Contractor abandoned job after receiving payment, Augusta GA

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Contractor abandoned job after receiving payment, Augusta GA

Thien Nguyen
Rental Property Investor · Augusta, GA · Member since 2019 · 11 posts · 8 votes

Hi all, thank you taking the time to read this post.

I have a property undergoing complete remodel in Augusta, GA. However after my contractor received his 2nd draw at the end of Sept, 2019 he stopped showing up to the job. The situation has escalated and now my case is peculiar.  My construction manager and I are working to find the best avenues to move forward. The following are current issues.

1. The contractor has passed his deadline for project completion dated Sept 29th, 2019 and he has not even finished the roof replacement and wall reconstruction. He stopped showing up to the job site after getting 2nd payment around Sept 24th, never finished the roof and walls, and his incompetence on a replacing a flat roof recently led to water completely soaking one of the room and causing some damages.

2. When I first employed him, he advised me he was a general contractor with insurance and everything. I come to find a month later after we signed a contract when he was suppose to start that he did not pull any permits, (contract indicated contractor is responsible for the permits). He advised me that he had to get these permits pulled by another person with a general contractor licences as he now does not have one. (I understand this now to be an extreme red flag, and should have stopped the process however in hindsight he was offering extremely competitive pricing compared to other bids and some of his referrals stood true so I decided to move foreword). He charged me $2,000 as per the "other" general contractors condition to have the permits pulled. I find out now after speaking with the "other" GC my contractor shaded the "other GC" only gave him half. The contract I have with my contractor has no mention of the "other GC". Is this consider a "fraud" and I have a potential legal court approach to take?

At this point in time, I have already paid the contractor 2/3 of the payment however I no longer trust he is competent enough to finish the job and decided to fire him. I asked him for the 2nd draw back so I can continue on with another contractor to finish the job and take the loses as it is. He however advised he no longer has the money. I am having my construction manager go after his bond in efforts to recoup whatever loses we can. 

Does anyone have ideas on what options I have moving forward? 

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Jan Kerr
REI Mentor · Perry, UT · Member since 2019 · 101 posts · 123 votes
6y

You need a better contractor agreement that has a lot more detail and conditions that do not require you to pay in advance. When you pay as you go for, only  work completed to your satisfaction, they either have to finish to get paid, or when they drop out, you still have your money to pay someone else to finish it. Hard lessons we all learn eventually. I've done it too!

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  • Kenneth Mooney
    Rental Property Investor · Augusta, GA · Member since 2016 · 348 posts · 171 votes
    6y

    Thien, unfortunately this is all too common. I made this mistake as well in the beginning and got lucky that they did not skip town. I feel like I've tried just about every contractor in Augusta and every single time I come back to the fact that I just need to buy the houses lower and hire a professional to do the job. 

    I recently almost had to file something that would have put a warrant on the contractor but luckily the guy came and finished the job once I had mentioned this. I'll DM you to let you know who I would recommend contact (attorney). 

    3Reply
  • Jan Kerr
    REI Mentor · Perry, UT · Member since 2019 · 101 posts · 123 votes
    6y

    You need a better contractor agreement that has a lot more detail and conditions that do not require you to pay in advance. When you pay as you go for, only  work completed to your satisfaction, they either have to finish to get paid, or when they drop out, you still have your money to pay someone else to finish it. Hard lessons we all learn eventually. I've done it too!

    4Reply
  • Lori Greene
    Specialist · Huntsville, UT · Member since 2015 · 458 posts · 249 votes
    6y

    @Thien Nguyen

    We've been working with contractors for a long time and learned the hard way (just like you) that you can't trust any of them. We've learned how to protect ourselves with our vetting and our contract.

    First off, never choose a contractor based solely on price. Start off with the highest rated contractors with the most and the best reviews. Confirm that they are licensed and bonded. Then narrow them to the ones who are willing to accept YOUR terms in YOUR contract. Never take their word for anything. Put in your contract restrictions against making any changes to the agreement, especially pricing and timeline changes. Stipulate fines for everyday the deadline has been missed. Those who agree to your terms can then be narrowed down by price. 

    And like @Jan Kerr said, pay them in increments only for work completed satisfactorily. Never pay them ahead of time or you will find, time and time again, they will skip out immediately after being paid. Contractors are always focused on chasing the next payment, rather than focused on finishing a job before moving on to the next. If you make it so they have to finish work before they get paid, they are much more likely to finish the job.

