Renovation - Upfront Deposit
We are negotiating the contract with our GC on a 400k renovation. Can anyone advise on the common deposit rate? We’ve heard 10%, 20% and 30% of the contract. I just think anything over 10% is somewhat excessive. Any recommendations would be appreciated. Thank you
brooklyn72
in Renovation 11 years and 9 months ago
6
Please log in, in order to post replies!
6 replies
brooklyn72 | 11 years and 9 months ago
Thank you everyone for your comments and advices. We agreed on a 10% deposit + periodicaly payments based on the completion of work. This was also based on the advice of our architect who thought it was not usual to ask for 30% deposit upfront.
tanner | 11 years and 9 months ago
My architect told us what our GC wanted was typical: 30% to start, 30% after 1/3 complete, 30% at 2/3 done, and last 10% after final inspection. I’d never do that again. 10% isn’t enough to motivate the GC to prioritize getting every last detail done. (We’ve been through this twice, stupidly. Same both times: after about 3/4 done and paid, the crew gets reassigned somewhere else and the last of the work is suddenly incredibly slow.) I think that a big chunk up front is reasonable in order to start, particular for materials purchase, but I definitely don’t think 10% held back at the end is enough. If I had to do it again, I would shoot for 25% up front, 25% at half, 25% at 3/4, and the final 25% not until after final inspection and all details complete, period.
c_w | 11 years and 9 months ago
There isn’t enough information here. What’s the deposit for? A retainer until work starts or payment to start work? When is the next payment going to be? It seems definitely high as a retainer and somewhat low as payment to start work. If you have a quote with proper break down you could assess for yourself. Expect the payment to start work to include: 30% of plumbing, 30% of electrical, 30% of HVAC (standard subcontractor deposits), all of demolition, 50-100% of framing & drywall (materials only), basic consumable supplies, permit related costs, and of course labor until the next payment. It could also include deposits for windows or items with a long lead time for more time sensitive projects.
jcarch | 11 years and 9 months ago
10% should be plenty for a $400K project. All of that amount should be credited back to you on the contractor’s first requisition. And as August said, you hold back 10% of the value of the completed work until the very end of the project. Be sure that you only pay for work that’s already been completed. You should not be paying in advance for kitchen cabinets. You pay for them when they arrive on site. The biggest way homeowners get in trouble is by paying their contractor for more than what’s actually been done. If you do that, and your contractor walks, you’ll never get that money back. You should also have the contractor – and his subs – submit partial lien waivers with each requisition. So that if you’ve paid for 50% of the electrical work, the electrician submits a short form letter, signed and notarized, stating that he’s been paid 50%, and won’t file a lien against that completed work. This way you know that the GC is actually passing your payments on to the subs, and not paying his mortgage with the electrician’s money. Good Luck. jcarch ———————— James Cleary Architecture brownstoner.staging.wpengine.com/jamescleary
Augustiner | 11 years and 9 months ago
BTW, is that the 5 story building you mentioned in your earlier HVAC post? If 400k includes Carpentry, Hvac, Plumbing and Electrical …. that´s a lowball offer. You are definitely right to be cautious.
Augustiner | 11 years and 9 months ago
2-4 weeks before work starts the first payment is due. 50k-70k seems like the right number. If you don´t do a gut and they need to order a lot of materials right away, then it can be more. Have them present a payment plan what they expect to get at what point. Make sure you hold back 10% of the total until final inspection.