The Offhand Tip That Ended Up Saving Me $11,000 on a Disastrous Flip

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The topic of finding a good contractor is discussed frequently on BiggerPockets — in the Forums, on the Podcast, and here on the Blog. Good help is hard to find.

My flipping career started off fairly small, with cosmetic changes and minor repairs. I did nothing structural in those first flips, and I didn’t need to hire anyone to help me out.

Our first major flip had us rearranging the entire first floor and building a second story. We couldn’t do this work ourselves and felt confident we did our due diligence by interviewing three contractors before deciding on one. As it turns out, sometimes people tell lies in order to get your business.

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The Warning Signs of a Bad Contractor

I could write volumes about the problems we had with this contractor. I’m still surprised that they turned out to be so bad, because one of the things that swayed the vote in their direction was their story of buying houses to flip during the winter so their guys would have work. (This was in Wisconsin where winters are tough and construction projects end for six months.) Here are just some of the issues we had with them:

  • Showing up late
  • Skipping days
  • Shoddy work
  • Blaming others for problems they caused
  • Stealing from the job site
  • Padding the final invoice

They tried to cut corners in a lot of ways, too.

  • They installed insulation themselves. The biggest insulation installer in that area came and gave us a quote to do it. They buy in such volume that they can purchase the materials AND install it for less than what it would cost me to buy it at the local supply store. But my guys wanted to save costs, so they did it themselves. Not a very good job, either.
  • They did their own flatwork. Flatwork is flat cement finishing, similar to a sidewalk. I needed a new patio poured, and they started to do some of it. After the concrete was poured, they started to smooth it out — WITH A BROOM! I demanded they stop, and we hired out the rest of it to someone with a cement company.


Related: The Ultimate Guide to Finding an Incredible Contractor

The Offhand Comment Worth $11,000

My father, who was heading up the construction of an office building for his company, gave me an offhand comment: “Make sure you get signed lien waivers from all subcontractors before writing the final check to the general contractor.” At least it seemed like an offhand comment at the time.

We were about a third of the way through the job at that point and still had a good relationship with the contractor. I felt silly asking him for something like that at this point in the job. They had been delivering on their promises, and it felt like I was telling them I didn’t trust them — or that I was trying to renegotiate the contract after it was signed.

When I brought it up, I blamed my dad. Total cop-out, but I was feeling really nervous about asking for them in the first place. I said, “My dad recommended I get signed lien waivers from you before I write the final check.” And then held my breath.

The contractor didn’t act like this was anything out of the ordinary or any big request, so all that worry was for nothing. They agreed to get them from the subcontractors they had already paid and would get them moving forward. No problem.

Of course, that was all agreed to during the honeymoon phase of the job, when everyone was still all happy and smiley. Things got worse, as they tend to when you’re working with unprofessional people.

The Problems Start

The “great” crew leader quit or got fired. Turns out, he was showing up drunk to the jobsite. Even drunk, he had more construction knowledge than the other guys. No one told me he wasn’t going to be working there anymore, and I kept waiting to ask my questions until he showed up. (He actually came back to the site a few months later. I never noticed him drunk, so maybe he went through rehab. He knew more than all the other guys put together.)

The guys stopped showing up for work on a regular basis. Sometimes they wouldn’t show up for days. Subcontractors arrived in foul moods, too. It’s never a good sign when they all show up mad.

Drywall was the final project they were coordinating for us, and of course it was a disaster. Dust everywhere, they started a day too early — we had planned on them starting Thursday when we would be out of the house. I was so angry at the whole process taking so long that every little thing was blown out of proportion. (Did I mention we were living there at the time?) The dry wallers left, and almost immediately the contractor started asking for his final check.


The Piece of Paper Worth $11,000

I insisted on the signed lien waivers from the drywall company and electrician/plumber before I would write the final check. The contractors didn’t have enough money to write the check to the drywalling company without my check. The drywallers didn’t want to sign the waivers before they got paid. Rinse, repeat.

