. Everything will be signed next week. Hopefully this is our last roundup for the casa.

Broken Man
“If I cannot drink Bourbon and smoke cigars in Heaven than I shall not go. " -Mark Twain

Cruise
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Re: Contractor draws during remodeling project

Post by Cruise » Mon Dec 10, 2018 1:32 am

Just did a bathroom remodel. 1/3 down, 1/3 after a benchmark completion, and 1/3 upon total completion.

6Pack
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Re: Contractor draws during remodeling project

Post by 6Pack » Mon Dec 10, 2018 6:37 am

We do 1/3 at signing contract, 1/3 halfway through and 1/3 at completion.

Some states have laws on how much you can pay upfront (I know Maryland does).

noco-hawkeye
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Re: Contractor draws during remodeling project

Post by noco-hawkeye » Mon Dec 10, 2018 8:27 am

We've done 50% up front and 50% on completion. We've also done 50% up front and then pay for each portion as it is completed.

I would certainly understand the concern with cabinets. They are pretty expensive and if you contractor is independent it might be a pretty big initial outlay for them. The thing you can also do is just pay for the cabinets yourself and take it out of his concern. We like to take this approach but after a while you start to become the general contractor if you break up expenses too much. Some people may not want to do this.

There are lots of ways to do these projects, just make sure you listen to your gut and advocate for yourself - no one else will.

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