Can someone provide an expalnation for a residential contractor’s requirement to provide a percentage of payment (around 10%) at contract signing? This is not how a commercial job is ever awarded. Also, if you do not have the financial stability to start the project without a down payment, why should I hire you? Are most residential contractors unfamiliar with payment for work completed? Most contracts I see expect payment in percentage increments and not according to verified work complete.
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Replies
Large popcorn with butter and yeast, please!
Roar!
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
'scuse me, now I need a hot dog and a soda. Ice cream later.
RC,
Early in my career, I booked projects-signed contracts, set start dates, ordered materials only to have the owner call me up the day or week before we start to cancel the project. So I have spent time and money for a project that is not going to happen.
Now, I request 10% down which is credited toward the final payment at the signing of contract. It makes sure the client is serious about the project (has skin in the game) and it also keeps me from financing the project. My company is not a bank and while I have great credit terms with all my vendors and substantial lines of credit with my bank, I am not in the credit giving business.
I have never stolen any money from a client and all my business is referral based so those asking for me to work with them know I am reliable. I also explain that I am not a bank. If they would like me to be, it will cost more.
This is one of the reasons why I do not do commercial work. I do not care to deal with funding between draws.
There is money spent up front for any project. Who carries the burden is relevant.
I can understand your concern about giving money down, but being stiffed happens both ways. Find a contractor you can trust. That is most important. If the trust is present, I am sure you can find a mutually agreeable draw schedule.
Bruce
Commercial work is usually much more stable, with respect to funding, and there is almost always a written contract in place before anything happens. There is much less opportunity for emotions to be involved, less cold feet by the customer. Speaking as a owners project manager, if i had a signed contract and the gc approached me for an advance to buy materials, depending on what it was I would probably work with them. There is a standard entry on the monthly draw invoice for "stored materials" where they can paid for material delivered to the site or warehouse but not installed yet.
"Put your creed in your deed." Emerson
"When asked if you can do something, tell'em "Why certainly I can", then get busy and find a way to do it." T. Roosevelt
That's good, Eddie. Great explanation.
To that I'll add, as is done with some other types of deals made with private citizens, consider nonrefundable hand money advanced against a property sale, airline tickets, special-rate hotel deals, etc.
People just cannot be trusted. That simple.
View Image
"A stripe is just as real as a dadgummed flower."
Gene Davis 1920-1985
Guys,
Agree, "cold feet" can happen with the owner or contractor. Provided you have a signed contract with (at least generally) correct terms, either party upon default of the other could enter into mediation or litigation. Then it comes down to how strong your contract was. (good luck) The difficulty is that while the contractor may get cold feet and never show up the owner is still left with work that needs to be completed. The cold footed contractor has moved on to an easier (less informed) client by the time the first guy gets a complaint filed. If the owner gets cold feet the contractor should have proper contract terms that prohibit such action and make a claim while starting other work. Neither party can simply get "cold feet" and walk away from a proper contract without expecting the other party to seek legal action. But remember, it's still the homeowner who has work not done and is hardshipped.
Also, applying the deposit to the final payment does not leave a retainer for punchlist work; a typical process that any qualified and dependable contractor should not object to. Down payment credited to final payment leaves the owner fully exposed.
if you want on my construction schedule.. i get a substantial deposit with the signing of the contract...
no deposit... no schedule..... no contract
Mike Hussein Smith Rhode Island : Design / Build / Repair / Restore
Mike:Either you or someone else here had sent me a link to your post of a project you had built. YOu recommended that I do something similar once we had started and we finally have. Would you mid sending me the link again - it would help me figure out what I should be posting. I have gotten permission from the builder and architect to post pictures and the plans/model photos.Thanks for your helpMark Macleod
go to the photo section and you will find a lot of picture projectsMike Hussein Smith Rhode Island : Design / Build / Repair / Restore
The one significant assumption on your position is that one can collect on defaulted contract terms. Here in Texas it is very difficult to collect on residential project, even if you get a decision.
My attorney has told me that if it is less than $10,000, don't even bother, it would cost more to get it (via the courts).
All my draw schedules still have ample retainage for the completion of punchlist and the owner is not exposed. We are equally exposed. The draws are based on completion as defined by approved building inspections.
Most commercial contracts are weighted toward the owner. My contract is slighty weighted in my favor for only the initial draw. The rest is equitable for both sides.
If I was the owner, I would naturally want something in my favor. Being the GC, I do what is in my best interest.