In the end, I held fast in my refusal to write the check without the signed lien waiver. I told them they could come pick up the check and drop off the waivers at the same time, but I would absolutely not write it before then. I don’t know what coercion techniques they used to get the dry wallers to sign the waivers, but I received them before I wrote the final check.

Related: 8 Simple Tips for Managing Contractors Without Losing Your Mind

Of course, that was the last I ever heard from those contractors. The next day, the drywaller called, frantically asking if I had paid the contractor yet. He also wanted to know if I had a contact number for the contractor, as he wasn’t picking up his phone.

This sordid tale doesn’t end happily for the drywaller or the electrician/plumber. Both of them signed lien waivers before they got paid, and neither of them were paid the full amount they were owed. We spoke a couple more times with the dry waller, who confirmed he was never paid for the work he did — $11,000. The electrician/plumber had done lots of work for this company in the past and was paid for about half of what he did.

But I only had to pay once. I held up my end of the bargain, which was to pay the general contractor for the work that was performed. Those offhand words from my dad saved me at least $11,000. Having never had to use contractors before, I didn’t realize that this could happen. If I hadn’t listened to my dad, the drywall company could have put a lien on my house for the $11,000, essentially making me pay twice for the same job.

So I share my story with you, in the hopes that you never have to go through this, too. If you are using any contractors or they are using any subcontractors, keep track of everyone who works on your house and get a signed lien waiver from every single company who does anything for you.

If you are a contractor, don’t sign the lien waiver until you get paid.

[Editor’s Note: We are republishing this article to help out our newer members.]

What are YOUR best tips for finding and managing contractors without pulling your hair out?

Let me know with a comment!

About Author

Mindy Jensen

Mindy Jensen has been buying and selling homes for almost 20 years. She buys houses, moves in, makes them beautiful, sells them, and starts the process all over again. She is a licensed real estate agent in Colorado, author of How to Sell Your Home, and the community manager for, where she helps new and experienced investors learn the proper ways to invest in real estate to grow their wealth. Mindy is an alumnus of the School of Hard Knocks and will happily share her experiences with anyone who asks. When you can get her to stop talking about real estate, you can find her on her bike or adventuring in the beautiful mountains of Colorado.


    • Mindy Jensen

      If my dad hadn’t shared that tip with me, I would have lost so much money. The $11,000 was just the drywall guy. There were a lot of other subs that signed lien waivers. I wonder what would have happened if I had not taken that advice?

  1. Jarred Sleeth

    This is a new one! We will definitely be implementing this into our business in the future. One shady contractor could create a mess of problems that way, glad you were able to sort it out before it became YOUR problem. I hope those subs find more reliable work, or recover their funds somehow. What a shame.

  2. Jay Orlauski

    Excellent tip – great to know something like that ahead of time. I have had a few gaffs with contractors myself so I have learned a few things the hard way – that $11,000 worth of advice could ultimately be worth millions – thanks for the post!

  3. I have been there. I had a subcontractor put a lien on a house before anyone was paid because he was in a dispute with the general contractor. I paid him and subtracted the amount from the amount due to the general contractor after unsuccessfully trying to get the general contractor to pay. I gave notice to the general contractor to contact my attorney if he had an objection to this, so he couldn’t come after me for the full amount. (At this point, he was in violation of his contract with me and I terminated via a contract provision anyway) I try to see that the honest, hard-working people get paid if possible. When the general contractor is broke, sometimes it is easier to pay the subcontractors yourself and also prevents him from cheating the subs.

    • Mindy Jensen

      There are so many things I would have done differently had I known what was going to happen. I do wish I had paid the drywaller directly. I hope he was able to recover the money. Like I said, I never heard from the contractors again. They certainly didn’t answer my phone calls.

      I now run my own show. I act as GC, and find my own subs when I need to hire jobs out. I make sure the jobs are complete, and I make sure they get paid.

