We recently bought our first flip and began to get estimates. One of the subs needed is a chimney repairman/tech. He recently gave an estimate for $6500 and wants $2500 down and the balance upon completion. Is it usual to require this much down, up front?
Yes good contractors will ask for a down payment. Would you yourself buy any materials for a job with your own money only to show up and the customer got someone else to do the work?
If you are unfamiliar with what goes into repairing the chimney, ask the contractor for a detailed estimate. All materials and labor each on its own line. If they are willing to show you what's going into the project so you understand, then you have a contractor that cares about their customer.
Be careful there. Not really. Of course the contractors on these forums will tell you, yes. But, no. I wouldn't do that. Offer to pay them out on day 1 or 2 when they hit a milestone goal. If they can't afford to work for one day then you don't want to be working with them.
Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes
6y
No, most definitely not. The materials costs of chimney repair are minimal. This guy does not need to go out and buy a ton of expensive supplies to fix your chimney, which is why he would want that kind of money upfront. I'd walk away from this.
Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes
6y
You will hear " never pay a deposit " . And as a contractor I always get a deposit when I sign a contract , if the customer doesnt want to , I will then thank you for your time and move on to the next job.
Yes good contractors will ask for a down payment. Would you yourself buy any materials for a job with your own money only to show up and the customer got someone else to do the work?
If you are unfamiliar with what goes into repairing the chimney, ask the contractor for a detailed estimate. All materials and labor each on its own line. If they are willing to show you what's going into the project so you understand, then you have a contractor that cares about their customer.
You will hear " never pay a deposit " . And as a contractor I always get a deposit when I sign a contract , if the customer doesnt want to , I will then thank you for your time and move on to the next job.
I agree with this but for this particular job, the deposit is way too high. I would check with your state laws regarding contractor deposits and see if their is a max. Here in CA, a contractor can not change a deposit on contract signing of more than 10% which can not exceed $1,000.
As a contractor, yes, I want a client to have some skin in the game and not be out of pocket too much on any job but I also understand the client also wants to be protected and not have to risk any contractor collecting a large deposit and then running off never to be seen again (a common scam in the industry).
In this case, the contractor is asking for too high of a deposit which is a red flag to me so I would either ask them to reduce that deposit or find another sub for this service. You need to protect yourself from scams.
Contractor · Seattle, WA · Member since 2019 · 339 posts · 325 votes
6y
@Christine Krizenesky we always have our clients give us a deposit when we sign the contract and our subs typically ask for a deposit when we sign them onto a job.
Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes
6y
@Will Barnard Thats slightly over 1/3 . In MD a deposit of 1/3 is the norm and the most allowed by law. If the repair is relining a chimney that amount covers the materials , which is entirely fair since they are cut to order . So if the customer changes their mind the contractor isnt stuck with material they cant use and are out of pocket for .
@Will Barnard Thats slightly over 1/3 . In MD a deposit of 1/3 is the norm and the most allowed by law. If the repair is relining a chimney that amount covers the materials , which is entirely fair since they are cut to order . So if the customer changes their mind the contractor isnt stuck with material they cant use and are out of pocket for .
Maryland is Maryland, CA is CA, and so on. We all know each state has different laws regarding contractor deposits. And “slightly over 1/3rd” when 1/3rd is the max is still a violation under the law if it took place in Maryland.
My point is, I felt that the deposit was too much for the job and task at hand posted by the OP and advised the OP to be careful as there are unscrupulous characters in the construction industry. A simple attempt to advise of these facts and to get another bid and opinion. Nothing more.
Attorney · Worton, MD · Member since 2014 · 276 posts · 195 votes
6y
@Christine Krizenesky - Kudos for you to being careful. I agree with pretty much everything that has been said above, which is a pretty good sign that there is a legitimate difference of opinions on this issue. A good contractor is hard to come by, but if you find one, they are a treasure worth hanging onto. The only legitimate reason a contractor needs a deposit up front is for the purchase of materials. If you find a contractor you like who asks for a deposit, ask them to provide you with a materials list and offer to buy the materials directly and have them delivered to your job site in advance in lieu of a deposit.
Then inspect the work they have done as soon as they are finished and pay them in full right away. My contractors get a check as soon as they give me a bill. After the first time I use them, they never ask me for money up front and they always answer the phone for me.
Also, never pay for more work than is done and never give them the final payment before the job is finished - no matter what the sob story is. The one time I did it was the one guy that burned me. Lesson learned.
Rental Property Investor · St. Petersburg, FL · Member since 2017 · 3k+ posts · 4k+ votes
6y
@Christine Krizenesky I've never paid a subcontractor a deposit. I will buy material, if needed, through my own HD account, and have them pick it up. I will then pay the labor costs in increments as work is completed. Thatblarg of a deposit up front is a red flag for me
@Christine Krizenesky - Kudos for you to being careful. I agree with pretty much everything that has been said above, which is a pretty good sign that there is a legitimate difference of opinions on this issue. A good contractor is hard to come by, but if you find one, they are a treasure worth hanging onto. The only legitimate reason a contractor needs a deposit up front is for the purchase of materials. If you find a contractor you like who asks for a deposit, ask them to provide you with a materials list and offer to buy the materials directly and have them delivered to your job site in advance in lieu of a deposit.
