Investor · San Antonio, TX · Member since 2016 · 90 posts · 28 votes
Flipping my first house and first time dealing with sub-contractors. The electrician that gave the best bid wants 50% up front. I balked at that and he said he can do 25% up front. He said he doesn't want to fund it himself and I told him that worries me if he can't fund a job this small. He said it's not that he can't, but he doesn't want to. I live 8 hours away from this job.
I'm using a rehab loan with a local bank and they have a draw schedule, which I doubt includes up front payment.
Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes
9y
You dont trust him and he doesnt trust you . How does the contractor know that you are good for the money especially when you arent a local ? Why as a contractor should he finance your job ? Copper wire , breaker panel , permits arent cheap materials are close to the 50% he wants . Supply houses do offer credit , net 10 days usually then there is a carry charge after that . Then you have labor , so he gets the rough in done and has all his money out and has to wait till you get a draw ? Thats what he is avoiding .
I am a contractor , no deposit , no work , no exception . My funds are working for me in my investments , not the customers . If I have 3 or 4 jobs running and I am fronting materials , I could have 10's of thousands of dollars out . Then waiting for my money , not.... Thats not a contractors business , thats what banks do .
Financial Advisor · Cascais, Lisboa · Member since 2015 · 199 posts · 83 votes
9y
Never ever ever ever ever ever pay a sub-contractor upfront. EVER!!!
And also get them under contract.
They will overcharge you and walk on you leaving the thing undone. Never met a reliable contractor nor met someone that met one as well. Nobody but you cares about your money. If they smell blood on the water because you start to show signs of dependancy on them(repeated calls and mails) beware.
Just my 2 cents.
Specialist · Toronto, Ontario · Member since 2016 · 564 posts · 425 votes
9y
@Larry H. I have gotten screwed by contractors. One contractor a few years ago scammed me and ended up walking away with $2,800 without doing any work.
However, I'm still willing to pay contractors up front. I'm a little more careful now. Make sure you have a proper contract, ask for proof of their electrical license, their business insurance, and a photo of their ID to confirm who they are.
I've asked contractors for a photo of their ID, and they said fine, but then I want a photo of yours. I don't care.
San Antonio, TX · Member since 2009 · 3k+ posts · 1k+ votes
9y
@Larry H. You may want to get a few more bids from other electricians to see your options. In my experience, I've never paid a deposit that much for an electrician. Many I've worked with don't even do a deposit. Though, that will depend on experience and reputation. Good luck!
Lender · San Francisco, CA · Member since 2015 · 22 posts · 10 votes
9y
While 50% upfront might be a hefty sum in some cases, as has been pointed out, why should the guy trust you to be good for the money? He is assessing the risk of you not being able to pay (or simply not paying) just like you are assessing the risk of him not completing the job. If you vetted your contractor (i.e. referrals, examples of past work, BBB, Yelp, etc) then you should have confidence in your selection to provide him the funds to get started and have less of a concern of him walking. You sound hesitant to do so, which means you likely did not do enough diligence on the contractor and don't have enough faith in your own decision to stand behind it.
Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes
9y
If you get screwed by a contractor , the only person to blame is the person who hired them . With all the online information , it is easy to check someone out . What usually happens is the customer goes with the cheapest person they find . Its no different than lowering your standards and not checking out an applicant just to put a tenant in a rental property .
You are not going to get a good reliable contractor on the cheap . . We are in demand , we dont have to lower our prices , we can set our terms , and we have a waiting list . Same with subs , I dont use the cheapest , they just dont work out .
I want my customers to check me out . I want them to feel comfortable when they hire me . I will tell them to do a credit check , and give them the online source to check for lawsuits in Maryland . I also do the same thing on them , I make sure they pay their bills , arent being sued , how many loans on the house etc. And I get a deposit as allowed by law in Maryland .
Real Estate Broker · Cleveland, OH · Member since 2017 · 719 posts · 658 votes
9y
I don't pay my electricians up front but only because they never ask. They know that I'll write check as soon as the job is done.
I do have contractors who need up front check - they usually are broke and don't charge much. I'm gladly cooperating and write a check up to 70% of the estimate.