  4. Michael Paris

    Getting lien releases is always prudent. However, since lien laws vary by state, so it’s not a bad idea to have an an understanding of them so you’re not chasing them needlessly. Here in MD, there are some very strict parameters that must be met (e.g., timeline to file, the collective work completed must increase the value of the property by 15%, etc.).

    Naturally, the subs who signed releases without first having received payment made poor choices (but they aren’t the first, nor will they be the last to do so.) That said, if you have a sincere desire to see to it that the subcontractors/suppliers get paid, then simply contact them when the GC provides you with their lien releases and ask if they’ve actually received payment.

    If not, as an extra layer of protection for yourself, and to go the extra mile in attempting to ensure that the sub receives payment, stroke a joint check made out to the GC and the sub/supplier.

    The respect and appreciation garnered from those subs/suppliers may pay dividends down the road.

    • Mindy Jensen

      Michael, that’s a really great tip, to check with the subs to make sure they were paid. Like I said, I feel horrible that they didn’t get their check, and I hope that somehow down the line they were able to resolve this.

      I’ve changed the way I handle work that I hire out. It’s also one of the top reasons I do most of the work myself – I know it’s done right and paid for when I do it… As I scale, I have to figure out a different way.

  5. christopher zito

    Thanks for the article. This same situation actually happened to us on one of our first flips. The contractor did not pay the plumber and we didn’t have (or even know about) a lien waiver. The plumber cam after us for his money and we went to our atty. Due to the FL laws, the plumber was not eligible to claim a lien. Fortunately, I think he eventually got paid, as we have worked with the plumber on other jobs…

  6. Mark Boyd

    Perhaps a silly question, but I’ve never dealt with a lien waiver. Is it possible they were forged? Or did the drywaller not know what he was signing? Why the frantic call to you to see if GC had been paid? Earlier in the story it states they didn’t want to sign them. Maybe I am missing something. Wouldn’t be the first time!

    I think dad deserves a nice dinner out!

    Take care,

  7. Michael Hayworth

    Mindy, your overall advice about lien releases is good advice. But for the rest of your piece, you are presenting yourself as knowledgeable, but showing otherwise and doing your contractor a disservice.

    First, very few GCs would use a separate contractor for insulation, patricularly on an investor job where margins are usually very thin. You say “it wasn’t a very good job”, but you don’t say why. There’s no neatness points for insulation – it’s crammed inside the wall. and works around framing, wiring and everything else. Did it pass inspection? If it did, it was an acceptable job.

    Second, broom-finishing is a the proper technique for a concrete patio. It adds texture and traction, reducing the chance of slipping. Your contractor was doing it exactly right, and you flipped out and stopped them.

    There are a lot of bad contractors out there, but there are also a lot of bad clients, and investors tend to be low-margin, high-maintenance clients for a good GC. Maybe you really did have a bad contractor. That’s very possible. But maybe the project spiraled downhill because he had a bad client.

    • Mindy Jensen

      Thanks for reading, Michael.
      I’m sorry you feel I am presenting myself as not knowledgeable.

      In the city where this particular flip took place, there is an insulation company that does an enormous amount of work. You see their trucks all over the city all the time. Insulation goes in after the walls are constructed, so I had some time to see how my GC’s guys worked. I wasn’t really happy with their overall quality or attitude. (They didn’t work full days, didn’t have regular or even close to regular start times or finish times. They didn’t even show up on a regular basis.)

      I called the insulation company for a quote. Their quote was significantly less than the cost of purchasing the insulation from the local home improvement store and included installation. The GC somehow convinced me to let his guys do it, and they failed the insulation inspection. Twice. (They also purchased their insulation from the local home improvement store. So they didn’t end up saving themselves any money.)

      Insulation isn’t crammed into the wall, it is placed into the wall. Cramming is exactly what they did do, and they left no air pockets that allow the insulation to do it’s job. They also used unfaced insulation in exterior walls, which is against code.

