Contractor Deposit
We will be doing some minor renovations soon and Im starting my research. What’s the standard (recommended) % deposit for contractors? I know it varies for contractors and jobs but any insight would be appreciated. thx
We will be doing some minor renovations soon and Im starting my research. What’s the standard (recommended) % deposit for contractors? I know it varies for contractors and jobs but any insight would be appreciated.
thx
I do construction work and each contract I draft is unique to the situation. In the event there is a large upfront cost for special materials I include this in my deposit requirement. If I require subcontractors like plumbers electricians etc they too want a deposit to procure materials. This also is included in the deposit or mobilization. No contractor wants to finance anyone’s project but everything has to be reasonable. You should never pay anyone 100% for anything. Usually speaking the deposit is anywhere from 10% to 20% of the total project.
I would never agree to 1/3 + 1/3 + 1/3 payment distribution for the reason that it ultimately causes confusion. When do you pay the 2nd third? exactly. Quantifiable progress payments creates complete clarity.
For small projects I require half the money up front to again procure materials and mobilize. Masterbuilder is right in that only shady contractors take advantage of people.
Hi,
These comments all assume the contractor is shady, and unfortunately many are. Do your research and find someone you can trust. Find someone who can demonstrate project management and who has great references. We do exist.
Here’s a link to some of my work:
http://web.mac.com/salemfilm/iWeb/Site%2011/portfolio.html
And no matter what, make sure the last payment is a very big one and don’t pay it until every single last detail is done. After a small deposit, you might, for example, pay 1/3 of the remaining amount after approx. 1/3 of the work is done, the next 1/3 after 2/3 of the work is done, and the last 1/3 after the job is completed–down to the last switchplate.
I would agree with all the previous posters advice. Under no circumstances should you pay more than what is done (labor+materials). Last thing you want is to give the contractors more leverage.
Before you sign the contract, speak to the contractor and break down the payments based on the timeline. Good luck.
If you decide to pay materials invoices separately, check that they’re not round numbers. A friend of mine kept paying for goods & didn’t notice that all the supplies came in figures such as $250.00 – there should always be odd numbers & cents. Contractor eventually absconded.
“In case anything goes wrong, you want the contractor to be owed money, not the other way abound.”
Lots of folks have learned that one the hard way. Self included.
I usually recommend that the contractor get 10% (for a small job, less for a large job) deposit on signing of a contract w/ the owner. That amount is credited against the contractors first requests for payment.
At the same time, 10% is deducted from each payment request from the contractor, and is withheld until the job is done.
Review payment requests in detail. Never pay for more than has been done on site, and never pay for items that are off site (i.e. “I need $15K for the kitchen cabinets, they’re built but won’t be on site for two weeks”).
In case anything goes wrong, you want the contractor to be owed money, not the other way abound.