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  • Thien Nguyen
    OP
    Rental Property Investor · Augusta, GA · Member since 2019 · 11 posts · 8 votes
    6y

    Hi @Lori Greene, @Kenneth Mooney, and @Jan Kerr,

    Thank you for your advice. This is my first renovation project, and I expected some hiccups but not quite as large as this. I realize now I need to balance best pricing with reliable quality work along with strategic payment plan. I guess you could say he charmed me with his bravado early on only to realize the unfortunate truth. I will take these advice onto my future projects. 

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  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    6y
    Originally posted by @Thien Nguyen:

     however in hindsight he was offering extremely competitive pricing compared to other bids and some of his referrals stood true so I decided to move foreword).

    That was your initial red flag. In most things that have to do with construction, you don't see more than a 10-15% spread between high and low - everyone gets their materials from the same place, hires out of the same labor pool, has to pay the same insurance, etc. Things that make jobs competitive: leftover materials from another job; mobilization in that general area already for a different job; economy of scale (one guy does 1000 homes, one guy does 10) purchasing power, specialized equipment already on hand (i.e. boring machinery, tapping equipment, etc), quality of material (if contractor is providing material). Outside of that, low bidders tend to either be desperate for the work, unprofessional, corner-cutters (like not paying for licensing, which some would lump back into unprofessional), or forgot something in the bid. For most jobs the only realistic difference in bids outside of material quality is the amount of profit the contractor is willing to accept. Some guys really desperate to keep crews working will take some off their bottom line, or if they are trying to pay the last job with your job, things like that. 

    This doesn't mean you should take the most expensive quote. It just means there should be a good reason why someone's bid is much lower than everyone else's bid. 

     As for options going forward, you can try to sue to recover the money or go the route you are going (after his bid bond). In the future you should draw only based on verified completion minus retainage (typically 5-10%). So if it was a 100k job and they finished 50% of the job, verified by your inspector, you would pay them $40-45k. 

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  • Marc Winter
    Real Estate Broker · Northeast PA · Member since 2017 · 2k+ posts · 2k+ votes
    6y

    That's why they are called CON-tractors.

    3Reply
  • John Thedford
    Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
    6y

    Next time go online to your state database if available to verify licensing, insurance, etc. There are lots of people looking for a quick buck any way they can steal it.

    0Reply
  • Lori Greene
    Specialist · Huntsville, UT · Member since 2015 · 458 posts · 249 votes
    6y
    Originally posted by @Thien Nguyen:

    Hi @Lori Greene, @Kenneth Mooney, and @Jan Kerr,

    Thank you for your advice. This is my first renovation project, and I expected some hiccups but not quite as large as this. I realize now I need to balance best pricing with reliable quality work along with strategic payment plan. I guess you could say he charmed me with his bravado early on only to realize the unfortunate truth. I will take these advice onto my future projects. 

    You're welcome Thien.

    0Reply
  • Jan Kerr
    REI Mentor · Perry, UT · Member since 2019 · 101 posts · 123 votes
    6y

    @Thien Nguyen I hope you will be able to figure out how to fund and finish your project. When interviewing contracrtors from now on, get references to customers for whom they have worked. Names,  addresses, contact information if possible. You want jobs that they did at least 6 months ago or more. If the job is too recent, the customer may not have found any flaws yet, especially if the trasnformaiton was a big one, they are still in love wiht a new look. After six months, they've had time to find the flaws or defects and will be able to tell you if this contractor really does quality work or not. If it is holding up after 6 months, they probably did a pretty good job. Make sure to talk to the people and not just drive by to see the outside work. A client once told me that a contractor gave him a reference for a roof job, so he drove by and saw a nice job. Luckily the owner was outside so he stopped to talk to her about the contractor. She revealed to him that she had hired that guy and fired him for shoddy work. The job was finished by someone else she had to hire after firing him! 

    1Reply
  • Ola Dantis
    Multifamily Syndicator · Houston, TX · Member since 2016 · 1k+ posts · 2k+ votes
    6y

    @Thien Nguyen I had a contractor walk out on me too 😒😒😒

    What did I do? I got another one within 48 hours. 

    Now, I know you paid this contractor, but you really want to keep the show going and get another contractor in there quick to finish this job. TIME IS MONEY!

    Another reason why I'm not a fan of flips plus using smaller contractors. 

    I really hope things work out for you, as I can feel your pain. 