      Broom finishing is the correct way to finish flatwork. I guess I didn’t make myself clear when I said they did a bad job and I made them stop. Broom finishing is also an art, and they didn’t have the skill to make it look nice. It looked awful. It had dips in the surface, and the entire thing slanted toward the house. Trust me when I say my contractor was absolutely not doing it exactly right.

      In addition to these things, we ended up ripping off the entire back of the house after they were finished, because they didn’t seal the windows or doors properly. One of the two owners of the company tried to fake his death in order to not deal with problems on our and other homes. They went out of business, re-appeared as a new name shortly after, then again went out of business.

      This was absolutely a case of a bad contractor, not a bad client. I’ve worked with good contractors, and I know the difference.

  8. Gloria Almendares on

    Hi Mindy!
    Thanks for the tip, but I do agree with Michael H. My brother is the Chief Architect and G/C for a very famous beverage drink (rhymes with “Poke”). He is also very knowledgeable when it comes to installation of cement. The way your contractor applied the cement (with a broom, or a stiff brush) is the proper way of installing the cement before it starts to cure.

    I am curious, did you report your G/C to the proper agency that governs G/C license renewals? Here it is the DCCA.

    Gloria Almendares – PB
    Realty By The Sea
    Kailua, Hawaii

    • Mindy Jensen

      I just went back and re-read the part about the cement finishing, and I realize I didn’t make myself clear. Yes, broom finishing is the correct way to finish flatwork, however they were using a kitchen-style broom, and finishing it in the same way you would sweep a floor. The brush strokes aren’t even, or even in the same direction.

      The proper way to broom finish cement flatwork is to use a large push-style broom, and go slow and in one direction. They didn’t do that.

      I regret that I did not report them to the licensing agency.

  9. Rob LaRovere

    I am fairly new to the “Real Estate Game” and I’m obviously on BP to learn from you and other members… That being said, this post certainly opened my eyes to just how bad it can be! WOW! I will definitely learn from your experience and your father’s advice. Thanks for sharing your story and I’m glad that it worked out well for you in the end.

    – Rob

  10. Tammy Parsons

    Very good advice. But you forgot to mention that you should record the lien release at the county, right away. The lien release is no good if you hold onto it and a contractor or a sub beat you to the county to file a lien against your property. As soon as you receive that lien release, got to your county recorder and record it.

  11. Cornelius Charles

    I know i’m late to the party on this one, but i thought I read somewhere that you only need to have subs sign lien waivers if you are hiring them yourself. If the GC subs out to others to do some of the work, i did not think that the subs could put a lien on the property since you are not the one who directly hired them. Any light that anyone could shed on this would be helpful.


  12. Joseph Anthony

    Wow! This article was listed on the email newsletter, but it looks like I’m a few years behind. 🙂

    Great article Mindy! What would have happened if the contractor wasn’t able to get the lien waver from the subcontractor? Would the subcontractor still be able to place a lien on your property? Would you just pay the sub at that point?

    • Mindy Jensen

      I would not have written a check without having the lien waiver. If the subcontractor would have balked at giving one before receiving payment, I would have arranged for them to be present at check delivery, and would have given them a check for the amount they were owed, and the difference to the GC.

      I’m devastated for the drywaller and plumber/electrician. That is a LOT to just eat. However, I did not want to be responsible for $11,000 twice. That would have been too much for me to just eat, too.

  13. James Kokalj

    Just a note, “theft by contractor” carries both civil and criminal liabilities in Wisconsin and is applicable to the person: so s/he cannot shield her/himself behind a company, LLC, etc. This is a long ways from my primary legal expertise, but from the outline of what you wrote, it seems it may apply. Your insisting on the waiver, however, is much better than the headache of litigating it and trying to get triple the amount from the contractor. As for the subs, hopefully they made fast friends with the DA, who really has the leverage to push GC’s to make subs whole.

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