ALWAYS PURCHASE YOUR MATERIALS YOURSELF or else!
Anyone, and I really mean anyone that is doing any form of construction/rehab, a word of warning: Always buy whatever materials (lumber, cabinets, flooring, sheetrock, plumbing, tile, sprinkler system, lighting, etc., etc) you need for a project seperately with your own credit card/checkbook. You own it. Not the contractor. In all due respect to contractors/subs, never ever let a contractor or anyone else purchase materials other than yourself, esp. if you don't know them well. You can go with the contractor, but the actual register purchase should be with your own credit card/checkbook as the rightful owner.
Reason: If you ever have a falling out or dispute with anyone working on your project who purchased project materials, that they could easily claim it as theirs, take off site (steal??) or whatever, and still they bill you for it even if they never finish the project or left the materials on site, good luck trying to get it back in a dispute or if they walk off the job. Let's say you get into a dispute, you fail to pay them or withhold payment or the contractor/sub fails to show up again or whatever, and you have paid them some monies already, well, technically, until you pay for all materials, under most state laws, those materials are not yours.
If you personally purchased the materials seperately from the contractor/sub, that is your property irrespective of any disputes/claims the parties may have. You want to purchase and own the materials yourself, even if you have to go with the contractor/sub to do so, and it may be a pain, but having rightful ownership will at least mitigate any future disputes that may arise.
On the same note in CA, and likely in most states, any contractor can put a Mechanics Lien on your property's title pretty much at will. Simply filling out a form, and for $15, can go into the County Recorder's Office and record a ML against the title of your property without notice to you (you won't know until you do a title search and see the lien). He/she doesn't need lawyer either in CA. Getting it removed is a whole legal process. Though recording one on title without just cause is fraud, but a lot of good that does you while fixing/flipping your house up quickly.
ALWAYS get a clear Legal ML Waiver and release stating essentially the contractor has been paid and full, and releases all future rights and claims. Furthermore, it is imperative that his/her subs sign a seperate release because if the sub doesn't get paid by the General Contractor, rightly or wrongly, they too can put a lien on your property, I am not sure what other states do, but in CA, there is no policing of ML. If a contractor gets p---sed off randomly, a simple trip to the Recorders/Clerks office for $15 will make him/her feel a lot better.
Never has happened to me but I know others who had nightmares. Watch your title and get waiver releases at the end of each project from anyone who set foot on your property that ever picked up a tool!
Wow! 50% deposit? You would never work on one of my jobsNor on any of mine. In fact, I teach my students to never pay such a high deposit. In fact, this is one of the many benefits of buying the materials yourself as an investor, the contractor has no out of pocket expenses and as such, the first payment to the contractor is not until the end of the first week and consists of the payroll.
There has even been several media stories warning homeowners to NEVER pay a contractor 50% deposit. Why in the world would they ever need that much just to start a job?! There have been so many people stiffed by paying such a large deposit, never to see or hear from the contractor again. Utilizing such a business practice to demand 50% deposit is a red flag in my book and I would consider that to be a potential scam. (not to say that you are scamming people, just decribing the perception and perception can make or brake you in business.
Amen Will. In MD a licensed contractor can't take more than 1/3 of the contract value as a deposit by law. 10% is the max I would pay, and I try to never pay that, especially if I'm supplying the materials. It's too easy for contractors to disappear and when you find them they are notoriously judgement proof. If your contractor is not financially solvent enough to start the job without a huge deposit, it's probably not a contractor you want to be working with.
Having said that, I have no problem paying for progress or even working in bonuses for better than scheduled progress, so most contractor's I've worked with like working with me.
Originally posted by @Will Barnard:
Originally posted by J Scott:
Apparently, the purchasing of materials (by the investor) was just one fact that led the court to determine that the contractor was an employee. I imagine there were many others (such as no independent contractor agreement, etc), but the materials issue was documented as one contributing factor.I hear you in this example, which is my point. DONT have ANY other factors to contribute to this determination by the courts. If you have a contractors agreement (whicyh you should ALWAYS have, in explicit detail) and insurance, and your entity, etc etc there should never be this problem.
Originally posted by Pete Milano:
If after delivered your material is not correct (ie. wood doesn't match in size, color, warped, wrong cabinets) then the installation will not be correct. Ie. You purchased the material and you told the contractor to install it and that is what he will do. Who should pick up the tab when the contractor has to work longer or be on the job longer due to your involvement?This is not how I operate. My contractor picks the items needed and in most cases, orders it from Lowes/HD, so all the items are ordered by him. Any mistakes are on him and my contractors agreement with him stipulates it. I only pay for it with my business credit account there.
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Developer
- KDS Homebuyers
Last post was an accidental click my mistake. Really old post. I guess since I did post Ill comment on it. Ian that is actually the worst way to do it. Not that you will get called on it but you are actually directing them where to buy the materials and not allowing them to make a profit on it (at least thats what it sounded like) That is exactly what the irs doesn't want. You would be better off ordering it having it delivered to the job. You can't direct a contractor where to buy the materials.
IF you line item or put in your scope of work that part of the contract is for delivery of materials that you purchased that might fly and you probably are doing that but just thought Id clarify.
Biggest problem with everyone on this entire forum that has issues with contractors is usually they pay sub par rates and prices and expect the world. Its amazing that someone that makes 20 bucks an hour sitting in an office expects someone doing somewhat dangerous work to work for 10 bucks an hour.
Investors "when they buy right" should have no problems paying an extra 3 or 4 thousand for a decent contractor (that is what the contractor will make on a small to mid size job 10 percent sometimes 20 for retail) that could supply their own materials or not whatever but has employees that you would be proud to say they are working on your job. That usually takes more than minimum wage, and usually they can get the job done for the same anyways especially when you do have more time managing or you have to pay a manager more for having to spend more time managing a job that would take less of their time with a decent contractor.
IF your worried about getting gouged do a cost plus fixed fee contract (best option but be careful with laws on this) or a time and material contract with a max price.
And seriously anyone that tries to say they don't allow change orders is rediculous, not legal at all, even if its in the contract it would get squashed in court. Of course the contractor that is hired is probably so poor for working on those projects they couldn't pay 10 bucks for an attorney to fight it.
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Developer
- KDS Homebuyers
I have a question about buying materials up front, so if I buy the materials, how do I know if a contractor is taking materials from my job and using them on others?
Originally posted by @Fred Conway:
I have a question about buying materials up front, so if I buy the materials, how do I know if a contractor is taking materials from my job and using them on others?
If you purchase the correct amount of materials and the contractor runs out of materials before the job is finished, clearly some of them are disappearing.
If you don't know how to determine the amount of material to buy, then you shouldn't be buying materials.
My contractor suggested that I purchase all materials and then pay him a weekly labor cost. Everyone I've asked about this tells me it will save me money, but here's my issue: The property is located about 4 hours away from where I live, and I don't have a lot to time to get over there to supervise. I'm a little hesitant to do this because a) I don't really know what I'm supposed to buy; b) I'm not there to accept delivery or otherwise deal with getting materials to the house, and c) I too thought that maybe a contractor would be able to get better pricing on materials than a layperson like me. It's probably the only way I'm going to get this contractor to do the work, and I've been trying to find contractors in the area for about 4-5 months now with little luck. I could use some guidance on how to structure the deal if I do in fact do this.