    0Reply
  • Phillip Vera
    Rental Property Investor · Augusta, GA · Member since 2019 · 129 posts · 112 votes
    6y

    @Thien Nguyen sorry to hear about your troubles.  This is all too common in real estate investing.  The biggest lesson I've learned is a simple one, you always get what you pay for.  I second that buying the properties right and hiring a professional is the only route I'll go.  

    Also, you want to make sure you always have a contract and a draw schedule is clearly laid out for work completed ONLY!  For us, we require permits in the window before work can start.  I'm in the process of revamping my entire reno process and pay structure.  On my rental properties and flips, I will be meeting with the project manager or GC bi weekly.  Once for a property check and once to go over invoices/checks and draw schedule/timeline.  

    My business partner is an attorney in the Augusta area and I'd be happy to connect you with him.  He goes after crooks like these all the time to ensure they don't continue to screw people over.  Let me know if you need recommendations on contractors as I'm happy to recommend some reliable ones, which are hard to find.

    3Reply
  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    6y

    Sadly in all fields it is rare to find good companies to do anything these days. When you do most hold onto them like gold as very hard to find.

    What a service charges for price is on my list but not usually at the top. The reason is those that are the best often are in high demand and are not the cheapest typically. If they are cheap and good then likely they are just starting out and pretty soon will raise rates because of demand.

    So like another investor in the post mentioned you need to plan on paying close to market rates for repairs/replace and see if numbers still look good. I see some investors massage debt terms to try and make a property work with a loan or then overpay before repair costs and then they are stuck using sub par contractors. I have even seen investors put no management fee in and self manage but eventually they tire of it and want to use management. If it wasn't built into purchase cost in the beginning they often do not have the money to pay for it. Even if the investor keeps self managing odds are high an out of the area investor will be the buyer when the seller sells eventually and they will want to use management and count that as an expense in their offer pricing. 

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  • BOB CRANEY
    HIGHLAND, MD · Member since 2011 · 160 posts · 141 votes
    6y

    @Thien Nguyen

    Like Ronald Reagan said “Trust but Verify” . The best contractors are also good salesman and can smell a newbie a mile away. They will only provide you the minimum in documentation to get you hooked and get your money flowing.

    No job should be started without the proper permits being pulled and copies provided to you and posted at the property. It’s a big red flag if the contract has dates that are vague or draws that have you paying money for work that isn’t done yet. If you have an experienced construction manager it sounds like he is not doing his job along the way and holding the contractors feet to the fire.

    Forget asking for your money back and call a lawyer to sue the contractor if it’s for more than $5-7k, if not the lawyers fees will eat up all you are trying to recover

    . Many contractors are so slammed with work now they are running around collecting 1st draws on jobs they know they will not be able to start on time or keep on track. Try to come up with a draw schedule that is equal to the work that is done and don’t pay a penny until all the work for that draw is completed and inspected.

    1Reply
  • Jan Kerr
    REI Mentor · Perry, UT · Member since 2019 · 101 posts · 123 votes
    6y

    @Thien Nguyen I've got a little more to say about this. In addition to checking contractor references, etc., you want verification of their license, proof of necessary permits and REALLY IMPORTANT...Proof that they have Insurance for liability as well as Workman's Comp. Do Not let them hand you their proof of insurance. Get them to name their insurer and contact the insurer directly to have you, or your company, added to their policy as an "Additional Insured" This is a common practice and the insurance company won't even question why. There's already a spot on their proof of insurance form for the insurance agent to add you and your company name as an additional insured. This will then be sent to you directly from the insurance company. Now as an additional insured, you know they have proper coverage and you will be notified if anything about that policy changes in the future. It costs nothing to be added as an additional insured, so there should be no reason what-so-ever that they would refuse to do it for your piece of mind, unless they have something to hide or are not really covered.  

    One more tip: Do not pay a contractor directly for any materials that were delivered to the property by the supplier until you verify that the supplier was paid. The act of delivering the materials to the job site automatically gives the supplier the right to put a lien on the property if they do not get paid by the contrcator. Contact the supplier directly in this case to make sure they have been paid for those materials before paying your contractor for the materials portion of the work. If the supplier has not yet been paid, pay them for the materials first and then deduct that from the whole job bid before paying the contractor his final labor payment. 

    I did this on a siding and windows job and the suppleir thanked me for making sure they got paid before paying my contractors. They said they had never had a problem with the people I was using, but many other contractors had not paid them, forcing them to put liens on people's houses. They hate doing that.

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