How would you manage this contractor if you were me?

Buying & Selling Real Estate
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How would you manage this contractor if you were me?

Tareq Salaita
Investor · Decatur, GA · Member since 2015 · 56 posts · 38 votes

Hello everyone, I wanted to summarize an issue I'm facing with my contractor and get feedback from the community here about how you would recommend I proceed. Here is a summary of the situation:

  • In December, 2015 I purchased an old home that was not in living condition (3 bedroom/1 bathroom home)
  • I signed a contract with a design-build contractor to upgrade the home into a 4 bed/ 4 bath -- contract included budget, details of work to be done and payment schedule. Project was supposed to be completed by July but we have been going through problems with permitting, unexpected things coming up..
  • I have 2 more payments remaining on the contract-- my contractor asked if he can get them in advance to finish the project 'in the next few weeks'. I don't feel comfortable in doing this as he has not finished the kitchen at this stage, tiling, bathrooms, etc.. 
  • To make things more complicated, I already have a seller who wants to put the home under contract and make 'additions to the home'. I don't trust my contractor in completing the original work on budget and don't want to get the new seller involved with my contractor as not to distract him further

My question is: Should i continue making payments although my contractor is behind schedule ( he has already submitted 2 change orders which I paid for)?  Should I advance him the last 2 payments? How do i know if the change orders he is sending me are legitimate ? Does it make sense to bring in a second contractor to check on the work and give me a 'sanity check' of where the project really is?

Thanks!

Tareq

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Tony Gunter
Investor · Canton, GA · Member since 2014 · 727 posts · 500 votes
9y
No. Pay as work is completed. You will loose all leverage with your contractor if you do this. I assuming he took them job agreeing to be paid in stages, as stages are completed. Frankly I would be rather PI$$3D off being asked to finance finishing the work and in fact wanting to change the deal. Changes and complications are part of the business. As a contractor he should know this. Don't do it. You will regret it IMHO.
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  • Tony Gunter
    Investor · Canton, GA · Member since 2014 · 727 posts · 500 votes
    9y
    No. Pay as work is completed. You will loose all leverage with your contractor if you do this. I assuming he took them job agreeing to be paid in stages, as stages are completed. Frankly I would be rather PI$$3D off being asked to finance finishing the work and in fact wanting to change the deal. Changes and complications are part of the business. As a contractor he should know this. Don't do it. You will regret it IMHO.
    3Reply
  • Account Closed
    Rental Property Investor · Orlando, FL · Member since 2016 · 463 posts · 220 votes
    9y

    Everything and everyone I have ever read said to NEVER pay in advance, especially if he is already behind. He will just blow you off after he gets the money.

    0Reply
  • Adam Abdel-Hafez
    Contractor · Atlanta, GA · Member since 2015 · 236 posts · 91 votes
    9y
    I agree with the previous replies, never pay in advance unless you have previously worked with them and trust them. More than likely, his bid was too low or expenses too high, so now he is running out of money to pay for materials or labor workers. If I were you, I would increase my oversight on him and the project now. You need to go there at least once a day and call him to get updates. Clear deadlines need to be set or else the rehab will go on forever.
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  • Robert S.
    Contractor · Milltown, NJ · Member since 2016 · 297 posts · 213 votes
    9y
    There is an entire industry dedicated to assisting people in your position. They are called owner's representatives. Almost every member in this field spent many years in construction. They then use this knowledge to make sure owners do not get put into bad predicaments with their GC's and sub-contractors. The previous stated advice from other members is sound IMHO. Going forward, I would look into hiring one of these professionals. Their fees tend to be reasonable, and often pay for themselves. Most importantly, you won't need to ask yourself if a change order was necessary or not. Best of luck solving your current issues.
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  • Marko Cvetkovic
    Developer · Kansas City, KS · Member since 2015 · 84 posts · 9 votes
    9y

    Dont pay anything else until they are were they should be. I ran into a similar issue with my last Contractor. I made sure i was at location at least every other day. The money you have is the only leverage you have in the deal.

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  • Brian Pleshek
    Investor · Hamilton, OH · Member since 2016 · 272 posts · 77 votes
    9y

    I have my work listed out in the contract, per page.  When a page of work is complete, then I pay for that page.  It helps to have the items organized so that things on the same page make sense to complete together.

    I don't pay in advance.  I will go with the contractor and pay for the materials myself and take advantage of any discount he can provide me.  I don't write a materials check to him.

    Brian

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