Bruce
This has long time been a discussion.
This is not the only instance this type of activity happens .
I want to buy your house . I sign a contract and give 500 dollars earnest money.
Im willing to give your full price so you should accept . Right ?
I need possesion of the house at closing . I want the house the day I pay for it .
See any problems?
You want 5000 grand down payment to make sure IM serious about buying your house before YOu spend half that amount to move and the other half to get in another place .
Hmm , if I give you 5 grand and the agent 500 , how do I know youll move ? How do I know the house will be in the same condition?
Hiring contractors can be just as risky. Or working for homeowners . Both can be pretty flaky. You cant afford having your house tore up and me run off with your money leaving uncompleted work and I dont have time to think about working for you and not getting paid. We better just move on.
Thats what it comes down to. Some one has to draw the gun or no one gets to shoot . Mike Smith that resides in this forum has a saying for contactors . " Dont ever put your money in someone elses dream. " That doesnt help you but its a good rule of thumb for a contractor.
The best thing you can do is pick the best references . If youre that hung up on a 10 percent deposit then its the best option left becuase you have to trust who ever you open your home to and if you dont trust me with 10 percent I dont want to be there . That goes both ways .
I dont know how its gonna happen with out some trust .
Tim
Good points, Tim.It's getting harder and harder to hold a buyer in a real estate contract. Lots of sellers don't realize how important it is and just want a signed contract assuming that the buyer will close the deal. The standard saying in the real estate industry is: Buyers are liars.
We do small project compared to most here. 3-30k. If you want on my schedule you pay 10% at signing, 50% the day it begins and the balance upon completion.
If I don't show the client will have work that is not complete and are due their 10%. If they cancel I am stuck with trying to send back material (paying a restock fee of about 15%) and keep the material that is a custom size or color as most places won't take it back.
I am also now charged with trying to move someone up on the schedule to keep my employees working so I don't lose them. The new person taking your place is not ready for me, they don't have the bath cleaned out, son is home from college, Thanksgiving is a only a couple of weeks away and we need the kitchen etc. And odds are all the material is not in yet for that job. So we clean the shop, clean the trucks etc. and lose money.
Having a little invested keeps a lot of people in the game as we are generally (not at the moment) booked out 2-3 months. A lot more folks than you would imagine will go a month into their wait and suddenly get an itch for a new car instead. But not if they think they might lose their 10%. As said above. People are not trustworthy. DanT
What about the contractor that scheduled "your" job with no money down, has had it on his schedule for 3 months and has turned down other projects because they couldn't be fit into the schedule due to "your" project."You" cancel 3 days (or day) prior to start of project and the contractor now has 3 week/3 month hole in his schedule...can get pretty expensive for the contractor, no? These gaps cannot always be filled at a moment's notice, so tough luck for the contractor.Just another viewpoint.Jay
I like to have some common language to discuss and explain things with someone.
Are you a homeowner wanting some residential remodeling?
Do you have a career background in commercial contracting? Or5 another career? You come across as a bit angry and combative. Fleshing out the context can help me and others find a way to communicate with you about this.
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ever the diplomat
Not really, just don't want to cast pearls before swine if that is how it turns out. Learning when and where to spend time.And there goes my diplomat card, eh?
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
There's one problem with this discussion, from the original question to most of the answers.
It is incorrect to assume that all contractors are the same, or that all customers are treated the same.
For example, I just came from quoting a job for a man who has been difficult in the past. As you might guess, he didn't get my best rate or most generous terms. I quoted using a higher rate, left less 'wiggle room' in the estimate, and expect to be paid the moment I'm finished.
Other folks won't get a bill from me until some time has passed, and I'm SURE they're happy. I sharpen my pencil for them. I'll charge a lower rate.
Sure, I have a base rate, and 'standard' practices. These are pretty much just a starting point for new, unproven customers. Depending on our experience, I'll adjust. Some folks are so bad I'd be 'too busy' even if I were standing in a soup line.
Most excellent point.
expect to be paid the moment I'm finished.
We all expect that. Often doesn't happen.
I've got a regular customer that's got a 90 day old past due invoice for about $400. He's got a $3000 job for me that he's leaning on me to do. I won't start until I get the $400 he owes me + half of the new contract because of his history. And I've dealt with him for 10-15 years. I know his routine. He'll eventually pay me.
I don't know about the next guy. Might pay me on time, might not. http://www.quittintime.com/ View Image
This topic is a hot one every time it re-emerges, as it often does.