Example: replace furnace and HWT cost $2450, I wrote a check for $2K. Today he's finishing - I'll write the balance check. However, this is not the first time and he was referred to me by reliable source.
First time with any contractor - I don't give any money upfront. If it's painting - I'll buy paint myself.
If it's plumbing - I'll go with him and buy all he needs in plumbing store or Home Depot or whatever. His discount or mine - I'll pay with credit card.
In this case I'm with contractor - these guys get screwed all the time, and I wouldn't pay for materials for the job also - what if you don't like something and you have no clue how it should be done.
If you wait till inspection from city or third party performed - it might take weeks.
All my contractors will fix any problem after inspection right away but I do pay when their job is done. I've seen enough inspectors to know their requirements, so, generally we don't have come-backs. Unless codes change recently
You work with contractor first time - it's more important to build relationship for future. Check his license, go to the city building Dept and ask for their opinion, Google him - make sure you trust him first
He doesn't trust you for the reasons mentioned above - all good reasons.
Investor · Metuchen, NJ · Member since 2016 · 8 posts · 1 vote
9y
Hi Larry,
Is this a 203K loan? If it is then what Chris wrote is spot on, this contractor is not qualified to do the work. If it's not a 203K loan I personally wouldn't hire the lowest bidder. From my experience, the lowest bidder ALWAYS cost more in the long run.
Contractor · Los Angeles, CA · Member since 2015 · 4k+ posts · 1k+ votes
9y
@Jason Chen How about this, I'd say "No, the same deal as last time, 50% up front, 50% after I'm done with rough electrical and before I begin finish work. Since you like my job, I do good work, and I'm sorta reliable, you can take it or leave it."
Socorro, NM · Member since 2017 · 26 posts · 3 votes
9y
Post dated checks are ill-advised. He could cash early and your bank has NO obligation to honor the date. Ask your bank if you don't believe me. if you do it and it bounces then you have just committed fraud.
Post dated checks are ill-advised. He could cash early and your bank has NO obligation to honor the date. Ask your bank if you don't believe me. if you do it and it bounces then you have just committed fraud.
This is not the first time I've heard this and it's BS in my opinion.
If there's a valid reason you stopped a check (i.e. your contractor didn't show up when he said he would), how is me stopping the payment, fraud?
Contractor · Matthews, NC · Member since 2017 · 15 posts · 1 vote
9y
Ask if he accepts credit cards. That will at least give you the option to dispute the charges if you walks of the job for some reason. Even if he charges a few extra bucks, it sounds like it might be worth it for your peace of mind.
Ask if he accepts credit cards. That will at least give you the option to dispute the charges if you walks of the job for some reason. Even if he charges a few extra bucks, it sounds like it might be worth it for your peace of mind.
Your CC company will tell you to kick rocks and take him to court
Rental Property Investor · Yorba Linda, CA · Member since 2013 · 100 posts · 65 votes
9y
Here is SoCal we have ~325 units + exterior remodels to the tune of ~$13,000,000+.... Our GC is essentially our unofficial partner as the relationship is good. Value-Add multi-family is hand-to-mouth. All of our subs are paid deposits of 50%. You wan't them to show up and work you better grease the wheels.
Here is SoCal we have ~325 units + exterior remodels to the tune of ~$13,000,000+.... Our GC is essentially our unofficial partner as the relationship is good. Value-Add multi-family is hand-to-mouth. All of our subs are paid deposits of 50%. You wan't them to show up and work you better grease the wheels.
Yeah right. No customer in SoCal will get 50% up front. Either 10% or $1000 whichever is lesser. The loophole is material could be advanced. Never heard of a commercial GC getting 50% up front, never. I've seen 400k uncashed / unbilled retension funds for 18 months and counting because they don't have time to do the closeout/final paperwork. 50% up front? Please..
Ask if he accepts credit cards. That will at least give you the option to dispute the charges if you walks of the job for some reason. Even if he charges a few extra bucks, it sounds like it might be worth it for your peace of mind.
Your CC company will tell you to kick rocks and take him to court
Yeah, there's no dispute on a "service" for 3k card charge. It's not covered in most cases. You think credit cards are stupid that they'll simply give you 3k without investigation? That's nuts, I might open a CC with whoever you're using if you say you have personal experience of getting 5k dispute without question.
