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September 24, 2009
Contractor Deposit-Too early?
I am on the verge of signing a contract for a basic basement renovation, nothing custom, just walls, floor, ceilings, pipes, electrical. It will be $55,000. The GC has asked for 10,000 on contract signing, even though he may not get started till December. He claims he needs deposits for the electrician and plumber. He has since lowered it to 8,000. I think it's waaaaaayyyy to early to give any kind of substantial deposit now, and still think the the size of the reduced deposit is still too much(15%). Remember, there is no custom work being done that requires a materials deposit. What's reasonable that I should counteroffer and the maximum I should agree to?
Thanks.
Comments
a 15 percent deposit upon signing is pretty standard...
Posted by: eman1234 at September 24, 2009 7:06 AM
I agree with eman. Did the contractor come from good recommendations???
Posted by: daveinbedstuy at September 24, 2009 8:05 AM
15% is not unusual, but paying someone 2 or 3 months in advance is very risky. There's no reason he needs the money for your job right now. If he's insistent and you really don't want to lose him, then offer to make the deposit to his subs directly or put the amount in escrow until he's actually ready to start. Nevermind that $10,000 (or even $8,000) is probably more than he's paying the electrician and plumber for all of their work, let alone just the deposit, on a $55,000 job.
As an architect, I would strongly discourage anyone from putting down that sizable a deposit this far out. Most important of all, as DIBS said, check the references.
Posted by: JimHill at September 24, 2009 9:31 AM
The guy's suggesting he *might* start in the middle of the holidays and in the middle of heating season. That's a red flag for me. As others have said, the amount of the deposit does not seem excessive. The timing's a different story. Unless this was someone I'd worked with before, or involved permits and/or advance purchase of costly or exotic materials, I would not put money down so far in advance, and also not without very good references and a guaranteed start date.
Posted by: vinca at September 24, 2009 9:42 AM
I wouldn't give more than 5% upon signing, with an additional 10% the day he shows up to begin. That's what I did anyway, and I already knew the contractor.
Posted by: denton at September 24, 2009 10:08 AM
Absolute std. with contractors- 1/3 at signing of contract, 1/3 the day they start and the last 1/3 (where their profit is) when job is done (and you are satisfied).
Posted by: bmfesq at September 24, 2009 11:17 AM
Why should he reserve his time for you without a good-faith deposit? If the guy does not come recommended and you don't trust him, why are you using him?
Posted by: Susan Elkins at September 24, 2009 11:40 AM
I would not allow a client to pay until a couple of weeks before work was to start (a specific date, not "around the holidays).
bmfesq...w/ your 3x1/3 payment schedule, at 2 points, the owner's very exposed financially if the contractor disappears... and at the end the contractor is exposed if the owner decided not to pay.
It's a small job, but have the initial payment credited against the first invoice from the contractor, and pay only for what's done/on site after that. For a job this size, this may mean paying once a week so that the contractor's not too exposed, but that's fine. Withold 10% for the end, when absolutely everything's been done.
This is all very standard. If your contractor balks, its a red flag.
Posted by: jcarch at September 24, 2009 11:43 AM
I have paid 1/3 upon signing of contract, 1/3 at midpoint of project, and balance following satisfactory completion. But that's with detailed contracts and using contractors with sterling references (licensed, insured, naming us additionally insured, etc.). I never have and never would hire a contractor who wouldn't specify a timeframe in writing, including timeframe for substantial completion, or who claimed they needed an advance for their subs.
Posted by: vinca at September 24, 2009 11:59 AM
This whole setup sounds like a red flag to me. What Jim Hill said.
The Neighborhood Housing Service of East Flatbush says give them 10 percent or $1,000 to start, whichever is LESS. Does that sound extreme?
Posted by: mopar at September 24, 2009 1:15 PM
I wouldn't sign a construction contract without my lawyer's OK, but others will have a different view. If you have a lawyer, what does s/he say? The contract normally provides details on the payment schedule.
Posted by: bohuma at September 24, 2009 1:26 PM
What jcarch said.
Does the auto shop that does a $2k repair on your car ask for a 1/3rd of the cost up-front? In any area of the construction industry other than home improvements jcarch's description is the norm. Damned if I understand why it's not for home renovations. After all, some of the larger contractors that do them are working under the "norm" on jobs of equivalent value for commercial clients.
Posted by: johnife at September 24, 2009 1:32 PM
i assume that you have an architect on the job, to make sure that benchmarks for further payment requests are met..did you use the standard aia contract which lays out all of the conditions to be met?..are the contractors recommendations good?.. if you are doing the renovation unfiled with the dob, cancel the job ..you are setting yourself up for nothing but headaches.. do it when you can afford a real job.. it seems that you have trust issues before the job has started, and i , as a contractor, would turn down the job
Posted by: eman1234 at September 24, 2009 9:13 PM
If You Need A Good Electrician You Can Use Erick From RICINSTALLATION You Can Reach Him @ 347-512-4869.
Posted by: OldManSam at September 25, 2009 9:45 PM
Hello my name is Dan and I am a licensed contractor if you want give me a call and let me see the job and I will work with you and I know for sure that I would not ask that much for a down payment at contract signing I can be reached at 718 919-7794 or 718 902-9213 and 646 726-0475 I only hope you did not put your john hancock on anything yet.
Thank You,
Dan
Posted by: superdee01 at September 26, 2009 3:17 PM
In my opinion, and as a contractor, it is too early to ask for 15%. A good reputable contractor should have enough money to float the beginning of a project, or at least wait until the actual start date. It sounds like he really just wants to make sure you arent going to back out, and if you give him 15%, then you certainly wont. Tough call, go with your gut. On a separate note, I'm not one to steal work from other contractors, but I bet I could do your renovation for less than he's charging you ! If you havent fully committed, contact me if you'd like: smdconstruction@gmail.com
Posted by: smdconstruction at September 26, 2009 8:58 PM
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