The tradesmen and contractors all start barking about how slimy those homeowner customers are, how they cannot be trusted, how they refuse to "finance" a nickel of anybody's job, and more. Gimme the money or you don't get me. Period.
Renosteinke said it best. The property owners aren't all dirtbags, nor are the contractors and tradesmen all salt-of-the-earth hardworking saints. The shades of gray go everywhere in between.
What if Ms Homeowner offers Mr Remodeler his "schedule deposit," but says that since she just bought the place and is new in town and doesn't really know him from Adam, she'll place it in escrow for him, to be released to him after she sees him start and all or most of the materials are on the job?
Just as much as Mr Remodeler can feel that Ms Homeowner cannot be trusted to go forward with him without earnest money consideration, so can Ms Homeowner feel that Mr Remodeler won't show to do the work, or even show at all.
It's a two-way street.
View Image
"A stripe is just as real as a dadgummed flower."
Gene Davis 1920-1985
Several times a year I get paid from an escrow account. The bigger the job, the more likely that is to happen.
I've also recently been letting the customer write the check directly to the distributor for special order materials. If they are willing to stay within my comfort zone, I'll gladly go to the place where their comfort zone overlaps mine.http://www.quittintime.com/ View Image
letting the customer write the check directly to the distributor for special order materials
As long as they use your distributor and the materials you're comfortable with, that's a pretty good compromise."Put your creed in your deed." Emerson
"When asked if you can do something, tell'em "Why certainly I can", then get busy and find a way to do it." T. Roosevelt
As long as they use your distributor and the materials you're comfortable with
There's no choice there.http://www.quittintime.com/ View Image
that's fine.... .. but i can give the owner a list of references of recent and past customers
ie: my reputation is easier to check than my customers... and this is how we do businessMike Hussein Smith Rhode Island : Design / Build / Repair / Restore
ie: my reputation is easier to check than my customers... and this is how we do business
That's what I wanted to say, but fumbled around for a paragraph and still didn't make my point. http://www.quittintime.com/ View Image
"It is incorrect to assume that all contractors are the same, or that all customers are treated the same."Why I asked him for some feedback and background. If he is serious about wanting to understand about the situation, I'll be glad to help and can frame the words in language he can understand.But if his only purpose in coming here is to bitch about it, I refuse to be an enabler
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
<!----><!----> <!---->After reading some comments I offer the following:
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Background
Here goes my red flag – I am a licensed architect. Before you stop reading, I am also a licensed contractor. I have over twenty years experience in design and construction. For several years I owned and operated my own construction company. I did not work for the public. I worked for myself doing real estate development and self-performed most of the work except for MEP, masonry, flooring and tile. However, I have done all these jobs to some extent myself in the past and I can appreciate the difficulties of each trade. You just can’t do it all alone and make money so I got some help. I got out when the RE market tanked. Just understand that I know what construction is about and what it’s like to work in the cold, heat, rain, snow, with complaining neighbors, with cracked hands, no-show help, insurance costs, equipment costs, job site theft, etc., etc., etc. I also know the joys of framing on a sunny spring day, the pleasure of trimming out a house, etc. It's not all bad.
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Now you may want to know why I am not familiar with a contractor’s desire to be paid at signing, right? Well I am very familiar with that and have had subs work both ways. Some will demand money up front and I pay. I have found these subs through good contacts so I am not too concerned but you never can tell. Some show up, do the work and leave without ever asking for a dime. I have even had to track some subs down to pay them! Incidentally, I can say that the best workmanship has been received from the subs that do not ask for deposits.
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The concern for homeowners is that contractors will not show up. Most people I know who are not involved in construction in some way have a difficult time getting any work done on their house. The typical scenario is to call ten people; five call back, three show up to give an estimate and one gives you a price. Now the customer thinks – will this guy show up? Maybe other geographic areas have tradesmen that are actually in the trade by choice, respond and do quality work. I am in the northeast of the country and here there are a lot of mostly disreputable, small (1-5 men) businesses that are difficult to work with. For my projects I had a difficult time finding tradesmen that would even take on large projects like mine. Example – plumber shows up to give estimate to RI plumbing and install fixtures. “Yea, Yea, great job, love to help, do this all the time!†Never hear from them again. They do have ads though in newspapers for new water heater, new toilet, city violations corrected, etc. You all know these guys, they want a quick buck. Who wants to RI in house for two weeks? They are not even sure if they can make money that way. (Not trying to disrespect any one trade, plumbers, just an easy example) There are also other companies that have better reputations but their prices are through the roof. It seems you pay a premium just to have someone answer the phone and show up. Sometimes the costs are not justifiable for the work from the more reputable contractors. Especially if you are familiar with what you are getting.
