Contractor requesting 50% Upfront

192 Replies

Our HVAC company asks for 50% down to start because alot of equipment has to be purchased. Other vendors like roofing, electrical we pay once the job is done. Just depends...

@Alex Varner I'm happy to give larger deposits to those who I have good relationships with. I would try and work with somebody else on this. That's a scary proposition to give somebody that much money upfront that you don't or barely know.

Other alternative that I use often is to pay for all of the materials myself and then I only pay the contractor for the labor. That way it's pretty cut and dry. And he has no material money risk either.

I'm a complete newbie - but am reading The Book on Estimating Rehab Costs by By J Scott ... He goes through each type of common repair and - among many other things - says whether a deposit (and how much) is justifiable and normal on that type of repair.  I highly recommend the book!

Where I am unfortunately 50% down is often a sign that the contractor needs your money to finish a job somewhere else. I offer to pay for all materials and pay the rest in stipends as the work progresses, too many contractors bounce between work sites and don't get the work done in a timely manner otherwise.

@Alex Varner I'm assuming this the first time you are using this contractor. The contractor may be just as skeptical as you about whether there will see payment for the service. I always asked for 50% if the jobs were less than 5k. But you can set up a schedule for tasks completed if you're uncertain.

@Alex Varner No no no, and no. Like previous comments stated unless it is a solid company with a reputation on the line, I would steer clear. If you do decide to go with them it could go great and everything could workout as planned, but there is always the alternative where things don't quite go as planned. In this case you end up spending more than you were quoted and you pay for 50% of the work upfront while 9 months go by and only 20% of the work has been completed... and precious valuable time wasted.. Just my two cents, make sure you have an airtight contract drawn up by a professional either way, that is where I would spend my money.

The max amount you should ever have to put up should be 100% of the material upfront. I’ll never pay any portion of the labor upfront unless I know them very well. If you pay even a little bit of the labor upfront and they back out, what do you have to show for it? At least with material, you’ve got something tangible. Once you start getting more comfortable with the contractor, you can try 1/3 upfront, 1/3 at the midpoint and 1/3 at conclusion of work. Hope that helps!

As a Handyman I don't do large jobs very often, at most between $1,000-2,000 for the whole job and I never charge a customer before the job is complete UNLESS the person who hired me doesn't live in the property I am contracted to work at. I've never had an issue with payment nor with getting the jobs complete since my company has very little overhead (except marketing) and keeps most of its money.

@Jason Staine

It’s not a big job and is the 2nd contractor I worked with. The first contractor didn’t ask for any and this one asked for 50%, so I wanted to see everyone’s take on it.

From what I’m gathering in all of the responses the larger the job = the smaller the initial down payment (but this is also dependent on the type of job being done).

@Alex Varner absolutely not! I pay ZERO upfront. This is generally a huge red flag and means that the contractor is not able to sustain his expenses and keep a positive cash flow. I’ve been screwed so many times and don’t want to you to. A reliable and legit contractor does not need any money upfront. Beware.

Originally posted by @Alex Varner :

Hello,

I have a contractor that is requesting 50% of what he quoted the job up front. It isn’t a super large sum of money, but I’m curious on what type of things I should do/look for to protect myself. As of now all I have for information on the guy is his phone number.

Thank you!

 move on don't pay it. every lender i've ever talked to won't pay up front and almost 100% of banks won't pay for work up front either so you shouldn't either. 

@Alex Varner 50% is usually asked for to buy materials. Last 50% is to pay for labor. If you’re worried, maybe you can pay for items/pick up yourself? Otherwise, just need to understand how legit he is as well as have a contract if necessary

It does depend on the size and type of project for the initial draw. Paying for materials upfront is justifiable; 1/3 of the quote is a good rule of thumb. It is good practice to draft up at least a 1-page work order outlining a scope of work and payment schedule. Include the estimated work duration as well. For large projects, request the contractor to provide a schedule of values before starting work; pay based on % complete weekly, bi-weekly or monthly.

@Alex Varner

No. You meet them on site the day operations begin and give them a small good faith deposit. Create a plan that pays at pre discussed trigger points.

The best way to decrease the likelihood of a contractor showing up day 1, is to pay him a chunk of money to not show up.

You will see requests for all different amounts.  I would suggest interviewing quite a few contractors and looking into their references and prior jobs before settling on someone.

@Alex Varner I would walk if they push for the 50%. I don’t give more then 10% upfront and have an agreed upon payment schedule based on completion of specific stages such as rough in, Sheetrock, flooring, cabinets and finishes. I always hold back last 10% to make sure the punch list is completed satisfactorily. If a GC doesn’t agree to this type of schedule, then I move on.

@Alex Varner That is a very poorly weighted agreement in his favour. He is getting more money in his account before he even begins the project than he will have once the project is complete, which takes away the incentive to complete the project. I have never required any up front payment for small jobs. For larger projects, a 10% down payment and a draw schedule is not uncommon where I am, just to show commitment and ability to pay on the clients part; but 50% would be a huge red flag that he’s either flat broke or looking to scam you. Either scenario will result in a bad outcome. If his reasoning is that he doesn’t trust you; perhaps you could talk to a lawyer about having the money held ‘in trust’?

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@Alex Varner ,

In my opinion, it comes down to reputation and references. 50% does seem high, but if it is a small job it may be their way of doing business. I would recommend asking for referrals, and don’t just call on the phone - drive by the sites, talk to the property owners, and examine the work that was done.

I would also encourage you to ask him if this is his standard way of doing business, or is his upfront money request based on the relatively small cost of the job. It never hurts to ask the hard questions up front, rather than later in the game when expectations may have already been established.

Good luck!

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