Then inspect the work they have done as soon as they are finished and pay them in full right away. My contractors get a check as soon as they give me a bill. After the first time I use them, they never ask me for money up front and they always answer the phone for me.
Also, never pay for more work than is done and never give them the final payment before the job is finished - no matter what the sob story is. The one time I did it was the one guy that burned me. Lesson learned.
Fantastic post and info in here. Great job explaining that in detail Brian. As a client, I have many subs that never ask me for the money upfront, they do the work, bill me, get paid, and keep going.
As the contractor, if I have an established client, I too do the work, invoice them, and get paid. For new clients, I certainly ask for a deposit but always within the legal limits of the law here in CA and that client is told, shown, or given my credentials, performance history, and any referrals they need, including ability to view any number of my ongoing projects. This shows my clients that I am here, not going anywhere, and care about my name and rep.
In other words, reciprocity is key in any relationship, new or established in this business.
Flipper/Rehabber · Montgomery, NY · Member since 2016 · 2k+ posts · 1k+ votes
6y
I have done both, deposit and no deposit. Make sure your contractor is licensed (if needed) and insured. You can ask them about the deposit, what it is for. If it is all materials especially something being custom ordered, it shouldn’t be tough to verify this. I would also have a good contract in place. None of it guarantees anything, but it’s a risk of this business.
This did make me rethink having him itemize everything. I don’t if contractors think this is a pain, but at least then I know apples to apples what everyone is charging for what. Thank you, very helpful also!
I get this as well, but it does make me think about asking to adjust the contract to put down less of an amount. Is it unheard of for someone to rewrite a contractors contract and change terms or meet in the middle, especially if you have a reputable one?
Awesome ! I didn’t see this reply before I responded to the previous comment which all of these have been extremely helpful (esp. since it’s my first flip)
It looks like I’ll have him itemize everything so I know the cost of materials.
What does knowing the cost of materials matter ? A deposit is not just for materials , its to reserve and schedule a date . Its the consideration to enter into a contract . The contractor wont show you any receipt of any kind , he will just write it down .
I get this as well, but it does make me think about asking to adjust the contract to put down less of an amount. Is it unheard of for someone to rewrite a contractors contract and change terms or meet in the middle, especially if you have a reputable one?
Its not unheard of , but its doubtful . Especially in the current market , contractors are busy , there is no need to drop your price . Good contractors are in demand .
Matthew, are you serious? You're asking what does the material cost matter to a customer? On a site devoted to real estate investors!!! I commend you for at least disclosing that you're a contractor but you can't expect people to take you seriously, in saying stuff like this. You are after all posting on a site dedicated to real estate investors, and owners. If you are an owner or real estate investor yourself, you of course can appreciate the value of having transparency into material costs, including but not limited to:
#1: You get to see where materials are from (sometimes tells you something about their quality, whether or not they're stolen or re-purposed, and of course, if the angel of a contractor is not marking them up 200%+)
#2: You get to negotiate on what's SUPPOSED to be the 'value-add' of what a contractor is offering: their time and supposed experience/skill-set. Meaning, the contractor cannot 'hide' their desire to make $200/hr by obfuscating a time and materials quote where material costs are not shown
#3: Related to this OP's original question, which is: what is fair, if anything, for a deposit - well, if you as a contractor has NOTHING invested, vs. if you have to front $3,000 to come out and start work - this is a completely different scenario and that transparency would be fair and reasonable.
Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes
6y
@Jim Goebel a real estate investor should have an idea what the retail cost of materials are already . What ever discount the contractor has negotiated with the supplier is the contractors business .
Stolen materials ? seriously ? Why would a contracting company even risk jail time . Contractors are business owners . They hold licenses , have insurance , pay taxes , have employees .
I dont offer time and a skill set , I offer a finished product for a price . I intend to make a profit at the end of that project . Wages are just part of that . There is overhead .
As far as the deposit itself , for a contract to be binding there has to be consideration ( $$$ ) . Professional contractors do not finance the customers job , thats a recipe for failure . I usually have 4 jobs running at the same time with materials , my guys and subs . Depending on the week that could be $15K to $40K in materials , labor and other expenses being paid out . Thats why we get the 1/3 deposit .
Customers have a lot of excuses when it comes time to cut a check , " I am waiting for a draw ' , " My lender needs to inspect " " I thought you would be another week " Money keeps the work moving .
What a contractor makes per hour doesnt matter . The customer is paying for the finished product at an agreed price . If I am hired to dig a 10ft square hole 10 ft deep for $1000 , I could send 2 men with shovels and get the job done in 20 hours . Or I could send 1 man with a backhoe and get it done in 1 hour . The end price is still the same .