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Down Payment
Without totally thinking this through, the escrow account is probably the best option. However for the guy who wants money up front to provide confidence in the customer, he still does not have it. The escrow should be collateral enough. Your concern is getting paid and the customer has the money to pay for the job. The escrow account will verify this. You need to trust that the owner will not withdraw the money for something else. The fact that they set up the account should be enough to know their intent to have work done is sincere. A homeowner does not want to give someone 5 – 10K before they even show up no matter how many references you have. Nor should you need the money. No permits yet so you can’t start work. What do you need to pay for? That means you will probably spend or distribute this customer’s money before starting their job. Not ethical or smart business. If special or regular material needs to be ordered prior to the start of work (or even a permit if you are sure you will get it - think zoning) submit receipts to the owner and have them pay you, there’s no problem with that. You should be working on credit with suppliers so you have at least thirty days. If you do not have credit, stop reading.
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Payment Draws
As for payment draws I will assume that the owner has the money and it is in a verifiable account, no bank loans to coordinate with. Let’s assume a large job, 50K – 100K. I would suggest a down payment of $1000. Not too many people I know have 1K burning a hole in their pocket and would not want to walk away from that. Then another $1000 when permits are received. This is more good faith on the customer’s part because although you have done your job by applying for the permit, you are still not on site. Now you have 2K of someone’s money and have done nothing except estimate, talk to the owner about the job and file for permits. That should cover your expenses to date. Wait 4 - 6 weeks for a permit. Next, get a larger negotiated draw when work starts, i.e. you show up on site “hammer in handâ€. Subsequent draws should be made upon inspections, not at the beginning of a portion of work. Example, when framing is approved, not when framing starts; when plumbing RI is approved, not when plumbing starts. This provides the owner with assurances that the work has been properly completed or at least to code. This is helpful for the general public who does not know anything about what you are doing and does not have an architect working with them. Even if there is an architect involved, most do dot really know anything about construction anyway so pay-after-inspection is a really good way to go. This means you need to have enough cash available to keep your subs going if they need cash for material, labor etc. Your subs should work the same way you do and if not, we start this argument over again. Keep this draw schedule going until a pre-negotiated retainer for punch list work is reached. By now, if all is well, you should not be concerned about getting your final payment. Your work should also be of a high enough quality to minimize the required punch list.
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Contracts
Throw out yours. Stop paying a lawyer to review them too. You hired a lawyer in case of litigation, right? Well if you do get into a law suit rest assured opposing counsel will dispute every sentence of your contract in their client’s favor. Use AIA forms. There are abbreviated forms (5 pages) for small projects as well as more extensive forms for larger projects. Read them before making your judgment. These forms have been tried in the legal system for years. If you are caught in litigation the attorneys on both sides will be familiar with them. They do not favor architects. I repeat, read them. They protect contractors as well. More than likely, there isn’t an architect involved on your project anyway. If you do want to hire a lawyer, have them modify the AIA contract to remove architect references and replace with owner. Just some advice. You can keep using your form and hope that it will protect you someday if you ever need it to.
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Enough Said
This debate could go on forever and I am aware of holes in this argument as well. Spare the critique. Realize most homeowners have heard more stories about poor contractors than good ones and they are apprehensive. So are you, understood. Contractors never talk about the good owners, only the ones who stiff them or are difficult to work with. Both sides choose their “partner†cautiously and hope for the best.
"It seems you pay a premium just to have someone answer the phone and show up."
It costs money to have someone in the office to answer the phone. So if you want someone answering the phone and showing up promptly you have to be willing to pay more for that service.
" Sometimes the costs are not justifiable for the work from the more reputable contractors. Especially if you are familiar with what you are getting."
Who makes the decision what it is worth? What is the value of the "reputable contractor"? Do you make that decision? Some are willing to pay for the reputation and do. You choose not to and that is your choice. But there are others who are willing to pay so often the "reputable contractor" will go to them and you will (by choice) work with the less reputable. It's business. You build your reputation so you can charge more and make more money. Nothing new about that.
" A homeowner does not want to give someone 5 – 10K before they even show up no matter how many references you have. "
I don't want to pay for workers comp, truck payments, building payement and for materials either, no matter how many contractors the homeowner has worked with before. So what?
