Updated over 6 years ago on . Most recent reply
If you are too pay contractor and he says check goes in his bank
Hello my name is Sandra , my mortgage has a check to rehab my home I am told to pay contractor checks come in both owner and contractor name both have to sign check. Contractor says check goes in his bank if that is so how do I pay
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1. Put the check in your account. Open a new account if needed so you do not spend this money on other things than the house, but you keep it and manage it.
2. If you did not hire this contractor, then are you using the original contract with the old contractor? If so, then pay the old contractor payments as this contractor does the work. This contractor will get paid from the old contractor.
3. If the old contractor left the job and is gone, you need to have a contract with this new contractor. Make sure the insurance company reads this new contract as they may have to approve extra money in the future, so you want them to say you are not wasting it now. After a new contract is approved, then pay this new contractor by the new schedule.
4. House contracts should have a draw down or payment schedule. For example, when the foundation is poured they get XX, when the framing is approved by the building inspector he gets XX, when rough electrical is approved by the building inspector he gets XX, when the drywall is complete he gets XX, kitchen cabinets are done he gets XX, and so on. The insurance agent should be able to help you set up how much at what point. I like to use the condition of when it passes inspection as much as possible as then they do not put together crap and take the money and run, but it is an acceptable quality of work to the building inspector.
5. NEVER pay the contractor all the money upfront, or even half for a whole house. They can take the money and run. You will never see him or your money again.
6. You can pay for the material directly --pay the supplier for the material, then subtract it from the contract as you go through that part of the build. For example if plumbing is $5000 in the contract and you pay $2000 for plumbing things -toilets, pipes, sinks, tubs, fittings, etc.- then he gets the other $3000 when it is done.
7. You need a statement from the old and new contractor that all materials for the house are paid for or the supply companies can lien your house. GET THEM before you give the final payment to them.
8. Always keep enough of the money to pay someone else to finish the project. That is why you pay as you go, not a lot upfront. And if they cry about the cost of materials, you can meet them at the material store and write a check directly to the store, especially since getting receipts is a problem.
9. Don't let out of state riffraff that follow disasters bully you. They are the ones most likely to grab your money and disappear. Stand your ground and tell then that if they are not ok with you managing the money they can leave--and do not pay them a penny until the house is done and their work is checked by the building inspector and you can see what it is worth. Its a scam for these guys to pass project from scammer to scammer, each doing little and taking a lot of the money until its all gone and you do not have a house. They know you are not a building project manager and are taking advantage of you.
10. Recommendation--look for a local company that was in business in the past before the disaster and get on their waiting list. Your guy gives all the appearance of a scammer--not your original contractor, demanding money-all of it upfront, not giving receipts.
11. BTW, I just met with a local contractor where I am and he is building a 700 square foot room addition and a 900 square foot garage for me. My deposit was $10,000, and they were ALREADY clearing the lot where the garage goes at a cost of $4000 to them, and the cement and wood was already ordered before I gave them the deposit. That deposit was already spent before I gave it o him. From now on, I pay him on Fridays, based on what receipt they have, hours worked, and 15%. Its a cost plus 15% contract. Good contractors can get material with a delay in payment for 30 days on credit. They do not need money upfront, they just want it.