Specificity and Payment Breakdown for a Proposal (ADU)

10 Replies

Hi BP community,

So my friend is building an ADU in their backyard in the Los Angeles (specifically Westlake Village / Moorpark area). A couple of questions came up.

1) What is a typical payment structure that is fair to both the contractor and the client? Some bids seem to break things down in chunks of 20-30% (roughly 4 to 5 payments over the course of the project) and some seem to want 50% pretty much upfront. I guess I'm looking how to structure things to reduce risk yet still be fair to both.

2) The other question - I notice some bids are rather "loose" in their description of materials being used. I assume my friend should dig into the details and ensure the proposal has specific materials (e.g., "freon free air conditioner" as opposed to "air conditioner") before agreeing to work with the contractor? Just wondering how much time they should spend - I imagine some materials such as insulation are fairly standard whereas other things like countertops might require more homework in terms of selection and taste.

Updated 8 months ago

FYI - my friend does give the contractor(s) the architectural plans, so they have that level of detail when they make a bid.

They need drawings and specifications otherwise it’s a wild guess (or a extremely detailed contract).  I believe the law is that (at least for labor) 10% down payment max, regardless anything close to 50% seems way to high.

Thank you @Andrew Galambos , I updated the original post - my friend does give them the architectural drawings/plans, so they are able to make a bid from that.

@Bruce P. Hey Bruce, a GC/developer here so I am speaking from experience. The as-build from architectural plans normally would not call out the type of Appliances/countertop/ backsplash/ tile/vanity. Or sometimes, things are missed due to human errors. It is ALWAYS better to leave it out the soft cost items so the "owner supply the material for finishes". Or hire a designer and be as specific and detailed as you can so you have minimal change orders. Items like lumber, insulation, roofing would be categorize as hard costs. Soft cost item would be the tiles, cabinet, appliances, designer items, some finishes...etc.

By law, no more than 10% downpayment should be required. If the GC asks more than that, be very cautious and ask for all the right questions like their license, experience and insurance coverage. Make sure to check out their job site! Furthermore, your GC should have enough money in their account to cover at least 10-20% of the work. And make sure you always ONLY pay per progress, NOT ahead.

Bruce- No way your friend should pay 50% or anything close to that upfront.  See below one of my contractor's breakdown for a basic $55k project: 

1. Initial $7,536 will be collected for materials. 2. First progress payment of $15,100 plus any permit reimbursements will be collected after the addition's footings are inspected and approved by the City of Los Angeles Inspector. 3. Second progress payment of $15,100 will be collected after all framing and mechanical is completed and inspected by the City of Los Angeles inspector. 4​. Third progress payment of $10,100 will be collected after drywall nailing is inspected and approved by the City of Los Angeles Inspector. 5. Fourth progress payment of $5,000 will be collected after cabinets are installed and countertops have been measured. 6. Final progress payment of $2,500 and lien release will be collected when all work is completed.

With regard to materials, you are correct, the more detail the better. They don't have to select everything upfront, but they can at least agree to an 'allowance' for each finish item...ie. $200 for bathroom faucet, $4/sf for bathroom floor tile, etc. Or, the contract can indicate which finish materials the owner will pay for themselves directly (and aren't included in the contract price). I have a checklist of construction scope and materials that go into an ADU...happy to share it with you.

Thank you all, what you are saying makes so much sense. @Paul Dashevsky - I would love to get that checklist / resource, thank you and please feel free to DM or post it when you can!  Loved the specifics in your post. It jives with what I experienced when I asked for multiple bids.

Is it on your website somewhere @Paul Dashevsky ? On a related note, your website looks pretty cool - I wonder if I could use it to vet my friend's contractors who are bidding?

As a licensed contractor here in the Los Angeles area, the state of CA has very specific rules regarding deposits and none of the answers above are correct. The maximum deposit any contractor can charge with contract signing is 10% of the total value of the contract or $1,000 (whichever is less). 50% upfront? - RUN, don't walk.

With that said, the first draw can certainly be whatever the two parties agree to and typically it is a sizable one upon mobilization of temp facilities (construction fencing, toilets, etc) and some materials or start of demo.

Originally posted by @Bruce P. :

Thank you @Will Barnard, this "hiring of a contractor" thing is a challenge :)

 If it were easy, everybody could/would do it. 

It is the tough that makes it great (to Quote Tom Hanks in A League of Their Own)