I for one am not surprised you are an architect and have never contracted for consumers. Your attitude matches both descriptions.
As much as you claim to have worked in your field and ours I am surprised that you don't have a short list of reliable, work for no deposit, have to hunt them down to pay them, be there on time, answer the phone on the first ring guys that really enjoy working for you. Ok.........no I am not surprised. DanT
Looks like someone who just wanted to come in and stir up a storm.
Something about not feeding Trolls comes to mind.
hah,hah,hah.....<<<<< I did not work for the public. >>>please sir, may i have some more ?Mike Hussein Smith Rhode Island : Design / Build / Repair / Restore
Why would you bother posting your questions and commentary about about a "public interaction" when you have not done it nor do you wish to hear critique about your commentary?
Most of us are somewhat open to new ideas and thoughtful comments and criticism, but apparently you got it figured out-Why bother posting?
A homeowner does not want to give someone 5 – 10K before they even show up no matter how many references you have.
You should be careful making such universal statements.... I currently have around 10 customers in line waiting and all of them have made at least a 5k if not larger down-payment. The highest is at 20k. I also have a handfull of smaller projects on the books where I have 50% of the job-cost. I'm picking up another down-payment today for work we will start and complete sometime in Feburary and another on Friday.
I have no problems paying my people or my bills and have a very good cash position at the moment. Now why if all these customers are willing to trust me, should I take your advice?
Sounds like time to head for Vegas! Where we staying?
JUST KIDDING!!
despite the number of jobs on the books and current cash on hand I'm still worried about the late winter/early spring.
Our phone is not ringing nearly as much as it typically does this time of the year. There are still a few calls coming in a week but I've got 6 guys to keep busy.
On the flip side I do think (hope) this is temporary thing and part of a cycle that will eventually start to pick up again. I've upped our marketing with the plan of bringing in a few jobs but more to come out on top with more name recognition when it's all over.
Well, I think I am going to make a response for you but I can sum up what your problem is from one phrase you wrote here..."There are also other companies that have better reputations but their prices are through the roof. It seems you pay a premium just to have someone answer the phone and show up. Sometimes the costs are not justifiable for the work from the more reputable contractors. "So it seems you are looking for the cheapest available and expecting the same service from them as from the real contractors. Service has a price, and if you are not willing to pay it, you will generally not end up with it.Now I am on to ---whoops -- you said to spare the critique...well, what do I do? You asked questions and then don't want to hear answers???OK, Gottcha
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
He's applying the two ears one mouth principle I believe.
"They" always say we need to LISTEN.
As well as his background, his locale may make a difference. I've lived in places where, depending on the job, things often proceeded based on verbals and handshakes. New home construction usually involves deposits (not always - I know a contractor who doesn't take any money until closing) and, if you're smart, decent contracts, but not always. Some of this depends on your local culture, so that might be part of where he's coming from, too. Frequently, around here, for renovation work, the guys asking for deposits are the fly by nighters, and so that raises a red flag. And those that want to be paid for materials up front are really unusual.
So perhaps it's his background that makes him question the way things run.
if you're smart, decent contracts, but not always.
I'm in business to make a living, not to entertain myself or others. If I'd wanted to take a chance on getting paid, I'd have been a rock star.http://www.quittintime.com/ View Image
Isnt it great?
There seems to be this global assumption that the trades are all going to screw the homeowner somehow.
The homeowners however are always upfront and honest and would never put a tradesman in a tight spot.
We have been there, done it and seen it all so many times we could recite the play in our sleep.
We dont have a 9 to 5 job that hands over a pay cheque at the end of the week.
What we get is long hours, co-ordination of multiple trades at once, materials to take care of, the actual building to build...........and thats when things go right.
Then there is the idea that a free quote is a homeowners right, that they can toss the thing in the bin without so much as a call to say 'no thanks', they can back out of the job at the last minute becuse it doesnt suit them for any number of reasons..............and we are supposed to just smile and take it because we are just tradesmen.
Well, the deposit means that a huge improvement in compliance occurs, it means the trades are not bank rolling a job at their expense for a customer who could pull the pin at any minute.
Bottom line, why should a tradesman give free credit for someone they dont know?
Would you?
Deposits, and draws, are one way to limit risk. Even then, there's risk; all the money does is limit the exposure, the amount of the loss.