Manville, NJ · Member since 2015 · 140 posts · 59 votes
9y
I would say 1/3rd is fair at start. But I pay when the material arrives at the house first day of work. Also as for your security. If he is licensed, insured, you have a signed contract, and you have pulled a permit in his name. He will not steel. He can't too much is at risk. He could lose his license if he robs you. Now he can still do a crappy job, but he wont cheat you.
Post dated checks are ill-advised. He could cash early and your bank has NO obligation to honor the date. Ask your bank if you don't believe me. if you do it and it bounces then you have just committed fraud.
You just let the cat out of the bag :)
How about this strategy? Thinking out loud here... Post date a 'Joint Check' with your GC and another party you have control over. As soon as enough work is complete were you are satisfied, have your colleague put the second signature on the check.
I'm PM for luxury builder, all of our subs get paid when work is done. We buy the majority of materials (except for rough plumbing, HVAC, wiring) then add out markup. Subs should have enough credit to afford a little rough in material and if not, only in certain circumstances will I pay for it directly and only if i know them well. We bill our clients cost plus 15%-25% and every receipt, invoice and bill is sent to them every week. everything is completely transparent. If subs will not show me material receipts and time/labor broken down on their invoices then I do not hire them.
Bottom line is when you run a business- you are the standard- and if the players on your team won't play to your standards then fire them.
Post dated checks are ill-advised. He could cash early and your bank has NO obligation to honor the date. Ask your bank if you don't believe me. if you do it and it bounces then you have just committed fraud.
This is not the first time I've heard this and it's BS in my opinion.
If there's a valid reason you stopped a check (i.e. your contractor didn't show up when he said he would), how is me stopping the payment, fraud?
neither myself nor the person I quoted said "stop payment". I am referring to a "post dated check" and so was the person I quoted. I hope this clears it up, but if not, please google "post dated check", "bounced check", "check kiting", "check fraud". certainly NOT b.s. If google doesn't provide enough proof, then I encourage you to contact your local bank and ask them if it is illegal to write a check on an account that does not have enough funds to cover it. and if THAT doesn't clear it up, then contact your local prosecutor and ask the same question.
I see you're a cpa, so I am sure you know this. perhaps you simply mis-read my post.
From what I have heard its only a crime if you did not have money in the account at the time you gave him the check
sorry friend, also not true. i once had a check clear my bank that was a year old. it caused my account to overdraw. there was nothing i could do about it. i should have kept better records, or stopped payment or contact the recipient to inquire at the very least. i was very young and dumb at the time. furthermore, i move large sums of money all day long (not my own -- i wish!) in my job and I recently found out that the bank we use only honors "stop payments" for 6 months! not really germane to your post, but interesting nonetheless.
Post dated checks are ill-advised. He could cash early and your bank has NO obligation to honor the date. Ask your bank if you don't believe me. if you do it and it bounces then you have just committed fraud.
You just let the cat out of the bag :)
How about this strategy? Thinking out loud here... Post date a 'Joint Check' with your GC and another party you have control over. As soon as enough work is complete were you are satisfied, have your colleague put the second signature on the check.
the post-dating part is unnecessary. you could leave the date part blank and your bank would cash it. you could write "when hell freezes over" in the date part... no difference. checks are read by machine and posted to your account. when a human has to read it, then the date is overlooked.
i for one would not hand someone a half signed check, either. toooooo easy to forge.
why not use escrow? an earlier post suggested this...
Go 25 percent down...he's a contractor that's done this before. You don't know him and vice Versa and he doesn't like the idea of driving 8 hours to chase you down for money.
Get everything in writing including the sow (scope of work).
If he says it will take 6 weeks to do the job then give him $1500 now. Tell him he gets another $1500 in three weeks and put that in writing. Etc.
I would also have your father in law make regular unexpected stops at the job site when he knows they are there... and
For good kharma.....at the 25percent completion timeframe of they are still on schedule "surprise the crew" at the END of the day with a case of beer. I'm serious. They will know you're a cool person and it mentally gets them thinking that hey if we stay on schedule we get rewarded!