Paid contractor without contract and receipt-What are my options?

Question

Hello everybody,

I am a newbie investor from chicago land area and this is my first post. I have been following real estate investing and got in touch with a real estate agent who is working with investors. He showed me a HUD property and we submitted an offer and got accepted. I trusted this guy as he was claiming that he works for lot of investors and makes lot of flips using a general contractor who has multiple crews. He showed the listings that he placed on MLS and the work done by the general contractor.

I talked to the contractor over the phone and he mentioned that he does lot of rehabs for the investors. He went to the house and gave a detailed estimate and walked me through the estimate (40K rehab) later. He sent me a contract over email and also mentions in the email that first come first serve (whoever makes first payment will have their work started). We met at the house to talk through the work and I wanted him to sign the contract. He said it is better to do it contract signed online and said that I can mail the first 50%(20K) of the payment. I did a mistake there by handing over a check thinking that if he did not receive the payment, he would not start the work. He said he will send the lien receipt. I see that he cashed the check after couple of days. There is a check image in my transactions.

Now hell started for me. He would get the work started after 3 weeks after so many calls from me. Most of the time he would not respond. As I am busy with my regular Job, I get to check either during lunch time, evening or over the weekend. The work has been very slow. Sometimes nobody is at the work and when I call him he would not respond. It has been already 4 weeks since work started but has been very slow. Currently, i do not have contract with him and no receipt for the payment. I know I have done BIG mistake and I am learning it now. Given this situation, what are my options to get the work done. I have emails of the scope of the work and text messages from him that work will be done, cabinets and appliances are ordered etc. Please help me with your advice. I appreciate your advise.

Thanks,

Ray

Robert Leach · Answer

Hi Ray,

Hopefully you will see more progress in the coming days. Obviously handing over 50% of the job up front without a contract isn't smart but it's too late at this point. I would suggest taking time/dated stamped photos (time stamp is an app you can find for your phone if you do not have one) of the work that has been completed and create a visual time line of work performed. You may need this later for a variety of reasons. I would then put a percentage completed of each line item in his bid to current and then sit down with him. I would leave the emotion at the door and maybe even have a third party with you and determine a schedule moving forward. Have permits been pulled on the job? When will you pass rough inspections, usually this is the halfway point. Once you determine 50% of the work is complete, you may wish to sever ties and find another contractor to complete although most contractors don't like cleaning up after another, it is possible if there is any margin left. Sorry to hear of your situation, there isn't much that can be done other than trying to get your moneys worth for work already paid for.

Ray Rusty · Answer

@Brie Schmidt - Thank you for sharing the ideas. That is my plan as well. I am trying to get there.

Ray Rusty · Answer

@Jd Martinundefined

JD Martin - Thank you for your response. I have put in property address and word "Rehab" in the memo. I know as far as timelines I do have an issue. I realized it little and a big learning lesson for me. I am just trying and looking for options to get the work done at this time.

JD Martin · Answer

You do have a receipt - the cashed check. If you wrote in the Memo area what the check was for, there is your proof of services purchased. However, you probably don't have a timeline of services on your check, and in that area you are probably screwed.

I will say this, to give you hope: the fact that he didn't cash the check that day means he is probably a legitimate operator. Scam artists will run to the bank with your check. However, most operators don't need any money up front - they have the lien on your house as a fail safe, and enough working capital and purchase accounts/net 30 that they can get started without funds. I don't work with anyone that needs a down payment other than my heating guy, who is a small operator and it usually helps him out with his larger capital outlays (heat pumps, furnaces, etc). But I've worked with him for a long time on many jobs.

Brie Schmidt · Answer

@Ray Rusty - I ask because if he is close to 50% done I would cut my losses and bring someone else in to finish the job.

Ray Rusty · Answer

Hi @Brie Schmidt

Thank you for your response. I will PM you with the name. I do not want to publicize yet as he is working sometimes. I wanted to know what options I have at this time. He did not complete 50% of work yet.

RR

Brie Schmidt · Answer

@Ray Rusty - What is his name? How much work has been done so far? You paid him 50%, has he completed 50% of the work?

Paid contractor without contract and receipt-What are my options?

Paid contractor without contract and receipt-What are my options?

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