There's little sense in demagoging any single point; the deposit only makes sense when seen in context - that is, together with the bond, licensing, warranty, and other elements. There's not a contracting issue today that hasn't been around for centuries. What we have is about as good a balance of interests as you can ask for.
One gent I know has a license plate that reads "GSM 1." His business is solid. The reason? Because that plate reminds him every day" Get Some Money First!" That is, some tangible evidence of commitment. Otherwise, it's too easy for thing to be deferred, plans to change, etc.
Not that it's a perfect solution. There never is. Jobs fall through all the time. The deposit gets the customer to ask "Is it worth the deposit to change my mind?" The deposit helps defray any losses the contractor may have.
Often overlooked is that, at signing, the contractor already has substantial time invested in the project. All that time spent discussing things with the customer, preparing a bid, drawing a plan is time the contractor hasn't been paid for. No matter what the advertising may claim, there are no "free" estimates. You're just asked to pay for them later.
Edited 11/17/2008 2:08 pm ET by renosteinke
Depending, of course, on the scope of work and the amount to be paid in full at jobs completion, I will always get all the money up front for materials (unless it will be put on my or the homeowners account somewhere)and around %15 of the total bid price before we drop tools...and of course depending on the job, collect about the remainder of the first %50 at around jobs mid-completion and collect the last %50 at jobs end...that's just the way I have done it for years and homeowners seem to like that..
All I ever wanted in life was an unfair advantage...
That last 50% at completion is a huge amount to leaving hanging. Huge.
And if you get this, that's exactly what you have, an unfair advantage.
Just another unscrupulous hammer and handsaw owner posing as a contractor.
Too many wanna bees without the financial capability of going more than a rent check away from being broke.
Why should I trust you will show up just because you have some money? Do you pay your men a week in advance? Probably hard enough to get them just to show up sober for five days in a row.
I'm glad that you seem to have a grasp of our industry...easier to paint everyone with the same brushwhat's your end goal?Or are you just bored today?
Barry E-Remodeler
Next time you need some work done at your house just go down to Home Depot. Just remember, "You can do it, we can help".
The ironic part of that answer is that the Depot and the Blue guys make you pay the TOTAL amount up front regardless of completion or quality!
Let me guess...you just got 17 "free" estimates to have your bathtub caulked and 16 are "outrageous", right? You're not sure about the the 17th guy yet, but as soon as he sobers up, you think you've got your man. Plus, he'll work for beer and not require anything crazy, like a deposit, or signed contract.gotchyaJay
Exactly what are you trying to say?
Are you saying it is wrong for contractor with probably at least 50000 in tools, to protect themselves from unscrupulous homeowners?
Personal experience, I broke my payment schedule a few times when I was contracting. Every time these were the customers that gave me the hardest time in paying once the job was done, I suppose that is fair?
are you drunk dude? or just an ####?All I ever wanted in life was an unfair advantage...
Does it have to be 'or'?
As I'm sure you see by now, this is a hot topic for contractors. :)
Have you already checked out multiple references for the contractor you're thinking of hiring? If not, you haven't done your homework. If you have, what's the problem with paying a deposit?
I think the underlying issue here is that you could find someone who'll roll over for your terms, but is that the same person you'll trust to substantially alter your home?
This topic is related to local market conditions and the success (read: jobs lined up) of the specific contractor. I'd rather hire the cautious and business-like contractor who knows what he needs to stay in business.
Hiring the company with the least known reliability and seemingly most favorable-to-the-customer policies will likely come back to bite you later.
I'm not a contractor, although I was years ago.
I think DanT went ahead and did a good job explaining the contractors problems .
I think you assumed the contractor could not afford the expense but thats not really the point.
These guys have been in business a long time because I know them here and Ive been here a long time . Doin the same thing at the same address thing.
Thats how they stay there doing the same thing . To you it might not sound kosher but as long as they can work for people that will pay up front part of the expense they will be doing the same thing next year.
Tim
You'd never hire us then.
Our payments are based on milestones, Down-Payment, Start of Work, Prior to Mechanicals, Prior to sheetrock, Substantial Completion, & Final Completion. Occasionaly there are others if they make sense, sometimes some are omitted.
On a project less then 20k it's usually in 1/3's
1/3 down, 1/3 start, 1/3 final. Less then 10k it's usually 1/2 & 1/2.
We're not a bank and we will not finance someone elses project. We are always ahead of the client in payments. It makes cash flow work easily for our business. I've had only a few clients who questioned the payment schedule at all.