My contractor asked for a 50% upfront deposit before starting work. He said he it would be used to secure materials, pay for permits, etc. Is this ok?
I would be suspicious if a contractor asked for 50% down, signaling a red flag that they canât afford the materials and are not an upstanding contractor
Suburban Home Improvements asks for 0 money down and paid in full upon satisfaction of the job.
This creates and keeps a high trust level between the homeowner and us as the contractor.
Industry Trend is 33% up front. Although there have been instances when âSpecial Order Materialsâ have to be ordered ahead of time to avoid delays in construction. These could be expensive and possibly most of the dollars from the deposits could be applied to. Please ask your contractor to provide a breakdown of where the 50% deposit dollars are getting applied to and if it can be justified, than you should be OK to conduct business with him.
Hopefully this helps and Good Luck.
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With all of our projects, we only ask for $1000 or 10% of the project, which ever is less. Our contracts cover rough material and labor only and the customer is required to get the finished material for their project. If the material is included in the price of the project, we will charge the customer in our normal payment stages that are signed by the customer as part of the contract. We advise all customerâs to never pay more than $1000 or 10% of the project whichever is cheaper. We pay for the permit up front then send the customer an invoice with proof of the cost of the permit. With material, if we pick it up and pay for it, we will send an invoice to the customer with a receipt of what we paid for it.
Most of the customers that call me and tell me their original contractor asked for more than 10% or $1000 up front usually end up getting a contractor that takes the money and does not complete the job. I get these calls at least once a day. If you go into contract with this contractor, put into writing that you need to see receipts for all materials and permits purchased.
I have been in business for over 25 years and have never asked for less than 33% down but my projects are not nickel and dime either when your $30,000 invested into a project before even getting a penny and the customer backs out who wins on that one they are attorneys not the contractor.
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As like homequality, we also only ever take 10% or $1000 (whichever is less) as a deposit for any project. Weâve seen homeowners being scammed out of money with contractors who use this tactic to take the money and run. Be very careful and if he is insisting that the amount of money requested is necessary to start the job, have them write out exactly how that will be distributed for labor, materials, equipment, etc.
It depends on the type of the project. Traditional in stores lumber stock materials vs. custom long lead time. Some projects require to place orders for special materials, windows & doors, trusses, exterior finish wall and roof materials, custom cabinets, specialty items, it require payments in full, before construction work starts.
It depends on the project and scope of work. Residential vs. Commercial.
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The contractor may argue that it is not his job to finance the project out of his pocket, while your position is that you do not want to finance the contractor and pay for work not yet completed or materials not yet delivered.
Some states, including California and Maryland, limit the size of the down payment on a home-improvement contract. Maryland allows up to one-third of the contract price, while California limits the down payment to 10% of the job cost or $1,000, whichever is less.
It depends on the type of contractor. If you are using a General Contractor or Custom Builder, a request for a 50% of the total job up front is way too steep. Typical advancements / retainers / down payments for major improvement services should range more in the 10 to 20% range.
I would be suspicious for any contractor asking for that amount upfront. If you really like this contractor, as him to provide justification as to where exactly that initial down payment is going.
You might also want to establish an escrow account with a bank.
If you have questions, please feel free to contact me at [email protected].
Most contractors will request 1/3 up front
with my company it depends on the project and type of financing . on a custom home i work with the bank on draw schedules as the project proceeds .on additions i usually get around 20% to 30% depending on job size .i never take any funds until i and the materials are on the job site .
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i never take any funds until i and the materials are on the job site .
Thatâs a great idea. Do you pay for the cost of materials upfront then? And have you ever had this go the other way where youâve ordered materials and the client cancels?
Usually a regular job 10% when contract is signed and if special orders are involved the cost of that will be added to first payment, and if it was a one day job 10% due when contract is signed and payment due I full when job is complete, and if you donât get a good feeling with the homeowner donât do the job , go with your gut , they are also out there unfortunately !!
I see some people mentioning theyâll ask for 20-30% upfront as a deposit, which is clearly better than the 50% asked about, but still seems high.
Donât some areas have a limit on the deposit amount? I think California is capped at 10% down legally.
Most contractors will ask for a initial investment on projects generally $1,000.00 or more. The remaining 50% would be on the completion of the project. Not when work is done but after they do a final punch out or touch up if you will. Itâs a good way for the contractor and the investor to feel safe with moving forward.
Dans,
Its par for most contractors , We Personally donât all follow those 'âeveryone does it standardsâ'And collecting Monies up front.
I feel if your in this business , You should have the finances to run your business. But that is just my Opinion.
Always check your contractors background as well as ask for some recent referrals, Before handing over any funds for any reason. Cover yourself, And make the payment payable to the business, not the individual.
If things donât work out as planned you have better legal recourse for getting your money back.
Hope this helps with your decision making.
James Hood
Cadillac Tile LLc
Our contract states 50% which is given to us on the day we start working on site. Now with that being said we usually actually only collect 25-30%. There are laws in most states which limit what a contractor can require unless stated in the contract prior. We have this language in there in case we have to do a lot of special orders or spend a lot of up front money and this is just for our protection. See what all needs to be ordered up front and what expenses they will be occurring, also how often are the getting paid once a week, once a month etc. You want to make sure the contractor is getting paid as he goes for the work that is completed as that is fair to him and fair to you. I would say if any contractor has a problem with that payment system that would be a red flag for me.
No, there is no need to be suspicious of this, in fact for some types of project where expensive items need to be purchased a contractor may request up to 65%.
Just make sure that whom ever you choose you have made certain they are licensed, bonded and insured in your state and that the status of each of those is listed as ACTIVE!
In california you can only get 10% or up to $1000 dollars as a deposit but you can get paid through out the project in segments to pay for materails and labor should be written in the contract
$1000 or 10% (either is ok) is the guideline standard. 50% is excessive for a deposit. The initial deposit usually just secures the contract. Itâs almost a good faith payment. Another deposit is normally requested when the actual work begins.